Document:

EXECUTION
          COPY

      

       

      SECURITIES
        PURCHASE AGREEMENT

       

      This
        Securities Purchase Agreement (this “Agreement”)
        is
        dated as of April 6, 2007, among Vistula Communications Services, Inc., a
        Delaware corporation (the “Company”),
        and
        each purchaser identified on the signature pages hereto (each, including
        its
        successors and assigns, a “Purchaser”
and
        collectively the “Purchasers”).

       

      WHEREAS,
        subject to the terms and conditions set forth in this Agreement and pursuant
        to
        Section 4(2) of the Securities Act of 1933, as amended (the “Securities
        Act”)
        and
        Rule 506 promulgated thereunder, the Company desires to issue and sell to
        each
        Purchaser, and each Purchaser, severally and not jointly, desires to purchase
        from the Company, securities of the Company as more fully described in this
        Agreement.

       

      NOW,
        THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
        and for other good and valuable consideration the receipt and adequacy of
        which
        are hereby acknowledged, the Company and each Purchaser agree as
        follows:

       

      ARTICLE
        I.

      DEFINITIONS

       

      1.1 Definitions.
        In
        addition to the terms defined elsewhere in this Agreement: (a) capitalized
        terms
        that are not otherwise defined herein have the meanings given to such terms
        in
        the Notes (as defined herein), and (b) the following terms have the meanings
        indicated in this Section 1.1:

       

      “Action”
shall
        have the meaning ascribed to such term in Section 3.1(j).

       

      “Affiliate”
means
        any Person that, directly or indirectly through one or more intermediaries,
        controls or is controlled by or is under common control with a Person, as
        such
        terms are used in and construed under Rule 405 under the Securities
        Act.
        With
        respect to a Purchaser, any investment fund or managed account that is managed
        on a discretionary basis by the same investment manager as such Purchaser
        will
        be deemed to be an Affiliate of such Purchaser.

       

      “Bonus
        Shares”
means
        the 5 million shares of Common Stock, in the aggregate, to be transferred
        from
        Executive Management Services Limited (“EMS”)
        to
        each Purchaser within 15 Trading Days following the Closing Date.

       

      “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.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Closing”
means
        the closing of the purchase and sale of the Securities pursuant to Section
        2.1.

       

      “Closing
        Date”
means
        the date of the Closing.

       

      “Commission”
means
        the Securities and Exchange Commission.

       

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

       

      “Common
        Stock Equivalents”
means
        any securities of the Company or the Subsidiaries which would entitle the
        holder
        thereof to acquire at any time Common Stock, including without limitation,
        any
        debt, preferred stock, rights, options, warrants or other instrument that
        is at
        any time convertible into or exercisable or exchangeable for, or otherwise
        entitles the holder thereof to receive, Common Stock.

       

      “Company
        Counsel”
means
        Foley Hoag LLP.

       

      “Conversion
        Price”
shall
        have the meaning ascribed to such term in the Notes. 

       

      “Disclosure
        Schedules”
shall
        have the meaning ascribed to such term in Section 3.1 hereof.

       

      “Effective
        Date”
means
        the date that the initial Registration Statement filed by the Company pursuant
        to the Registration Rights Agreement is first declared effective by the
        Commission.

       

      “Escrow
        Agent”
shall
        have the meaning set forth in the Escrow Agreement.

       

      “Escrow
        Agreement”
shall
        mean the Escrow Agreement in substantially the form of Exhibit
        E
        hereto
        executed and delivered contemporaneously with this Agreement. 

       

      “Evaluation
        Date”
shall
        have the meaning ascribed to such term in Section 3.1(r).

