Document:

NEITHER
        THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
        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
        CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
        MARGIN
        ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

      

      Original
        Issue Date: April ___, 2007

      Original
        Conversion Price (subject to adjustment herein): $1.00

      

      $_______________

       

      12%
        CONVERTIBLE NOTE

      DUE
        APRIL ___, 2009

      

      THIS
        NOTE
        is one of a series of duly authorized and issued 12% Convertible Notes of
        Vistula Communications Services, Inc., a Delaware corporation, having a
        principal place of business at 405 Park Avenue, Suite 801, New York, New
        York
        10022 (the “Company”),
        designated as its 12% Convertible Note, due April __, 2009 (the “Note(s)”).

      

      FOR
        VALUE
        RECEIVED, the Company promises to pay to ________________________ or its
        registered assigns (the “Holder”),
        the
        principal sum of $_______________ on April __, 2009 (the “Maturity
        Date”)
        or
        such earlier date as the Notes are required or permitted to be repaid as
        provided hereunder, and to pay interest to the Holder on the aggregate
        unconverted and then outstanding principal amount of this Note in accordance
        with the provisions hereof. This Note is subject to the following additional
        provisions:

      

      Section
        1. Definitions.
        For the
        purposes hereof, in addition to the terms defined elsewhere in this Note:
        (a)
        capitalized terms not otherwise defined herein have the meanings given to
        such
        terms in the Purchase Agreement, and (b) the following terms shall have the
        following meanings:

      

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      “Base
        Conversion Price”
shall
        have the meaning set forth in Section 5(b).

      

      “Business
        Day”
means
        any day except Saturday, Sunday and any day which shall be a federal legal
        holiday in the United States or a day on which banking institutions in the
        State
        of New York are authorized or required by law or other government action
        to
        close.

      

      “Buy-In”
shall
        have the meaning set forth in Section 4(d)(v).

      

      “Change
        of Control Transaction”
means
        the occurrence after the date hereof of any of (i) an acquisition after the
        date
        hereof by an individual or legal entity or “group” (as described in Rule
        13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
        through legal or beneficial ownership of capital stock of the Company, by
        contract or otherwise) of in excess of 50% of the voting securities of the
        Company, or (ii) the Company merges into or consolidates with any other Person,
        or any Person merges into or consolidates with the Company and, after giving
        effect to such transaction, the stockholders of the Company immediately prior
        to
        such transaction own less than 50% of the aggregate voting power of the Company
        or the successor entity of such transaction, or (iii) the Company sells or
        transfers its assets, as an entirety or substantially as an entirety, to
        another
        Person and the stockholders of the Company immediately prior to such transaction
        own less than 50% of the aggregate voting power of the acquiring entity
        immediately after the transaction, (iv) a replacement at one time or within
        a
        three year period of more than one-half of the members of the Company’s board of
        directors which is not approved by a majority of those individuals who are
        members of the board of directors on the date hereof (or by those individuals
        who are serving as members of the board of directors on any date whose
        nomination to the board of directors was approved by a majority of the members
        of the board of directors who are members on the date hereof), or (v) the
        execution by the Company of an agreement to which the Company is a party
        or by
        which it is bound, providing for any of the events set forth above in (i)
        or
        (iv).

      

      “Common
        Stock”
means
        the common stock, par value $0.001 per share, of the Company and stock of
        any
        other class into which such shares may hereafter have been reclassified or
        changed.

      

      “Conversion
        Date”
shall
        have the meaning set forth in Section 4(a).

      

      “Conversion
        Price”
shall
        have the meaning set forth in Section 4(b).

      

      “Conversion
        Shares”
means
        the shares of Common Stock issuable upon conversion of Notes.

      

      “Dilutive
        Issuance”
shall
        have the meaning set forth in Section 5(b).

      

      “Dilutive
        Issuance Notice”
shall
        have the meaning set forth in Section 5(b).

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      

      “Effectiveness
        Period”
shall
        have the meaning given to such term in the Registration Rights Agreement.
        

      

      “Equity
        Conditions”
means,
        during the period in question, (i)
        the
        Company shall have duly honored all conversions and redemptions scheduled
        to
        occur or occurring by virtue of one or more Notices of Conversion of the
        Holder,
        if any, (ii) the Company shall have paid all liquidated damages and other
        amounts owing to the Holder in respect of this Note, (iii)
        there is an effective Registration Statement pursuant to which the Holder
        is
        permitted to utilize the prospectus thereunder to resell all of the shares
        issuable pursuant to the Transaction Documents (and the Company believes,
        in
        good faith, that such effectiveness will continue uninterrupted for the
        foreseeable future, but in no event less than 30 days following the date
        in
        question), (iv) the Common Stock is trading on a Trading Market and all of
        the
        shares issuable pursuant to the Transaction Documents are listed or quoted
        for
        trading on such Trading Market (and the Company believes, in good faith,
        that
        trading of the Common Stock on a Trading Market will continue uninterrupted
        for
        the foreseeable future, but in no event less than 30 days following the date
        in
        question), (v) there is a sufficient number of authorized but unissued and
        otherwise unreserved shares of Common Stock for the issuance of all of the
        shares issuable pursuant to the Transaction Documents, (vi) there is no existing
        Event of Default or no existing event which, with the passage of time or
        the
        giving of notice, would constitute an Event of Default, (vii) the issuance
        of
        the shares in question, or in the case of an Optional Redemption, the shares
        issuable upon conversion in full of the Optional Redemption Amount, to the
        Holder would not violate the limitations set forth in Section 4(c) herein,
        (viii)
        there has been no public announcement of a pending or proposed Fundamental
        Transaction or Change of Control Transaction that has not been consummated,
        (ix)
        the Holder is not in possession of any information provided by the Company
        that
        constitutes, or may constitute, material nonpublic information and (x) for
        each
        Trading Day in a period of 20 consecutive Trading Days prior to the applicable
        date in question, the daily trading volume for the Common Stock on the principal
        Trading Market exceeds 100,000 shares (subject to adjustment for forward
        and
        reverse stock splits and the like) per Trading Day.

      

      “Event
        of Default”
shall
        have the meaning set forth in Section 8.

      

      “Exchange
        Act”
means
        the Securities Exchange Act of 1934, as amended.

      

      “Forced
        Conversion”
shall
        have the meaning set forth in Section 6(c).

      

      “Forced
        Conversion Date”
shall
        have the meaning set forth in Section 6(c).

      

      “Forced
        Conversion Notice”
shall
        have the meaning set forth in Section 6(c).

      

      “Forced
        Conversion Notice Date”
shall
        have the meaning set forth in Section 6(c).

      

      “Fundamental
        Transaction”
shall
        have the meaning set forth in Section 5(e).

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      

      “Interest
        Payment Date”
shall
        have the meaning set forth in Section 2(a).

      

      “Late
        Fees”
shall
        have the meaning set forth in Section 2(d).

      

      “Mandatory
        Prepayment Amount”
for
        any
        Notes shall equal the sum of (i) the greater of: (A) 130% of the outstanding
        principal amount of Notes to be prepaid, plus all accrued and unpaid interest
        thereon, or (B) the principal amount of Notes to be prepaid, plus all other
        accrued and unpaid interest hereon, divided by the Conversion Price on (x)
        the
        date the Mandatory Prepayment Amount is demanded or otherwise due or (y)
        the
        date the Mandatory Prepayment Amount is paid in full, whichever is less,
        multiplied by the VWAP on (x) the date the Mandatory Prepayment Amount is
        demanded or otherwise due or (y) the date the Mandatory Prepayment Amount
        is
        paid in full, whichever is greater, and (ii) all other amounts, costs, expenses
        and liquidated damages due in respect of such Notes.

      

      “New
        York Courts”
shall
        have the meaning set forth in Section 9(d).

      

      “Note
        Register”
shall
        have the meaning set forth in Section 2(c).

      

      “Notice
        of Conversion”
shall
        have the meaning set forth in Section 4(a).

      

      “Optional
        Redemption”
shall
        have the meaning set forth in Section 6(a).

      

      “Optional
        Redemption Amount”
means
        the sum of (i) 150% of the then outstanding principal amount of the Note,
        (ii)
        accrued but unpaid interest and (iii) all liquidated damages and other amounts
        due in respect of the Note.

      

      “Optional
        Redemption Date”
shall
        have the meaning set forth in Section 6(a).

      

      “Optional
        Redemption Notice”
shall
        have the meaning set forth in Section 6(a).

      

      “Optional
        Redemption Notice Date”
shall
        have the meaning set forth in Section 6(a).

      

      “Permitted
        Indebtedness”
        means (a) the
        Indebtedness existing on the Original Issue Date and set forth on Schedule
        3.1(ii)
        attached
        to the Purchase Agreement, (b) lease obligations and purchase money indebtedness
        of up to $200,000, in the aggregate, incurred in connection with the acquisition
        of capital assets and lease obligations with respect to newly acquired or
        leased
        assets and (c) indebtedness that (i) is expressly subordinate to the Notes
        pursuant to a written subordination agreement with the Purchasers that is
        acceptable to each Purchaser in its sole and absolute discretion and (ii)
        matures at a date later than the Maturity Date.

      

      “Permitted
        Lien”
means
        the individual and collective reference to the following: (a) Liens for taxes,
        assessments and other governmental charges or levies not yet due or Liens
        for
        taxes, assessments and other governmental charges or levies being contested
        in
        good faith and by appropriate proceedings for which adequate reserves (in
        the
        good faith judgment of the management of the Company) have been established
        in
        accordance with GAAP; (b) Liens imposed by law which were incurred in the
        ordinary course of the Company’s business, such as carriers’, warehousemen’s and
        mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
        the ordinary course of the Company’s business, and which (x) do not individually
        or in the aggregate materially detract from the value of such property or
        assets
        or materially impair the use thereof in the operation of the business of
        the
        Company and its consolidated Subsidiaries or (y) are being contested in good
        faith by appropriate proceedings, which proceedings have the effect of
        preventing for the foreseeable future the forfeiture or sale of the property
        or
        asset subject to such Lien; (c) Liens incurred in connection with Permitted
        Indebtedness under clause (a) thereunder; and (d) Liens incurred in connection
        with Permitted Indebtedness under clause (b) thereunder, provided that such
        Liens are not secured by assets of the Company or its Subsidiaries other
        than
        the assets so acquired or leased.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      

      “Original
        Issue Date”
shall
        mean the date of the first issuance of the Notes regardless of the number
        of
        transfers of any Note and regardless of the number of instruments which may
        be
        issued to evidence such Note.

      

      “Person”
means
        a
        corporation, an association, a partnership, organization, a business, an
        individual, a government or political subdivision thereof or a governmental
        agency.

      

      “Purchase
        Agreement”
means
        the Securities Purchase Agreement, dated as of April __, 2007 to which the
        Company and the original Holder are parties, as amended, modified or
        supplemented from time to time in accordance with its terms.

      

      “Registration
        Rights Agreement”
means
        the Registration Rights Agreement, dated as of the date of the Purchase
        Agreement, to which the Company and the original Holder are parties, as amended,
        modified or supplemented from time to time in accordance with its
        terms.

      

      “Registration
        Statement”
means
        a
        registration statement meeting the requirements set forth in the Registration
        Rights Agreement, covering among other things the resale of the Conversion
        Shares, Warrant Shares and Bonus Shares and naming the Holder as a “selling
        stockholder” thereunder.

      

      “Securities
        Act”
means
        the Securities Act of 1933, as amended.

      

      “Subsidiary”
shall
        have the meaning given to such term in the Purchase Agreement.

      

      “Threshold
        Period”
shall
        have the meaning given to such term in Section 6(c). 

      

      “Trading
        Day”
means
        a
        day on which the Trading Market is open for business.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “Trading
        Market”
means,
        as applicable, the following markets or exchanges on which the Common Stock
        is
        listed or quoted for trading on the date in question: the American Stock
        Exchange, the New York Stock Exchange, the Nasdaq Capital Market, the Nasdaq
        Global Market, the Nasdaq Global Select Market or the OTC Bulletin
        Board.

       

      “Transaction
        Documents”
shall
        have the meaning set forth in the Purchase Agreement.

      

      “VWAP”
means,
        for any date, the price determined by the first of the following clauses
        that
        applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
        the daily volume weighted average price of the Common Stock for such date
        (or
        the nearest preceding date) on the Trading Market on which the Common Stock
        is
        then listed or quoted for trading as reported by Bloomberg L.P. (based on
        a
        Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
        time); (b) if the Common Stock is not then quoted for trading on the Trading
        Market and if prices for the Common Stock are then reported in the “Pink Sheets”
published by Pink Sheets, LLC (or a similar organization or agency succeeding
        to
        its functions of reporting prices), the most recent bid price per share of
        the
        Common Stock so reported; or (c) in all other cases, the fair market value
        of a share of Common Stock as determined by an independent appraiser selected
        in
        good faith by the Holder and reasonably acceptable to the Company.

      

      Section
        2. Interest.

       

      a) Payment
        of Interest in Cash.
        The
        Company shall pay interest to the Holder on the aggregate unconverted and
        then
        outstanding principal amount of this Note at the rate of 12% per annum, payable
        quarterly on March 31, June 30, September 30 and December 31, in arrears,
        beginning on September 30, 2007 and on each Conversion Date (solely as to
        that
        principal amount then being converted) and on the Maturity Date (except that,
        if
        any such date is not a Business Day, then such payment shall be due on the
        next
        succeeding Business Day) (each such date, an “Interest
        Payment Date”),
        in
        cash. 

      

      b) [INTENTIONALLY
        DELETED].

       

      c) Interest
        Calculations.
        Interest shall be calculated on the basis of a 360-day year and shall accrue
        daily commencing on the Original Issue Date until payment in full of the
        principal sum or conversion of this Note in full, together with all accrued
        and
        unpaid interest and other amounts which may become due hereunder, has been
        made.
        Interest hereunder will be paid to the Person in whose name this Note is
        registered on the records of the Company regarding registration and transfers
        of
        Notes (the “Note
        Register”).
        

       

      d) Late
        Fee.
        All
        overdue accrued and unpaid interest to be paid hereunder shall entail a late
        fee
        at the rate of 15% per annum (or such lower maximum amount of interest permitted
        to be charged under applicable law) (“Late
        Fees”)
        which
        will accrue daily, from the date such interest is due hereunder through
        and
        including the date of payment.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      e) Prepayment.
        Except
        as otherwise set forth in this Note, the Company may not prepay any portion
        of
        the principal amount of this Note without the prior written consent of the
        Holder.

      

      Section
        3.  Registration
        of Transfers and Exchanges.
        

       

      a) Different
        Denominations.
        This
        Note is exchangeable for an equal aggregate principal amount of Notes of
        different authorized denominations, as requested by the Holder surrendering
        the
        same. No service charge will be made for such registration of transfer or
        exchange.

       

      b) Investment
        Representations.
        This
        Note has been issued subject to certain investment representations of the
        original Holder set forth in the Purchase Agreement and may be transferred
        or
        exchanged only in compliance with the Purchase Agreement and applicable federal
        and state securities laws and regulations. 

      

      c) Reliance
        on Note Register.
        Prior
        to due presentment to the Company for transfer of this Note, the Company
        and any
        agent of the Company may treat the Person in whose name this Note is duly
        registered on the Note Register as the owner hereof for the purpose of receiving
        payment as herein provided and for all other purposes, whether or not this
        Note
        is overdue, and neither the Company nor any such agent shall be affected
        by
        notice to the contrary.

      

      Section
        4.  Conversion.

       

      a) Voluntary
        Conversion.
        At any
        time after the Original Issue Date until this Note is no longer outstanding,
        this Note shall be convertible into shares of Common Stock at the option
        of the
        Holder, in whole or in part at any time and from time to time (subject to
        the
        limitations on conversion set forth in Section 4(c) hereof). The Holder
        shall effect conversions by delivering to the Company the form of Notice
        of
        Conversion attached hereto as Annex
        A
        (a
“Notice
        of Conversion”),
        specifying therein the principal amount of Notes to be converted and the
        date on
        which such conversion is to be effected (a “Conversion
        Date”).
        If no
        Conversion Date is specified in a Notice of Conversion, the Conversion Date
        shall be the date that such Notice of Conversion is provided hereunder. To
        effect conversions hereunder, the Holder shall not be required to physically
        surrender Notes to the Company unless the entire principal amount of this
        Note
        has been so converted. Conversions hereunder shall have the effect of lowering
        the outstanding principal amount of this Note in an amount equal to the
        applicable conversion. The Holder and the Company shall maintain records
        showing
        the principal amount converted and the date of such conversions. The Company
        shall deliver any objection to any Notice of Conversion within 1 Business
        Day of
        receipt of such notice. In the event of any dispute or discrepancy, the records
        of the Holder shall be controlling and determinative in the absence of manifest
        error. The Holder and any assignee, by acceptance of this Note, acknowledge
        and
        agree that, by reason of the provisions of this paragraph, following conversion
        of a portion of this Note, the unpaid and unconverted principal amount of
        this
        Note may be less than the amount stated on the face hereof.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      b) Conversion
        Price.
        The
        conversion price in effect on any Conversion Date shall be equal to $1.00
        (subject
        to adjustment herein)(the “Conversion
        Price”).

      

      c) Conversion
        Limitations.
        The
        Company shall not effect any conversion of this Note, and a Holder shall
        not
        have the right to convert any portion of this Note, to the extent that after
        giving effect to the conversion set forth on the applicable Notice of
        Conversion, such Holder (together with such Holder’s Affiliates, and any other
        person or entity acting as a group together with such Holder or any of such
        Holder’s Affiliates) would beneficially own in excess of the Beneficial
        Ownership Limitation (as defined below).  For purposes of the foregoing
        sentence, the number of shares of Common Stock beneficially owned by such
        Holder
        and its Affiliates shall include the number of shares of Common Stock issuable
        upon conversion of this Note with respect to which such determination is
        being
        made, but shall exclude the number of shares of Common Stock which are issuable
        upon (A) conversion of the remaining, unconverted principal amount of this
        Note
        beneficially owned by such Holder or any of its Affiliates and (B) exercise
        or
        conversion of the unexercised or unconverted portion of any other securities
        of
        the Company subject to a limitation on conversion or exercise analogous to
        the
        limitation contained herein (including, without limitation, any other Notes
        or
        the Warrants) beneficially owned by such Holder or any of its Affiliates. 
Except as set forth in the preceding sentence, for purposes of this Section
        4(c), beneficial ownership shall be calculated in accordance with Section
        13(d)
        of the Exchange Act and the rules and regulations promulgated thereunder.
        To the
        extent that the limitation contained in this Section 4(c) applies, the
        determination of whether this Note is convertible (in relation to other
        securities owned by the Holder together with any Affiliates) and of which
        principal amount of this Note is convertible shall be in the sole discretion
        of
        the Holder, and the submission of a Notice of Conversion shall be deemed
        to be
        the Holder’s determination of whether this Note may be converted (in relation to
        other securities owned by such Holder together with any Affiliates) and which
        principal amount of this Note is convertible, in each case subject to the
        Beneficial Ownership Limitation. To ensure compliance with this restriction,
        the
        Holder will be deemed to represent to the Company each time it delivers a
        Notice
        of Conversion that such Notice of Conversion has not violated the restrictions
        set forth in this paragraph and the Company shall have no obligation to verify
        or confirm the accuracy of such determination. In
        addition, a determination as to any group status as contemplated above shall
        be
        determined in accordance with Section 13(d) of the Exchange Act and
        the
        rules and regulations promulgated thereunder. For
        purposes of this Section 4(c), in determining the number of outstanding shares
        of Common Stock, the Holder may rely on the number of outstanding shares
        of
        Common Stock as stated in the most recent of the following: (A) the Company’s
        most recent Form 10-QSB or Form 10-KSB, as the case may be; (B) a more recent
        public announcement by the Company; or (C) a more recent 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 a Holder, the
        Company shall within two Trading Days confirm orally and in writing to such
        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 Note, by such Holder or its Affiliates since the date as of
        which
        such number of outstanding shares of Common Stock was reported. The
“Beneficial
        Ownership Limitation”
shall
        be 4.99% or 9.99% per instructions of Holder on signature page to Purchase
        Agreement of the number of shares of the Common Stock outstanding immediately
        after giving effect to the issuance of shares of Common Stock issuable upon
        conversion of this Note held by the Holder. The Beneficial Ownership Limitation
        provisions of this Section 4(c) may be waived by such Holder, at the election
        of
        such Holder, upon not less than 61 days’ prior notice to the Company, to change
        the Beneficial Ownership Limitation to 9.99% of the number of shares of the
        Common Stock outstanding immediately after giving effect to the issuance
        of
        shares of Common Stock upon conversion of this Note held by the Holder and
        the
        provisions of this Section 4(c) shall continue to apply. Upon such a change
        by a
        Holder of the Beneficial Ownership Limitation from such 4.99% limitation
        to such
        9.99% limitation, the Beneficial Ownership Limitation may not be further
        waived
        by such Holder. The provisions of this paragraph shall be construed and
        implemented in a manner otherwise than in strict conformity with the terms
        of
        this Section 4(c) to correct this paragraph (or any portion hereof) which
        may be
        defective or inconsistent with the intended Beneficial Ownership Limitation
        herein contained or to make changes or supplements necessary or desirable
        to
        properly give effect to such limitation.
        The
        limitations contained in this paragraph shall apply to a successor holder
        of
this
        Note.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      d) Mechanics
        of Conversion

       

      i. Conversion
        Shares Issuable Upon Conversion of Principal Amount.
        The
        number of Conversion Shares issuable upon a conversion hereunder shall be
        determined by the quotient obtained by dividing (x) the outstanding principal
        amount of this Note to be converted by (y) the Conversion Price.