       

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

       

      
        
          
          

        

        
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      “Exempt
        Issuance”
means
        the issuance of (a) shares of Common Stock or options to employees, consultants,
        officers or directors of the Company pursuant to any stock or option plan
        duly
        adopted for such purpose by a majority of the non-employee members of the
        Board
        of Directors of the Company or a majority of the members of a committee of
        non-employee directors established for such purpose, (b) securities issued
        hereunder or upon the exercise or exchange of or conversion of any securities
        issued hereunder, convertible securities, options or warrants issued and
        outstanding on the date of this Agreement, provided that such securities
        have
        not been amended since the date of this Agreement to increase the number
        of such
        securities or to decrease the exercise or conversion price of any such
        securities, (c) warrants issued to an institutional lender licensed as such
        by a
        governmental agency in direct connection to a loan for money borrowed or
        as
        otherwise permitted by this Agreement and the Transaction Documents, provided
        such warrant is issued with a strike price at least equal to the market price
        of
        the Common Stock on the date of such issuance and is not subject to further
        price adjustment in respect of subsequent issuances of Common Stock or Common
        Stock Equivalents at a price below such strike price and the issuance of
        Common
        Stock upon exercise of such warrants and such issuance does not result in
        an
        adjustment to the conversion, exchange or exercise price of any other securities
        of the Company; (d) Common Stock issued in connection with the settlement
        of
        claims or litigation first arising after the Closing Date up to an aggregate
        maximum of 500,000 shares (subject to adjustment for reverse and forward
        stock
        splits and the like) and such issuance does not result in an adjustment to
        the
        conversion, exchange or exercise price of any other securities of the Company;
        (e) securities issued pursuant to acquisitions, joint ventures or other
        strategic transactions, including, without limitation, technology transfer
        and
        licensing transactions, but shall not include a transaction in which the
        Company
        is issuing securities primarily for the purpose of raising capital or to
        an
        entity whose primary business is investing in securities, (f) securities
        issued
        under agreements executed by the Company prior to the date of this Agreement
        and
        disclosed in the SEC Reports; and (g) warrants to be issued to the Placement
        Agent pursuant to an agreement, dated as of March 16, 2007, between the
        Placement Agent and the Company and any warrants to be issued to Persons
        that
        are disclosed in Schedule 3.1(s) to this Agreement and the issuance of Common
        Stock upon exercise of such warrants. 

       

      “GAAP”
shall
        have the meaning ascribed to such term in Section 3.1(h) hereof.

       

      “Indebtedness”
shall
        have the meaning ascribed to such term in Section 3.1(ii) hereof.

       

      “Intellectual
        Property Rights”
shall
        have the meaning ascribed to such term in Section 3.1(o).

       

      “Legend
        Removal Date”
shall
        have the meaning ascribed to such term in Section 4.1(c). 

       

      “Liens”
means
        a
        lien, charge, security interest, encumbrance, right of first refusal, preemptive
        right or other restriction other than rights of first refusal, preemptive
        rights
        or restrictions arising under the Transaction Documents or under applicable
        securities laws. 

       

      “Material
        Adverse Effect”
shall
        have the meaning assigned to such term in Section 3.1(b) hereof.

       

      “Material
        Permits”
shall
        have the meaning ascribed to such term in Section 3.1(m).

       

      “Maximum
        Rate”
shall
        have the meaning ascribed to such term in Section 5.17.

       

      
        
          
          

        

        
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      “Notes”
means,
        the 12% Subordinated Convertible Notes, in the form of Exhibit
        A,
        due,
        subject to the terms therein, two years from their date of issuance, issued
        by
        the Company to the Purchasers hereunder.

       

      “Participation
        Maximum”
shall
        have the meaning ascribed to such term in Section 4.13. 

       

      “Person”
means
        an individual or corporation, partnership, trust, incorporated or unincorporated
        association, joint venture, limited liability company, joint stock company,
        government (or an agency or subdivision thereof) or other entity of any
        kind.

       

      “Placement
        Agent”
shall
        mean Oceana Partners, LLC.

       

      “Pre-Notice”
shall
        have the meaning ascribed to such term in Section 4.13.

       

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

       

      “Purchaser
        Party”
shall
        have the meaning ascribed to such term in Section 4.11.