      

      ii. Delivery
        of Certificate Upon Conversion.
        Not
        later than three Trading Days after any Conversion Date, the Company will
        deliver to the Holder (A) a certificate or certificates representing the
        Conversion Shares which shall be free of restrictive legends and trading
        restrictions (other than those required by the Purchase Agreement) representing
        the Conversion Shares being acquired upon the conversion of Notes and (B)
        a bank
        check in the amount of accrued and unpaid interest. The Company shall, if
        available and if allowed under applicable securities laws, use its best efforts
        to deliver any certificate or certificates required to be delivered by the
        Company under this Section electronically through the Depository Trust Company
        or another established clearing corporation performing similar
        functions.

       

      iii. Failure
        to Deliver Certificates.
        If in
        the case of any Notice of Conversion such certificate or certificates are
        not
        delivered to or as directed by the applicable Holder by the third Trading
        Day
        after a Conversion Date, the Holder shall be entitled by written notice to
        the
        Company at any time on or before its receipt of such certificate or certificates
        thereafter, to rescind such conversion, in which event the Company shall
        immediately return the certificates representing the principal amount of
        Notes
        tendered for conversion. 

       

      
        
          
          

        

        
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      iv. Obligation
        Absolute; Partial Liquidated Damages.
        If the
        Company fails for any reason to deliver to the Holder such certificate or
        certificates pursuant to Section 4(d)(ii) by the third Trading Day after
        the
        Conversion Date, the Company shall pay to such Holder, in cash, as liquidated
        damages and not as a penalty, for each $1000 of principal amount being
        converted, $10 per Trading Day (increasing to $20 per Trading Day after 5
        Trading Days after such damages begin to accrue) for each Trading Day after
        such
        third Trading Day until such certificates are delivered. The Company’s
        obligations to issue and deliver the Conversion Shares upon conversion of
        this
        Note in accordance with the terms hereof are absolute and unconditional,
        irrespective of any action or inaction by the Holder to enforce the same,
        any
        waiver or consent with respect to any provision hereof, the recovery of any
        judgment against any Person or any action to enforce the same, or any setoff,
        counterclaim, recoupment, limitation or termination, or any breach or alleged
        breach by the Holder or any other Person of any obligation to the Company
        or any
        violation or alleged violation of law by the Holder or any other person,
        and
        irrespective of any other circumstance which might otherwise limit such
        obligation of the Company to the Holder in connection with the issuance of
        such
        Conversion Shares; provided,
        however,
        such
        delivery shall not operate as a waiver by the Company of any such action
        the
        Company may have against the Holder. In the event a Holder of this Note shall
        elect to convert any or all of the outstanding principal amount hereof, the
        Company may not refuse conversion based on any claim that the Holder or any
        one
        associated or affiliated with the Holder of has been engaged in any violation
        of
        law, agreement or for any other reason, unless, an injunction from a court,
        on
        notice, restraining and or enjoining conversion of all or part of this Note
        shall have been sought and obtained and the Company posts a surety bond for
        the
        benefit of the Holder in the amount of 150% of the principal amount of this
        Note
        outstanding, which is subject to the injunction, which bond shall remain
        in
        effect until the completion of arbitration/litigation of the dispute and
        the
        proceeds of which shall be payable to such Holder to the extent it obtains
        judgment. In the absence of an injunction precluding the same, the Company
        shall
        issue Conversion Shares or, if applicable, cash, upon a properly noticed
        conversion. Nothing herein shall limit a Holder’s right to pursue actual damages
        or declare an Event of Default pursuant to Section 8 herein for the Company’s
        failure to deliver Conversion Shares within the period specified herein and
        such
        Holder shall have the right to pursue all remedies available to it at law
        or in
        equity including, without limitation, a decree of specific performance and/or
        injunctive relief. The exercise of any such rights shall not prohibit the
        Holders from seeking to enforce damages pursuant to any other Section hereof
        or
        under applicable law.

       

      
        
          
          

        

        
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      v. Compensation
        for Buy-In on Failure to Timely Deliver Certificates Upon
        Conversion.
        In
        addition to any other rights available to the Holder, if the Company fails
        for
        any reason to deliver to the Holder such certificate or certificates pursuant
        to
        Section 4(d)(ii) by the third Trading Day after the Conversion Date, and
        if
        after such third Trading Day the Holder is required by its brokerage firm
        to
        purchase (in an open market transaction or otherwise), or the Holder’s brokerage
        firm otherwise purchases, shares of Common Stock to deliver in satisfaction
        of a
        sale by such Holder of the Conversion Shares which the Holder anticipated
        receiving upon such conversion (a “Buy-In”),
        then
        the Company shall (A) pay in cash to the Holder (in addition to any remedies
        available to or elected by the Holder) the amount by which (x) the Holder’s
        total purchase price (including brokerage commissions, if any) for the Common
        Stock so purchased exceeds (y) the product of (1) the aggregate number of
        shares
        of Common Stock that such Holder anticipated receiving from the conversion
        at
        issue multiplied by (2) the actual sale price of the Common Stock at the
        time of
        the sale (including brokerage commissions, if any) giving rise to such purchase
        obligation and (B) at the option of the Holder, either reissue Notes in
        principal amount equal to the principal amount of the attempted conversion
        or
        deliver to the Holder the number of shares of Common Stock that would have
        been
        issued had the Company timely complied with its delivery requirements under
        Section 4(d)(ii). 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
        conversion of Notes with respect to which the actual sale price of the
        Conversion Shares at the time of the sale (including brokerage commissions,
        if
        any) giving rise to such purchase obligation was a total of $10,000 under
        clause
        (A) 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.
        Notwithstanding anything contained herein to the contrary, if a Holder requires
        the Company to make payment in respect of a Buy-In for the failure to timely
        deliver certificates hereunder and the Company timely pays in full such payment,
        the Company shall not be required to pay such Holder liquidated damages under
        Section 4(d)(iv) in respect of the certificates resulting in such
        Buy-In.

       

      vi. Reservation
        of Shares Issuable Upon Conversion.
        The
        Company covenants that it will at all times reserve and keep available out
        of
        its authorized and unissued shares of Common Stock solely for the purpose
        of
        issuance upon conversion of the Notes free from preemptive rights or any
        other
        actual contingent purchase rights of persons other than the Holders, not
        less
        than such number of shares of the Common Stock as shall (subject to any
        additional requirements of the Company as to reservation of such shares set
        forth in the Purchase Agreement) be issuable (taking into account the
        adjustments and restrictions of Section 5) upon the conversion of the
        outstanding principal amount of the Notes. The Company covenants that all
        shares
        of Common Stock that shall be so issuable shall, upon issue, be duly and
        validly
        authorized, issued and fully paid, nonassessable and, if the Registration
        Statement is then effective under the Securities Act, registered for public
        sale
        in accordance with such Registration Statement.

       

      
        
          
          

        

        
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      vii. Fractional
        Shares.
        Upon a
        conversion hereunder the Company shall not be required to issue stock
        certificates representing fractions of shares of the Common Stock, but may
        if
        otherwise permitted, make a cash payment in respect of any final fraction
        of a
        share based on the VWAP at such time. If the Company elects not, or is unable,
        to make such a cash payment, the Holder shall be entitled to receive, in
        lieu of
        the final fraction of a share, one whole share of Common Stock.

      

      viii. Transfer
        Taxes.
        The
        issuance of certificates for shares of the Common Stock on conversion of
        the
        Notes shall be made without charge to the Holders thereof for any documentary
        stamp or similar taxes that may be payable in respect of the issue or delivery
        of such certificate, provided that the Company shall not be required to pay
        any
        tax that may be payable in respect of any transfer involved in the issuance
        and
        delivery of any such certificate upon conversion in a name other than that
        of
        the Holder of such Notes so converted and the Company shall not be required
        to
        issue or deliver such certificates unless or until the person or persons
        requesting the issuance thereof shall have paid to the Company the amount
        of
        such tax or shall have established to the satisfaction of the Company that
        such
        tax has been paid.

      

      Section
        5. Certain
        Adjustments.

       

      a)  Stock
        Dividends and Stock Splits.
        If the
        Company, at any time while this Note is outstanding: (A) pays a stock dividend
        or otherwise makes a distribution or distributions payable in shares of Common
        Stock on shares of Common Stock or any Common Stock Equivalents (which, for
        avoidance of doubt, shall not include any shares of Common Stock issued by
        the
        Company upon conversion of the Notes); (B) subdivides outstanding shares
        of
        Common Stock into a larger number of shares; (C) combines (including by way
        of a
        reverse stock split) outstanding shares of Common Stock into a smaller number
        of
        shares; or (D) issues, in the event of a reclassification of shares of the
        Common Stock, any shares of capital stock of the Company, then the Conversion
        Price shall be multiplied by a fraction of which the numerator shall be the
        number of shares of Common Stock (excluding any treasury shares of the Company)
        outstanding immediately before such event and of which the denominator shall
        be
        the number of shares of Common Stock outstanding immediately after such event.
        Any adjustment made pursuant to this Section 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.