       

      “Registration
        Rights Agreement”
means
        the Registration Rights Agreement, dated the date hereof, among the Company
        and
        the Purchasers, in the form of Exhibit
        B
        attached
        hereto.

       

      “Registration
        Statement”
means
        a
        registration statement meeting the requirements set forth in the Registration
        Rights Agreement and covering the resale of the Bonus Shares and Underlying
        Shares by each Purchaser as provided for in the Registration Rights
        Agreement.

      

      “Required
        Approvals”
shall
        have the meaning ascribed to such term in Section 3.1(e).

      

      “Required
        Minimum”
means,
        as of any date, the maximum aggregate number of shares of Common Stock then
        issued or potentially issuable in the future pursuant to the Transaction
        Documents, including any Underlying Shares issuable upon exercise or conversion
        in full of all Warrants and Notes, ignoring any conversion or exercise limits
        set forth therein.

      

      “Rule
        144”
means
        Rule 144 promulgated by the Commission pursuant to the Securities Act, as
        such
        Rule may be amended from time to time, or any similar rule or regulation
        hereafter adopted by the Commission having substantially the same effect
        as such
        Rule.

      

      “SEC
        Reports”
shall
        have the meaning ascribed to such term in Section 3.1(h).

       

      “Securities”
means
        the Notes, the Warrants, the Warrant Shares and the Underlying
        Shares.

       

      
        
          
          

        

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

      

      “Subscription
        Amount”
        means,
        as
        to each Purchaser, the amounts set forth below such Purchaser’s signature block
        on the signature pages
        hereto
        and next to the heading “Closing Subscription Amount”, in United States Dollars
        and in immediately available funds, which shall not be less than $100,000
        for
        any Purchaser unless the Company otherwise consents.

       

      “Subsequent
        Financing”
shall
        have the meaning ascribed to such term in Section 4.13.

      

      “Subsequent
        Financing Notice”
shall
        have the meaning ascribed to such term in Section 4.13. 

      

      “Subsidiary”
means
        any subsidiary of the Company as set forth on Schedule
        3.1(a)
        and
        shall, where applicable, include any direct or indirect subsidiary of the
        Company formed or acquired after the date hereof.

      

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

       

      “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”
means
        this Agreement, the Notes, the Warrants, the Registration Rights Agreement,
        the
        Escrow Agreement, all exhibits and schedules thereto and hereto and any other
        documents or agreements executed in connection with the transactions
        contemplated hereunder.

      

      “Underlying
        Shares”
means
        the shares of Common Stock issuable upon conversion of the Notes and upon
        exercise of the Warrants.

      

      “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 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 listed or quoted on a 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 Purchasers of a majority in interest of the Securities then outstanding
        and
        reasonably acceptable to the Company, the fees and expenses of which shall
        be
        paid by the Company.

       

      
        
          
          

        

        
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      “Warrants”
means
        collectively the Common Stock purchase warrants, in the form of Exhibit C
        delivered to the Purchasers at the Closing in accordance with Section 2.2
        hereof
        and the warrants issued to Oceana Partners, LLC (“Oceana”)
        pursuant to the terms of the Placement Agent Agreement entered into by the
        Company and Oceana, which Warrants shall be exercisable immediately and have
        a
        term of exercise equal to 5 years.

      

      “Warrant
        Shares”
means
        the shares of Common Stock issuable upon exercise of the Warrants.

       

      ARTICLE
        II.

      PURCHASE
        AND SALE

       

      2.1 Closing.
        On the
        Closing Date, upon the terms and subject to the conditions set forth herein,
        concurrent with the execution and delivery of this Agreement by the parties
        hereto, the Company agrees to sell, and the Purchasers agree to purchase
        in the
        aggregate, severally and not jointly, a minimum of $2,500,000 principal amount
        of the Notes and Warrants. The parties hereto agree that for United States
        Federal income tax purposes, the issue price of each Note shall be not less
        than
        99.26% of its principal amount. Upon satisfaction of the conditions set forth
        in
        Sections 2.2 and 2.3, the Closing shall occur at the offices of the Escrow
        Agent, or such other location as the parties shall mutually agree. The Closing
        shall occur within 5 Trading Days of the date hereof.