       

      
        
          
          

        

        
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      b) Subsequent
        Equity Sales.
        If, at
        any time while this Note is outstanding, the Company or any Subsidiary, as
        applicable, sells or grants any option to purchase or sells or grants any
        right
        to reprice, or otherwise disposes of or issues (or announces any sale, grant
        or
        any option to purchase or other disposition), any Common Stock or Common
        Stock
        Equivalents entitling any Person to acquire shares of Common Stock at an
        effective price per share that is lower than the then Conversion Price (such
        lower price, the “Base
        Conversion Price”
and
        such issuances, collectively, a “Dilutive
        Issuance”)
        (if
        the holder of the Common Stock or Common Stock Equivalents so issued shall
        at
        any time, whether by operation of purchase price adjustments, reset provisions,
        floating conversion, exercise or exchange prices or otherwise, or due to
        warrants, options or rights per share which are issued in connection with
        such
        issuance, be entitled to receive shares of Common Stock at an effective price
        per share that is lower than the Conversion Price, such issuance shall be
        deemed
        to have occurred for less than the Conversion Price on such date of the Dilutive
        Issuance), then the Conversion Price shall be reduced to equal the Base
        Conversion Price. Such adjustment shall be made whenever such Common Stock
        or
        Common Stock Equivalents are issued. Notwithstanding
        the foregoing, no adjustment will be made under this Section 5(b) in respect
        of
        an Exempt Issuance.
        If the
        Company enters into a Variable Rate Transaction, despite the prohibition
        set
        forth in the Purchase Agreement, the Company shall be deemed to have issued
        Common Stock or Common Stock Equivalents at the lowest possible conversion
        price
        at which such securities may be converted or exercised. The Company shall
        notify
        the Holder in writing, no later than 1 Business Day following the issuance
        of
        any Common Stock or Common Stock Equivalents subject to this Section 5(b),
        indicating therein the applicable issuance price, or applicable reset price,
        exchange price, conversion price and other pricing terms (such notice, the
        “Dilutive
        Issuance Notice”).
        For
        purposes of clarification, whether or not the Company provides a Dilutive
        Issuance Notice pursuant to this Section 5(b), upon the occurrence of any
        Dilutive Issuance, the Holder is entitled to receive a number of Conversion
        Shares based upon the Base Conversion Price on or after the date of such
        Dilutive Issuance, regardless of whether the Holder accurately refers to
        the
        Base Conversion Price in the Notice of Conversion.

       

      c) Subsequent
        Rights Offerings.
        If the
        Company, at any time while the Debenture is outstanding, shall issue rights,
        options or warrants to all holders of Common Stock (and not to Holders)
        entitling them to subscribe for or purchase shares of Common Stock at a price
        per share that is lower than the VWAP on the record date referenced below,
        then
        the Conversion Price shall be multiplied by a fraction of which the denominator
        shall be the number of shares of the Common Stock outstanding on the date
        of
        issuance of such rights or warrants plus the number of additional shares
        of
        Common Stock offered for subscription or purchase, and of which the numerator
        shall be the number of shares of the Common Stock outstanding on the date
        of
        issuance of such rights or warrants plus the number of shares which the
        aggregate offering price of the total number of shares so offered (assuming
        delivery to the Company in full of all consideration payable upon exercise
        of
        such rights, options or warrants) would purchase at such VWAP. Such adjustment
        shall be made whenever such rights or warrants are issued, and shall become
        effective immediately after the record date for the determination of
        stockholders entitled to receive such rights, options or warrants.

       

      
        
          
          

        

        
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      d) Pro
        Rata Distributions.
        If the
        Company, at any time while Notes are outstanding, shall distribute to all
        holders of Common Stock (and not to Holders) evidences of its indebtedness
        or
        assets or rights or warrants to subscribe for or purchase any security, then
        in
        each such case the Conversion Price shall be determined by multiplying such
        Conversion Price in effect immediately prior to the record date fixed for
        determination of stockholders entitled to receive such distribution by a
        fraction of which the denominator shall be the VWAP determined as of the
        record
        date mentioned above, and of which the numerator shall be such VWAP on such
        record date less the then fair market value at such record date of the portion
        of such assets or evidence of indebtedness so distributed applicable to one
        outstanding share of the Common Stock as determined by the Board of Directors
        in
        good faith. In either case the adjustments shall be described in a statement
        provided to the Holders of the portion of assets or evidences of indebtedness
        so
        distributed or such subscription rights applicable to one share of Common
        Stock.
        Such adjustment shall be made whenever any such distribution is made and
        shall
        become effective immediately after the record date mentioned above.

       

      e) Fundamental
        Transaction.
        If, at
        any time while this Note 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 transaction
        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 conversion of this Note, the Holder shall have the right
        to
        receive, for each Conversion Share that would have been issuable upon such
        conversion immediately prior to the occurrence of such Fundamental Transaction,
        the same kind and amount of securities, cash or property as it would have
        been
        entitled to receive upon the occurrence of such Fundamental Transaction if
        it
        had been, immediately prior to such Fundamental Transaction, the holder of
        1
        share of Common Stock (the “Alternate
        Consideration”).
        For
        purposes of any such conversion, the determination of the Conversion Price
        shall
        be appropriately adjusted to apply to such Alternate Consideration based
        on the
        amount of Alternate Consideration issuable in respect of 1 share of Common
        Stock
        in such Fundamental Transaction, and the Company shall apportion the Conversion
        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
        conversion of this Note 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 note consistent with the foregoing provisions and evidencing the Holder’s
        right to convert such note 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 5(e) and insuring that this Note (or any such
        replacement security) will be similarly adjusted upon any subsequent transaction
        analogous to a Fundamental Transaction.

       

      
        
          
          

        

        
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      f) Calculations.
        All
        calculations under this Section 5 shall be made to the nearest cent or the
        nearest 1/100th of a share, as the case may be. For purposes of this Section
        5,
        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.

      

      g) Notice
        to Holders.

      

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

       

      ii. Notice
        to Allow Conversion 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 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 filed at each office or agency maintained for the purpose of
        conversion of the Notes, and shall cause to be mailed
        to
        the Holders at their last addresses as they shall appear upon the stock
        books 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. Holders are entitled to convert Notes during the 20-day period
        commencing the date of such notice to the effective date of the event triggering
        such notice. 

       

      
        
          
          

        

        
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      iii. Re-Adjustment
        of Conversion Price.
        If the
        Conversion Price has been adjusted based on the issuance of a right, option,
        warrant and/or Common Stock Equivalent and all of such right, option, warrant
        and/or Common Stock Equivalent expires pursuant to its own terms before it
        is
        exercised, exchanged and/or converted, an upward adjustment will be made
        such
        that the Conversion Price will no longer reflect the issuance of such right,
        option, warrant and/or Common Stock Equivalent; provided,
        however,
        that
        the Holder is provided at least 20 days’ prior written notice of such adjustment
        before it is deemed effective.

       

      Section
        6. 

      

      a) Optional
        Redemption at Election of Company.
        Subject
        to the provisions of this Section 6, at any time after the 12-month anniversary
        of the Original Issue Date, the Company may deliver a notice to the Holder
        (an
“Optional
        Redemption Notice”
and
        the
        date such notice is deemed delivered hereunder, the “Optional
        Redemption Notice Date”)
        of its
        irrevocable election to redeem some or all of the then outstanding principal
        amount of this Note for cash in an amount equal to the Optional Redemption
        Amount on the 10th
        Trading
        Day following the Optional Redemption Notice Date (such date, the “Optional
        Redemption Date”
and
        such redemption, the “Optional
        Redemption”).
        The
        Optional Redemption Amount is payable in full on the Optional Redemption
        Date.
        The Company may only effect an Optional Redemption if each of the Equity
        Conditions shall have been met on each Trading Day during the period commencing
        on the Optional Redemption Notice Date through to the Optional Redemption
        Date
and
        through and including the date payment of the Optional Redemption Amount
        is
        actually made in full.
        If any
        of the Equity Conditions shall cease to be satisfied at any time during the
        10
        Trading Day period, then the Holder may elect to nullify the Optional Redemption
        Notice by notice to the Company within 3 Trading Days after the first day
        on
        which any such Equity Condition has not been met (provided that if, by a
        provision of the Transaction Documents, the Company is obligated to notify
        the
        Holder of the non-existence of an Equity Condition, such notice period shall
        be
        extended to the third Trading Day after proper notice from the Company) in
        which
        case the Optional Redemption Notice shall be null and void, ab initio.
        The
        Company covenants and agrees that it will honor all Notices of Conversion
        tendered from the time of delivery of the Optional Redemption Notice through
        the
        date all amounts owing thereon are due and paid in full.

       

      
        
          
          

        

        
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      b) Redemption
        Procedure.
        The
        payment of cash or issuance of Common Stock, as applicable, pursuant to an
        Optional Redemption shall be payable on the Optional Redemption Date. If
        any
        portion of the payment pursuant to an Optional Redemption shall not be paid
        by
        the Company by the applicable due date, interest shall accrue thereon at
        an
        interest rate equal to the lesser of 15% per annum or the maximum rate permitted
        by applicable law until such amount is paid in full. Notwithstanding anything
        herein contained to the contrary, if any portion of the Optional Redemption
        Amount remains unpaid after such date, the Holder may elect, by written notice
        to the Company given at any time thereafter, to invalidate such Optional
        Redemption, ab initio,
        and,
        with respect to the Company’s failure to honor the Optional Redemption, the
        Company shall have no further right to exercise such Optional Redemption.
        Notwithstanding anything to the contrary in this Section 6, the Company’s
        determination to redeem in cash or its elections under Section 6(b) shall
        be
        applied ratably among the Holders of Notes.
        The
        Holder may elect to convert the outstanding principal amount of the Note
        pursuant to Section 4 prior to actual payment in cash for any redemption
        under
        this Section 6 by the delivery of a Notice of Conversion to the
        Company.