       

      2.2
        Deliveries.

       

      a) At
        or
        prior to the Closing, unless otherwise indicated below, the Company shall
        deliver or cause to be delivered to the Escrow Agent with respect to each
        Purchaser at the Closing the following:

       

      (i) this
        Agreement duly executed by the Company;

       

      (ii) a
        Note
        with a principal amount equal to such Purchaser’s Subscription Amount,
        registered in the name of such Purchaser;

       

      (iii) a
        Warrant
        registered in the name of such Purchaser to purchase up to a number of shares
        of
        Common Stock equal to 100% of such Purchaser’s Subscription Amount divided by
        $1.00, with an exercise price equal to $1.00, subject to adjustment
        therein;

       

      (iv) the
        Registration Rights Agreement duly executed by the Company; 

       

      
        
          
          

        

        
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      (v) a
        legal
        opinion of Company Counsel, in the form of Exhibit
        D
        attached
        hereto; and

       

      (vi) the
        Escrow Agreement duly executed by the Company.

       

      b) At
        or
        prior to the Closing, unless otherwise indicated below, each Purchaser at
        the
        Closing shall deliver or cause to be delivered to the Escrow Agent the
        following: 

       

      (i) this
        Agreement duly executed by such Purchaser;

       

      (ii) such
        Purchaser’s Subscription Amount, for the applicable Closing, by wire transfer to
        the account of the Escrow Agent; 

       

      (iii) the
        Escrow Agreement duly executed by such Purchaser; and

       

      (iv) the
        Registration Rights Agreement duly executed by such Purchaser.

       

      2.3 Closing
        Conditions. 

       

      a) The
        obligations of the Company hereunder in connection with the Closing is subject
        to the following conditions being met:

       

      (i) the
        accuracy in all material respects when made and on the Closing Date of the
        representations and warranties of the Purchasers contained herein;

       

      (ii) all
        obligations, covenants and agreements of the Purchasers required to be performed
        at or prior to the Closing Date shall have been performed; 

       

      (iii) the
        Company shall have received executed Agreements from Purchasers with
        Subscription Amounts aggregating at least $2,500,000; and

       

      (iv) the
        delivery by the Purchasers of the items set forth in Section 2.2(b) of this
        Agreement.

       

      b) The
        respective obligations of the Purchasers hereunder in connection with the
        Closing are subject to the following conditions being met:

       

      (i) the
        accuracy in all material respects when made and on the Closing Date of the
        representations and warranties of the Company contained herein;

       

      
        
          
          

        

        
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      (ii) all
        obligations, covenants and agreements of the Company required to be performed
        at
        or prior to the Closing Date shall have been performed; 

       

      (iii) the
        delivery by the Company of the items set forth in Section 2.2(a) of this
        Agreement; 

       

      (iv) there
        shall have been no Material Adverse Effect with respect to the Company since
        the
        date hereof; and

       

      (v) at
        any
        time prior to the Closing Date, trading in securities generally as reported
        by
        Bloomberg L.P. shall not have been suspended or limited, or minimum prices
        shall
        not have been established on securities whose trades are reported by such
        service, or on any Trading Market, nor shall a banking moratorium have been
        declared either by the United States or New York State authorities nor shall
        there have occurred any material outbreak or escalation of hostilities or
        other
        national or international calamity of such magnitude in its effect on, or
        any
        material adverse change in, any financial market which, in each case, in
        the
        reasonable judgment of each Purchaser, makes it impracticable or inadvisable
        to
        purchase the Notes at the Closing.

       

      ARTICLE
        III.