       

      c) Forced
        Conversion.
        Notwithstanding anything herein to the contrary, if after the earlier of
        the
        Effective Date and the date on which the Conversion Shares are eligible for
        sale
        without restriction pursuant to Rule 144(k), the VWAP for each of any 20
        consecutive Trading Days, which period shall have commenced only after the
        Effective Date (such period the “Threshold
        Period”),
        exceeds $2.50 (subject to adjustment for reverse and forward stock splits,
        stock
        dividends, stock combinations and other similar transactions of the Common
        Stock
        that occur after the Original Issue Date), the Company may, within 1 Trading
        Day
        after the end of any such Threshold Period, deliver a written notice to the
        Holder (a “Forced
        Conversion Notice”
and
        the
        date such notice is delivered to the Holder, the “Forced
        Conversion Notice Date”)
        to
        cause the Holder to convert all or part of the then outstanding principal
        amount
        of this Note plus, if so specified in the Forced Conversion Notice, accrued
        but
        unpaid interest, liquidated damages and other amounts owing to the Holder
        under
        this Note, it being agreed that the “Conversion Date” for purposes of Section 4
        shall be deemed to occur on the third Trading Day following the Forced
        Conversion Notice Date (such third Trading Day, the “Forced
        Conversion Date”).
        The
        Company may not deliver a Forced Conversion Notice, and any Forced Conversion
        Notice delivered by the Company shall not be effective, unless all of the
        Equity
        Conditions are met on each Trading Day occurring during the applicable Threshold
        Period through and including the later of the Forced Conversion Date and
        the
        Trading Day after the date such Conversion Shares pursuant to such conversion
        are delivered to the Holder. Any Forced Conversion shall be applied ratably
        to
        all Holders based on their initial purchases of Notes pursuant to the Purchase
        Agreement, provided that any voluntary conversions by a Holder shall be applied
        against such Holder’s pro rata allocation, thereby decreasing the aggregate
        amount forcibly converted hereunder if only a portion of this Note is forcibly
        converted. For purposes of clarification, a Forced Conversion shall be subject
        to all of the provisions of Section 4, including, without limitation, the
        provision requiring payment of liquidated damages and limitations on
        conversions.

       

      
        
          
          

        

        
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      Section
        7. Negative
        Covenants.
        As long
        as any portion of this Note remains outstanding, unless the holders of at
        least
        75% in principal amount of the then outstanding Notes shall have otherwise
        given
        prior written consent, the Company shall not, and shall not permit any of
        its
        subsidiaries (whether or not a Subsidiary on the Original Issue Date) to,
        directly or indirectly:

      

      a) other
        than Permitted Indebtedness, enter into, create, incur, assume, guarantee
        or
        suffer to exist any indebtedness for borrowed money of any kind, including
        but
        not limited to, a guarantee, on or with respect to any of its property or
        assets
        now owned or hereafter acquired or any interest therein or any income or
        profits
        therefrom;

       

      b) other
        than Permitted Liens, enter into, create, incur, assume or suffer to exist
        any
        Liens of any kind, on or with respect to any of its property or assets now
        owned
        or hereafter acquired or any interest therein or any income or profits
        therefrom;

      

      c) amend
        its
        charter documents, including, without limitation, its certificate of
        incorporation and bylaws, in any manner that materially and adversely affects
        any rights of the Holder;

      

      d) repay,
        repurchase or offer to repay, repurchase or otherwise acquire more than a
        de minimis
        number
        of shares of its Common Stock or Common Stock Equivalents other than as to
        (a)
        the Conversion Shares or Warrant Shares as permitted or required under the
        Transaction Documents and (b) repurchases of Common Stock or Common Stock
        Equivalents of departing officers and directors of the Company, provided
        that
        such repurchases shall not exceed an aggregate of $100,000 for all officers
        and
        directors during the term of this Note;

      

      e) pay
        cash
        dividends or distributions on any equity securities of the Company (except
        that,
        to the extent that Debentures or the Notes are considered equity securities,
        the
        Company shall be able to pay dividends on the Debentures and
        Notes);

      

      f) enter
        into any transaction with any Affiliate of the Company which would be required
        to be disclosed in any public filing with the Commission, unless such
        transaction is made on an arm’s-length basis and expressly approved by a
        majority of the disinterested directors of the Company (even if less than
        a
        quorum otherwise required for board approval); or

      

      g) enter
        into any agreement with respect to any of the foregoing.

       

      Section
        8. Events
        of Default.
        

      

      a) “Event
        of Default”,
        wherever used herein, means any one of the following events (whatever the
        reason
        and whether it shall be voluntary or involuntary or effected by operation
        of law
        or pursuant to any judgment, decree or order of any court, or any order,
        rule or
        regulation of any administrative or governmental body):

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      

      i. any
        default in the payment of (A) the principal amount of any Note, or (B) interest
        (including Late Fees) on, or liquidated damages in respect of, any Note,
        in each
        case free of any claim of subordination, as and when the same shall become
        due
        and payable (whether on a Conversion Date or the Maturity Date or by
        acceleration or otherwise) which default, solely in the case of an interest
        payment or other default under clause (B) above, is not cured, within 3 Trading
        Days of written notice of such default sent by the Holder;

       

      ii. the
        Company shall intentionally fail to observe or perform any other covenant
        or
        agreement contained in this Note (other than a breach by the Company of its
        obligations to deliver shares of Common Stock to the Holder upon conversion
        which breach is addressed in clause (xi) below) which failure is not cured,
        if
        possible to cure, within the earlier to occur
        of
(A)
        5
Trading
        Days after notice of such default sent by the Holder or by any other
        Holder
        and
        (B)10 Trading Days after the Company shall become or should have become aware
        of
        such failure;

      

      iii. a
        material default or material event of default (subject in either case to
        any
        grace or cure period provided for in the applicable agreement, document or
        instrument) shall occur under (A) any of the Transaction Documents other
        than
        the Notes, or (B) any other material agreement, lease, document or instrument
        to
        which the Company or any Subsidiary is bound;

      

      iv. any
        representation or warranty made herein,
        in any
        other Transaction Documents, in any written statement pursuant hereto or
        thereto, or in any other report, financial statement or certificate made
        or
        delivered by the Company to the Holder or any other holder of Notes shall
        be
        untrue or incorrect in any material respect as of the date when made or deemed
        made;

      

      v. (i)
        the
        Company or any of its Subsidiaries shall commence, or there shall be commenced
        against the Company or any such Subsidiary, a case under any applicable
        bankruptcy or insolvency laws as now or hereafter in effect or any successor
        thereto, or the Company or any Subsidiary commences any other proceeding
        under
        any reorganization, arrangement, adjustment of debt, relief of debtors,
        dissolution, insolvency or liquidation or similar law of any jurisdiction
        whether now or hereafter in effect relating to the Company or any Subsidiary
        thereof or (ii) there is commenced against the Company or any Subsidiary
        thereof
        any such bankruptcy, insolvency or other proceeding which remains undismissed
        for a period of 60 days; or (iii) the Company or any Subsidiary thereof is
        adjudicated by a court of competent jurisdiction insolvent or bankrupt; or
        any
        order of relief or other order approving any such case or proceeding is entered;
        or (iv) the Company or any Subsidiary thereof suffers any appointment of
        any
        custodian or the like for it or any substantial part of its property which
        continues undischarged or unstayed for a period of 60 days; or (v) the Company
        or any Subsidiary thereof makes a general assignment for the benefit of
        creditors; or (vi) the Company shall fail to pay, or shall state that it
        is
        unable to pay, or shall be unable to pay, its debts generally as they become
        due; or (vii) the Company or any Subsidiary thereof shall call a meeting
        of its
        creditors with a view to arranging a composition, adjustment or restructuring
        of
        its debts; or (viii) the Company or any Subsidiary thereof shall by any act
        or
        failure to act expressly indicate its consent to, approval of or acquiescence
        in
        any of the foregoing; or (ix) any corporate or other action is taken by the
        Company or any Subsidiary thereof for the purpose of effecting any of the
        foregoing;

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      vi. the
        Company or any Subsidiary shall default in any of its obligations under any
        mortgage, credit agreement or other facility, indenture agreement, factoring
        agreement or other instrument under which there may be issued, or by which
        there
        may be secured or evidenced any indebtedness for borrowed money or money
        due
        under any long term leasing or factoring arrangement of the Company in an
        amount
        exceeding $150,000, whether such indebtedness now exists or shall hereafter
        be
        created and such default shall result in such indebtedness becoming or being
        declared due and payable prior to the date on which it would otherwise become
        due and payable; 

      

      vii. the
        Company shall be a party to any Change of Control Transaction or Fundamental
        Transaction, shall agree to sell or dispose of all or in excess of 50% of
        its
        assets in one or more transactions (whether or not such sale would constitute
        a
        Change of Control Transaction) or shall redeem or repurchase more than a
        de
        minimis number of its outstanding shares of Common Stock or other equity
        securities of the Company (other than redemptions of Conversion Shares and
        repurchases of shares of Common Stock or other equity securities of departing
        officers and directors of the Company; provided such repurchases shall not
        exceed $100,000, in the aggregate, for all officers and directors during
        the
        term of this Note);

      

      viii. a
        Registration Statement shall not have been declared effective by the Commission
        on or prior to the 150th calendar
        day after the Closing Date;

      

      ix. the
        Common Stock shall not be eligible for listing or quotation for trading on
        a
        Trading Market and shall not be eligible to resume listing or quotation for
        trading thereon within twenty (20) Trading Days;

      

      x. if,
        during the Effectiveness Period (as defined in the Registration Rights
        Agreement), the effectiveness of the Registration Statement lapses for any
        reason or the Holder shall not be permitted to resell Registrable Securities
        (as
        defined in the Registration Rights Agreement) under the Registration Statement,
        in either case, for more than 30 non-consecutive Trading Days during any
        12
        month period; provided,
        however,
        that in
        the event that the Company
        is negotiating a merger, consolidation, acquisition or sale of all or
        substantially all of its assets or a similar transaction and in the written
        opinion of counsel to the Company, the Registration Statement, would be required
        to be amended to include information concerning such transactions or the
        parties
        thereto that is not available or may not be publicly disclosed at the time,
        the
        Company shall be permitted an additional 20 consecutive Trading Days during
        any
        12 month period relating to such an event; and provided
        further;
        that in
        the event the Registration Statement is declared effective prior to the date
        on
        which the Company files its Form 10-KSB for the fiscal year ended December
        31,
        2006 with the Commission, it shall not be an Event of Default hereunder if
        the
        effectiveness of such Registration Statement is suspended for up to 60 days
        while the Commission reviews the post-effective amendment to the Registration
        Statement required in connection therewith as provided in the Registration
        Rights Agreement (and the Trading Days during which the Registration Statement
        is so suspended shall not count towards the number of Trading Days during
        which
        the Registration Statement is not effective for the purposes of this Section
        8(a)(ix);

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      

      xi. the
        Company shall fail for any reason to deliver certificates to a Holder prior
        to
        the fifth Trading Day after a Conversion Date pursuant to and in accordance
        with
        Section 4(d) or the Company shall provide notice to the Holder, including
        by way
        of public announcement, at any time, of its intention not to comply with
        requests for conversions of any Notes in accordance with the terms
        hereof;

      

      xii. any
        monetary judgment, writ or similar final process shall be entered or filed
        against the Company, any subsidiary or any of their respective property or
        other
        assets for more than $100,000, and such judgment, writ or similar final process
        shall remain unvacated, unbonded or unstayed for a period of 45 calendar
        days;
        or

      

      xiii. the
        failure to deliver the Bonus Shares to a Holder prior to the fifteenth
        (15th)
        Trading
        Day after the Closing Date. 

      

      b) Remedies
        Upon Event of Default.
        If any
        Event of Default occurs, the full principal amount of this Note, together
        with
        interest and other amounts owing in respect thereof, to the date of acceleration
        shall become, at the Holder’s election, immediately due and payable in cash. The
        aggregate amount payable upon an Event of Default shall be equal to the
        Mandatory Prepayment Amount. Commencing 5 days after the occurrence of any
        Event
        of Default that results in the eventual acceleration of this Note, the interest
        rate on this Note shall accrue at the rate of 18% per annum, or such lower
        maximum amount of interest permitted to be charged under applicable law.
        All
        Notes for which the full Mandatory Prepayment Amount hereunder shall have
        been
        paid in accordance herewith shall promptly be surrendered to or as directed
        by
        the Company. The Holder need not provide and the Company hereby waives any
        presentment, demand, protest or other notice of any kind, and the Holder
        may
        immediately and without expiration of any grace period enforce any and all
        of
        its rights and remedies hereunder and all other remedies available to it
        under
        applicable law. Such declaration may be rescinded and annulled by Holder
        at any
        time prior to payment hereunder and the Holder shall have all rights as a
        Note
        holder until such time, if any, as the full payment under this Section shall
        have been received by it. No such rescission or annulment shall affect any
        subsequent Event of Default or impair any right consequent thereon.

      

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      

      Section
        9. Miscellaneous.
        

       

      a) Notices.
        Any and
        all notices or other communications or deliveries to be provided by the Holders
        hereunder, including, without limitation, any Notice of Conversion, shall
        be in
        writing and delivered personally, by facsimile, sent by a nationally recognized
        overnight courier service, addressed to the Company, at the address set forth
        above, facsimile number (212)
        832-7563, Attn:
        Chief Executive Officer, with a copy to Jared Taylor at c/o Vaughn &
Associates, 639 Granite Street, Braintree, MA 02184, facsimile number
or
        such
        other address or facsimile number as the Company may specify for such purposes
        by notice to the Holders delivered in accordance with this Section. Any and
        all
        notices or other communications or deliveries to be provided by the Company
        hereunder shall be in writing and delivered personally, by facsimile, sent
        by a
        nationally recognized overnight courier service addressed to each Holder
        at the
        facsimile telephone number or address of such Holder appearing on the books
        of
        the Company, or if no such facsimile telephone number or address appears,
        at the
        principal place of business of the Holder. Any notice or other communication
        or
        deliveries hereunder shall be deemed given and effective on the earliest
        of (i)
        the date of transmission, if such notice or communication is delivered via
        facsimile at the facsimile telephone number specified in this Section prior
        to
        5:30 p.m. (New York City time), (ii) the date after the date of transmission,
        if
        such notice or communication is delivered via facsimile at the facsimile
        telephone number specified in this Section later than 5:30 p.m. (New York
        City
        time) on any date and earlier than 11:59 p.m. (New York City time) on such
        date,
        (iii) the second Business Day following the date of mailing, if sent by
        nationally recognized overnight courier service, or (iv) upon actual receipt
        by
        the party to whom such notice is required to be given.

       

      b) Absolute
        Obligation.
        Except
        as expressly provided herein, no provision of this Note shall alter or impair
        the obligation of the Company, which is absolute and unconditional, to pay
        the
        principal of, interest and liquidated damages (if any) on, this Note at the
        time, place, and rate, and in the coin or currency, herein prescribed. This
        Note
        is a direct debt obligation of the Company. This Note ranks pari passu
        with all
        other Notes now or hereafter issued under the terms set forth
        herein.  

       

      c) Lost
        or Mutilated Note.
        If this
        Note shall be mutilated, lost, stolen or destroyed, the Company shall execute
        and deliver, in exchange and substitution for and upon cancellation of a
        mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed
        Note, a new Note for the principal amount of this Note so mutilated, lost,
        stolen or destroyed but only upon receipt of evidence of such loss, theft
        or
        destruction of such Note, and of the ownership hereof, and indemnity, if
        requested, all reasonably satisfactory to the Company.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      

      d) Governing
        Law.
        All
        questions concerning the construction, validity, enforcement and interpretation
        of this Note shall be governed by and construed and enforced in accordance
        with
        the internal laws of the State of New York, without regard to the principles
        of
        conflicts of law thereof. Each party agrees that all legal proceedings
        concerning the interpretations, enforcement and defense of the transactions
        contemplated by any of the Transaction Documents (whether brought against
        a
        party hereto or its respective Affiliates, directors, officers, shareholders,
        employees or agents) shall be commenced in the state and federal courts sitting
        in the City of New York, Borough of Manhattan (the “New
        York Courts”).
        Each
        party hereto hereby irrevocably submits to the exclusive jurisdiction of
        the New
        York Courts for the adjudication of any dispute hereunder or in connection
        herewith or with any transaction contemplated hereby or discussed herein
        (including with respect to the enforcement of any of the Transaction Documents),
        and hereby irrevocably waives, and agrees not to assert in any suit, action
        or
        proceeding, any claim that it is not personally subject to the jurisdiction
        of
        any such court, or such New York Courts are improper or inconvenient venue
        for
        such proceeding. Each party hereby irrevocably waives personal service of
        process and consents to process being served in any such suit, action or
        proceeding by mailing a copy thereof via registered or certified mail or
        overnight delivery (with evidence of delivery) to such party at the address
        in
        effect for notices to it under this Note and agrees that such service shall
        constitute good and sufficient service of process and notice thereof. Nothing
        contained herein shall be deemed to limit in any way any right to serve process
        in any manner permitted by law. Each party hereto hereby irrevocably waives,
        to
        the fullest extent permitted by applicable law, any and all right to trial
        by
        jury in any legal proceeding arising out of or relating to this Note or the
        transactions contemplated hereby. If either party shall commence an action
        or
        proceeding to enforce any provisions of this Note, then the prevailing party
        in
        such action or proceeding shall be reimbursed by the other party for its
        attorneys fees and other costs and expenses incurred with the investigation,
        preparation and prosecution of such action or proceeding.

       

      e) Waiver.
        Any
        waiver by the Company or the Holder of a breach of any provision of this
        Note
        shall not operate as or be construed to be a waiver of any other breach of
        such
        provision or of any breach of any other provision of this Note. The failure
        of
        the Company or the Holder to insist upon strict adherence to any term of
        this
        Note on one or more occasions shall not be considered a waiver or deprive
        that
        party of the right thereafter to insist upon strict adherence to that term
        or
        any other term of this Note. Any waiver must be in writing.

       

      f) Severability.
        If any
        provision of this Note is invalid, illegal or unenforceable, the balance
        of this
        Note shall remain in effect, and if any provision is inapplicable to any
        Person
        or circumstance, it shall nevertheless remain applicable to all other Persons
        and circumstances. If it shall be found that any interest or other amount
        deemed
        interest due hereunder violates applicable laws governing usury, the applicable
        rate of interest due hereunder shall automatically be lowered to equal the
        maximum permitted rate of interest. The Company covenants (to the extent
        that it
        may lawfully do so) that it shall not at any time insist upon, plead, or
        in any
        manner whatsoever claim or take the benefit or advantage of, any stay, extension
        or usury law or other law which would prohibit or forgive the Company from
        paying all or any portion of the principal of or interest on this Note as
        contemplated herein, wherever enacted, now or at any time hereafter in force,
        or
        which may affect the covenants or the performance of this indenture, and
        the
        Company (to the extent it may lawfully do so) hereby expressly waives all
        benefits or advantage of any such law, and covenants that it will not, by
        resort
        to any such law, hinder, delay or impeded the execution of any power herein
        granted to the Holder, but will suffer and permit the execution of every
        such as
        though no such law has been enacted.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      g) Next
        Business Day.
        Whenever any payment or other obligation hereunder shall be due on a day
        other
        than a Business Day, such payment shall be made on the next succeeding Business
        Day.

      

      h) Headings.
        The
        headings contained herein are for convenience only, do not constitute a part
        of
        this Note and shall not be deemed to limit or affect any of the provisions
        hereof.

      

      i) Assumption. 
        Any successor to the Company or any surviving entity in a Fundamental
        Transaction shall (i) assume, prior to such Fundamental Transaction, all
        of the
        obligations of the Company under this Note and the other Transaction Documents
        pursuant to written agreements in form and substance satisfactory to the
        Holder
        (such approval not to be unreasonably withheld or delayed) and (ii) issue
        to the
        Holder a new note of such successor entity evidenced by a written instrument
        substantially similar in form and substance to this Note, including, without
        limitation, having a principal amount and interest rate equal to the principal
        amount and the interest rate of this Note and having similar ranking to this
        Note, which shall be satisfactory to the Holder (any such approval not to
        be
        unreasonably withheld or delayed).  The provisions of this Section 9(i)
        shall apply similarly and equally to successive Fundamental Transactions
        and
        shall be applied without regard to any limitations of this Note.

      

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

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the Company has caused this Note to be duly executed by
        a duly
        authorized officer as of the date first above indicated.

       

      
        	 	 	 
	 	
                VISTULA
                  COMMUNICATIONS SERVICES, INC.

              
	 
 	 
 	 
 
	
              	By:  	
              
	 	
                

                Name:
                  Jared P. Taylor

              
	 	
                Title:
                  Chief Financial Officer

              

      

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      ANNEX
        A

      

      NOTICE
        OF CONVERSION

      

      The
        undersigned hereby elects to convert principal under the 12% Convertible
        Note of
        Vistula Communications Services, Inc., a Delaware corporation (the “Company”),
        due
        on April __, 2009, into shares of common stock, par value $0.001 per share
        (the
“Common
        Stock”),
        of
        the Company according to the conditions hereof, as of the date written below.
        If
        shares are to be issued in the name of a person other than the undersigned,
        the
        undersigned will pay all transfer taxes payable with respect thereto and
        is
        delivering herewith such certificates and opinions as reasonably requested
        by
        the Company in accordance therewith. No fee will be charged to the holder
        for
        any conversion, except for such transfer taxes, if any.

      

      By
        the
        delivery of this Notice of Conversion the undersigned represents and warrants
        to
        the Company that its ownership of the Common Stock does not exceed the amounts
        determined in accordance with Section 13(d) of the Exchange Act, specified
        under
        Section 4 of this Note.

      

      The
        undersigned agrees to comply with the prospectus delivery requirements under
        the
        applicable securities laws in connection with any transfer of the aforesaid
        shares of Common Stock. 

      

        
          	
                  Conversion
                    calculations:

                	 
	 	
                  Date
                    to Effect Conversion:

                
	 	 
	 	
                  Principal
                    Amount of Notes to be Converted:

                
	 	 
	 	
                  Number
                    of shares of Common Stock to be issued:

                
	 	 
	 	
                  Signature:

                
	 	 
	 	
                  Name:

                
	 	 
	 	
                  Address:

                

        

         

        
          
            
            

          

          
            26

            
              

            

          

          
            
            

          

        

      

      

      Schedule
        1

      

      CONVERSION
        SCHEDULE

      

      The
        12%
        Convertible Notes due on April ___, 2009, in the aggregate principal amount
        of
        $____________ issued by Vistula Communications Services, Inc. This Conversion
        Schedule reflects conversions made under Section 4 of the above referenced
        Note.

      

      Dated:

       

      
        
          	
                  Date
                    of Conversion

                  (or
                    for first entry, Original Issue Date)

                	 	
                  Amount
                    of Conversion

                	 	
                  Aggregate
                    Principal Amount Remaining Subsequent to Conversion

                  (or
                    original Principal Amount)

                	 	
                  Company
                    Attest

                
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

        

      

      

      
        
          
          

        

        
          27NEITHER
      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
      COMMUNICATION 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 Communication
      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. Definitions.
      Capitalized terms used and not otherwise defined herein shall have the meanings
      set forth in that certain Securities Purchase Agreement (the “Purchase
      Agreement”),
      dated
      April __, 2007, among the Company and the purchasers signatory
      thereto.

     

    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 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. Notwithstanding anything herein to the contrary, the Holder shall not
      be
      required to physically surrender this Warrant to the Company until the Holder
      has purchased all of the Warrant Shares available hereunder and the Warrant
      has
      been exercised in full, in which case, the Holder shall surrender this Warrant
      to the Company for cancellation within 3 Trading Days of the date the final
      Notice of Exercise is delivered to the Company. Partial exercises of this
      Warrant resulting in purchases of a portion of the total number of Warrant
      Shares available hereunder shall have the effect of lowering the outstanding
      number of Warrant Shares purchasable hereunder in an amount equal to the
      applicable number of Warrant Shares purchased. The Holder and the Company shall
      maintain records showing the number of Warrant Shares purchased and the date
      of
      such purchases. The Company shall deliver any objection to any Notice of
      Exercise Form within 1 Business Days of receipt of such notice. In the event
      of
      any dispute or discrepancy, the records of the Holder shall be controlling
      and
      determinative in the absence of manifest error. The
      Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
      that, by reason of the provisions of this paragraph, following the purchase
      of a
      portion of the Warrant Shares hereunder, the number of Warrant Shares available
      for purchase hereunder at any given time may be less than the amount stated
      on
      the face hereof.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    b) Exercise
      Price.
      The
      exercise price per share of the Common Stock under this Warrant shall be $1.00,
      subject to adjustment hereunder (the “Exercise
      Price”).

     

    c) Cashless
      Exercise.
      If at
      any time after one year from the Closing Date 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 VWAP on the Trading Day 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.

            

    

    

    Notwithstanding
      anything herein to the contrary, on the Termination Date, this Warrant shall
      be
      automatically exercised via cashless exercise pursuant to this Section
      2(c).

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    d) Exercise
      Limitations.
      The
      Company shall not effect any exercise of this Warrant, and a Holder shall not
      have the right to exercise any portion of this Warrant, pursuant to Section
      2 or
      otherwise, to the extent that after giving effect to such issuance after
      exercise as set forth on the applicable Notice of Exercise, such Holder
      (together with such Holder’s Affiliates, and any other person or entity acting
      as a group together with such Holder or any of such Holder’s Affiliates), would
      beneficially own in excess of the Beneficial Ownership Limitation (as defined
      below).  For purposes of the foregoing sentence, the number of shares of
      Common Stock beneficially owned by such Holder and its Affiliates shall include
      the number of shares of Common Stock issuable upon exercise of this Warrant
      with
      respect to which such determination 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 such
      Holder or any of its Affiliates and (B) exercise or conversion of the
      unexercised or nonconverted portion of any other securities of the Company
      (including, without limitation, any other Common Stock Equivalents) subject
      to a
      limitation on conversion or exercise analogous to the limitation contained
      herein beneficially owned by such 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 and the rules and regulations promulgated thereunder, it being
      acknowledged by the Holder that the Company is not representing to such Holder
      that such calculation is in compliance with Section 13(d) of the Exchange Act
      and such 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 such Holder together with any
      Affiliates) and of which portion of this Warrant is exercisable shall be in
      the
      sole discretion of the Holder, and the submission of a Notice of Exercise shall
      be deemed to be the Holder’s determination of whether this Warrant is
      exercisable (in relation to other securities owned by such Holder together
      with
      any Affiliates) and of which portion of this Warrant is exercisable, in each
      case subject the Beneficial Ownership Limitation, and the Company shall have
      no
      obligation to verify or confirm the accuracy of such determination. In addition,
      a determination as to any group status as contemplated above shall be determined
      in accordance with Section 13(d) of the Exchange Act and the rules and
      regulations promulgated thereunder. For purposes of this Section 2(d), in
      determining the number of outstanding shares of Common Stock, a 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 a Holder, the
      Company shall within two Trading Days confirm orally and in writing to such
      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 such Holder or its Affiliates since the date as
      of
      which such number of outstanding shares of Common Stock was reported. The
“Beneficial
      Ownership Limitation”
shall
      be 4.99% or 9.99% per signature page of Purchase Agreement of the number of
      shares of the Common Stock outstanding immediately after giving effect to the
      issuance of shares of Common Stock issuable upon exercise of this Warrant.
      The
      Beneficial Ownership Limitation provisions of this Section 2(d) may be waived
      by
      such Holder, at the election of such Holder, upon not less than 61 days’ prior
      notice to the Company to change the Beneficial Ownership Limitation to 9.99%
      of
      the number of shares of the Common Stock outstanding immediately after giving
      effect to the issuance of shares of Common Stock upon exercise of this Warrant,
      and the provisions of this Section 2(d) shall continue to apply. Upon such
      a
      change by a Holder of the Beneficial Ownership Limitation from such 4.99%
      limitation to such 9.99% limitation, the Beneficial Ownership Limitation may
      not
      be further waived by such Holder. The provisions of this paragraph shall be
      construed and implemented in a manner otherwise than in strict conformity with
      the terms of this Section 2(d) to correct this paragraph (or any portion hereof)
      which may be defective or inconsistent with the intended Beneficial Ownership
      Limitation herein contained or to make changes or supplements necessary or
      desirable to properly give effect to such limitation. The limitations contained
      in this paragraph shall apply to a successor holder of this
      Warrant.

     

    
      
        
        

      

      
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    e) 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 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
      Agent Commission (“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 (or by cashless exercise, if permitted) 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.

     

    
      
        
        

      

      
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    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) 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.

     

    
      
        
        

      

      
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    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.

     

    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.

     

    f) Call
      Provision.
      Subject
      to the provisions of Section 2(d) and this Section 2(f), if, after the Effective
      Date, (i) the VWAP for each of 20 consecutive Trading Days (the “Measurement
      Period,”
which
      20 consecutive Trading Day period shall not have commenced until after the
      Effective Date) exceeds $2.50, subject to adjustment for reverse and forward
      stock splits, stock dividends, stock combinations and other similar transactions
      of the Common Stock that occur after the Original Issue Date, (ii) the average
      daily volume for such Measurement Period exceeds 100,000 shares of Common Stock
      per Trading Day (subject to adjustment for forward and reverse stock splits,
      recapitalizations, stock dividends and the like after the Initial Exercise
      Date)
      and (iii) the Holder is not in possession of any information that constitutes,
      or might constitute, material non-public information which was provided by
      the
      Company, then the Company may, within 1 Trading Day of the end of such
      Measurement Period, call for cancellation of all or any portion of this Warrant
      for which a Notice of Exercise has not yet been delivered (such right, a
“Call”)
      for
      consideration equal to $0.001 per Share. To exercise this right, the Company
      must deliver to the Holder an irrevocable written notice (a “Call
      Notice”),
      indicating therein the portion of unexercised portion of this Warrant to which
      such notice applies. If the conditions set forth below for such Call are
      satisfied from the period from the date of the Call Notice through and including
      the Call Date (as defined below), then any portion of this Warrant subject
      to
      such Call Notice for which a Notice of Exercise shall not have been received
      by
      the Call Date will be cancelled at 6:30 p.m. (New York City time) on the tenth
      Trading Day after the date the Call Notice is received by the Holder (such
      date
      and time, the “Call
      Date”).
      Any
      unexercised portion of this Warrant to which the Call Notice does not pertain
      will be unaffected by such Call Notice. In furtherance thereof, the Company
      covenants and agrees that it will honor all Notices of Exercise with respect
      to
      Warrant Shares subject to a Call Notice that are tendered through 6:30 p.m.
      (New
      York City time) on the Call Date. The parties agree that any Notice of Exercise
      delivered following a Call Notice which calls less than all the Warrants shall
      first reduce to zero the number of Warrant Shares subject to such Call Notice
      prior to reducing the remaining Warrant Shares available for purchase under
      this
      Warrant. For example, if (x) this Warrant then permits the Holder to acquire
      100
      Warrant Shares, (y) a Call Notice pertains to 75 Warrant Shares, and (z) prior
      to 6:30 p.m. (New York City time) on the Call Date the Holder tenders a Notice
      of Exercise in respect of 50 Warrant Shares, then (1) on the Call Date the
      right
      under this Warrant to acquire 25 Warrant Shares will be automatically cancelled,
      (2) the Company, in the time and manner required under this Warrant, will have
      issued and delivered to the Holder 50 Warrant Shares in respect of the exercises
      following receipt of the Call Notice, and (3) the Holder may, until the
      Termination Date, exercise this Warrant for 25 Warrant Shares (subject to
      adjustment as herein provided and subject to subsequent Call Notices). Subject
      again to the provisions of this Section 2(f), the Company may deliver subsequent
      Call Notices for any portion of this Warrant for which the Holder shall not
      have
      delivered a Notice of Exercise. Notwithstanding anything to the contrary set
      forth in this Warrant, the Company may not deliver a Call Notice or require
      the
      cancellation of this Warrant (and any such Call Notice shall be void), unless,
      from the beginning of the Measurement Period through the Call Date, (i) the
      Company shall have honored in accordance with the terms of this Warrant all
      Notices of Exercise delivered by 6:30 p.m. (New York City time) on the Call
      Date, and (ii) the Registration Statement shall be effective as to all Warrant
      Shares and the prospectus thereunder available for use by the Holder for the
      resale of all such Warrant Shares, and (iii) the Common Stock shall be listed
      or
      quoted for trading on the Trading Market, and (iv) there is a sufficient number
      of authorized shares of Common Stock for issuance of all Securities under the
      Transaction Documents, and (v) the issuance of the shares shall not cause a
      breach of any provision of 2(d) herein. The Company’s right to call the Warrants
      under this Section 2(f) shall be exercised ratably among the Holders based
      on
      each Holder’s initial purchase of Warrants.

     

    
      
        
        

      

      
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    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 upon exercise of 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 immediately before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding
      immediately after such event and the number of shares issuable upon exercise
      of
      this Warrant shall be proportionately adjusted such that the aggregate Exercise
      Price of this Warrant shall remain unchanged. 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.

     

    
      
        
        

      

      
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    b) Subsequent
      Equity Sales.
      If the
      Company or any Subsidiary thereof, as applicable, at any time while this Warrant
      is outstanding, shall sell or grant any option to purchase, or sell or grant
      any
      right to reprice, or otherwise dispose of or issue (or announce any offer,
      sale,
      grant or any option to purchase or other disposition) any Common Stock or Common
      Stock Equivalents entitling any Person to acquire shares of Common Stock, at
      an
      effective price per share less than the then Exercise Price (such lower price,
      the “Base
      Share Price”
and
      such issuances collectively, a “Dilutive
      Issuance”)
      (if
      the holder of the Common Stock or Common Stock Equivalents so issued shall
      at
      any time, whether by operation of purchase price adjustments, reset provisions,
      floating conversion, exercise or exchange prices or otherwise, or due to
      warrants, options or rights per share which are issued in connection with such
      issuance, be entitled to receive shares of Common Stock at an effective price
      per share which is less than the Exercise Price, such issuance shall be deemed
      to have occurred for less than the Exercise Price on such date of the Dilutive
      Issuance), then the Exercise Price shall be reduced and only reduced to equal
      the Base Share Price and the number of Warrant Shares issuable hereunder shall
      be increased such that the aggregate Exercise Price payable hereunder, after
      taking into account the decrease in the Exercise Price, shall be equal to the
      aggregate Exercise Price prior to such adjustment. Such adjustment shall be
      made
      whenever such Common Stock or Common Stock Equivalents are issued; provided,
      however,
      if the
      Exercise Price is adjusted due to the issuance of Common Stock Equivalents
      and
      all of such Common Stock Equivalents expire pursuant to their own terms before
      they are exercised, exchanged and/or converted, an upward adjustment will be
      made such that the Exercise Price will no longer reflect the issuance of such
      Common Stock Equivalents; provided,
      further,
      such
      upward adjustment shall only be effective upon at least 20 days prior written
      notice to the Holder of such upward adjustment. The Company shall notify the
      Holder in writing, no later than the Trading Day following the issuance of
      any
      Common Stock or Common Stock Equivalents subject to this section, indicating
      therein the applicable issuance price, or of applicable reset price, exchange
      price, conversion price and other pricing terms (such notice the “Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
      Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
      entitled to receive a number of Warrant Shares based upon the Base Share Price
      regardless of whether the Holder accurately refers to the Base Share Price
      in
      the Notice of Exercise. Notwithstanding the foregoing, no adjustments, Alternate
      Consideration nor notices shall be made, paid or issued under this Section
      3 in
      respect of an Exempt Issuance. If the Company issues a variable rate security,
      despite the prohibition thereon in the Purchase Agreement, the Company shall
      be
      deemed to have issued Common Stock or Common Stock Equivalents at the lowest
      possible conversion or exercise price at which such securities may be converted
      or exercised in the case of a Variable Rate Transaction (as defined in the
      Purchase Agreement).

     

    
      
        
        

      

      
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    c) Subsequent
      Rights Offerings.
      If the
      Company, at any time while the Warrant is outstanding, shall issue rights,
      options or warrants to all holders of Common Stock (and not to Holders)
      entitling them to subscribe for or purchase shares of Common Stock at a price
      per share less than the VWAP at the record date mentioned below, then the
      Exercise Price shall be multiplied by a fraction, of which the denominator
      shall
      be the number of shares of the Common Stock outstanding on the date of issuance
      of such rights or warrants plus the number of additional shares of Common Stock
      offered for subscription or purchase, and of which the numerator shall be the
      number of shares of the Common Stock outstanding on the date of issuance of
      such
      rights or warrants plus the number of shares which the aggregate offering price
      of the total number of shares so offered (assuming receipt by the Company in
      full of all consideration payable upon exercise of such rights, options or
      warrants) would purchase at such VWAP. Such adjustment shall be made whenever
      such rights or warrants are issued, and shall become effective immediately
      after
      the record date for the determination of stockholders entitled to receive such
      rights, options or warrants.

     

    d) Pro
      Rata Distributions.
      If the
      Company, at any time prior to the Termination Date, shall distribute to all
      holders of Common Stock (and not to Holders of the Warrants) evidences of its
      indebtedness or assets (including cash and cash dividends) or rights or warrants
      to subscribe for or purchase any security other than the Common Stock (which
      shall be subject to Section 3(b)), then in each such case the Exercise Price
      shall be adjusted by multiplying the Exercise Price in effect immediately prior
      to the record date fixed for determination of stockholders entitled to receive
      such distribution by a fraction of which the denominator shall be the VWAP
      determined as of the record date mentioned above, and of which the numerator
      shall be such VWAP on such record date less the then per share fair market
      value
      at such record date of the portion of such assets or evidence of indebtedness
      so
      distributed applicable to one outstanding share of the Common Stock as
      determined by the Board of Directors in good faith. In either case the
      adjustments shall be described in a statement provided to the Holder of the
      portion of assets or evidences of indebtedness so distributed or such
      subscription rights applicable to one share of Common Stock. Such adjustment
      shall be made whenever any such distribution is made and shall become effective
      immediately after the record date mentioned above.

     

    
      
        
        

      

      
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    e) 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
      (each “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
      immediately prior to the occurrence of such Fundamental Transaction, the number
      of shares of Common Stock of the successor or acquiring corporation or of the
      Company, if it is the surviving corporation, and any additional consideration
      (the “Alternate
      Consideration”)
      receivable as a result of such 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. 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 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(e) and insuring that this Warrant (or any such replacement security) will
      be
      similarly adjusted upon any subsequent transaction analogous to a Fundamental
      Transaction. Notwithstanding anything to the contrary, in the event of a
      Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
      transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
      as amended, or (3) a Fundamental Transaction involving a person or entity not
      traded on a national securities exchange, the Nasdaq Global Select Market,
      the
      Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any successor
      entity shall pay at the Holder’s option, exercisable at any time concurrently
      with or within 30 days after the consummation of the Fundamental Transaction,
      an
      amount of cash equal to the value of this Warrant as determined in accordance
      with the Black-Scholes option pricing formula using an expected volatility
      equal
      to the 100 day historical price volatility obtained from the HVT function on
      Bloomberg L.P. as of the trading day immediately prior to the public
      announcement of the Fundamental Transaction.

     

    f) 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.

     

    
      
        
        

      

      
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    g) 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.

     

    h) 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 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.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    Section
      5. Transfer
      of Warrant.

     

    a) Transferability.
      Subject
      to compliance with any applicable securities laws and the conditions set forth
      in Section 4 hereof and to the provisions of Section 4.1 of the Purchase
      Agreement, this Warrant and all rights hereunder (including, without limitation,
      any registration rights) 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 5(a) shall be 100,000 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 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.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Section
      6. Miscellaneous.

     

    a) Title
      to Warrant.
      Prior
      to the Termination Date and subject to compliance with applicable laws and
      Section 5 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 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 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.
      

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    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.

     

    f) Jurisdiction.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be determined in accordance with the provisions of the
      Purchase Agreement.

     

    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 Purchase Agreement.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    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.

     

    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.

    

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

    
      
        
        

      

      
        15

        
          

        

      

       

    

     

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

     

    Dated:
      April __, 2007

    
      	 	 	 
	 	VISTULA
              COMMUNICATIONS SERVICES, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
              Jared P. Taylor
	 	
              Title:
                Chief Financial Officer

            

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    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.

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