      REPRESENTATIONS
        AND WARRANTIES

       

      3.1 Representations
        and Warranties of the Company.
        Except
        as set forth under the corresponding section of the disclosure schedules
        delivered to the Purchasers concurrently herewith (the “Disclosure
        Schedules”)
        which
        Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
        the
        representations and warranties set forth below to each Purchaser.

       

      (a) Subsidiaries.
        All of
        the direct and indirect subsidiaries of the Company are set forth on
Schedule
        3.1(a).
        The
        Company owns, directly or indirectly, all of the capital stock or other equity
        interests of each Subsidiary free and clear of any Liens, and all the issued
        and
        outstanding shares of capital stock of each Subsidiary are validly issued
        and
        are fully paid, non-assessable and free of preemptive and similar rights
        to
        subscribe for or purchase securities. If the Company has no subsidiaries,
        then
        references in the Transaction Documents to the Subsidiaries will be
        disregarded.

       

      (b) Organization
        and Qualification.
        Each of
        the Company and each Subsidiary is an entity duly incorporated or otherwise
        organized, validly existing and in good standing under the laws of the
        jurisdiction of its incorporation or organization (as applicable), with the
        requisite power and authority to own and use its properties and assets and
        to
        carry on its business as currently conducted. Neither the Company nor any
        Subsidiary is in violation or default of any of the provisions of its respective
        certificate or articles of incorporation, bylaws or other organizational
        or
        charter documents. Each of the Company and the Subsidiaries is duly qualified
        to
        conduct business and is in good standing as a foreign corporation or other
        entity in each jurisdiction in which the nature of the business conducted
        or
        property owned by it makes such qualification necessary, except where the
        failure to be so qualified or in good standing, as the case may be, could
        not
        have or reasonably be expected to result in (i) a material adverse effect
        on the
        legality, validity or enforceability of any Transaction Document, (ii) a
        material adverse effect on the results of operations, assets, business,
        prospects or financial condition of the Company and the Subsidiaries, taken
        as a
        whole, or (iii) a material adverse effect on the Company’s ability to perform in
        any material respect on a timely basis its obligations under any Transaction
        Document (any of (i), (ii) or (iii), a “Material
        Adverse Effect”)
        and no
        Proceeding has been instituted in any such jurisdiction revoking, limiting
        or
        curtailing or seeking to revoke, limit or curtail such power and authority
        or
        qualification.

       

      
        
          
          

        

        
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      (c) Authorization;
        Enforcement.
        The
        Company has the requisite corporate power and authority to enter into and
        to
        consummate the transactions contemplated by each of the Transaction Documents
        and otherwise to carry out its obligations hereunder and thereunder. The
        execution and delivery of each of the Transaction Documents by the Company
        and
        the consummation by it of the transactions contemplated hereby and thereby
        have
        been duly authorized by all necessary action on the part of the Company and
        no
        further action is required by the Company, its board of directors or its
        stockholders in connection therewith other than in connection with the Required
        Approvals. Each Transaction Document has been (or upon delivery will have
        been)
        duly executed by the Company and, when delivered in accordance with the terms
        hereof and thereof, will constitute the valid and binding obligation of the
        Company enforceable against the Company in accordance with its terms except
        (i)
        as limited by applicable bankruptcy, insolvency, reorganization, moratorium
        and
        other laws of general application affecting enforcement of creditors’ rights
        generally, (ii) the exercise of judicial or administrative discretion in
        accordance with general equitable principles or public policy, (iii) as limited
        by laws relating to the availability of specific performance, injunctive
        relief
        or other equitable remedies and (iv) insofar as indemnification and contribution
        provisions may be limited by applicable law.

       

      (d) No
        Conflicts.
        The
        execution, delivery and performance of the Transaction Documents by the Company
        and the consummation by the Company of the other transactions contemplated
        hereby and thereby do not and will not: (i) conflict with or violate any
        provision of the Company’s or any Subsidiary’s certificate or articles of
        incorporation, bylaws or other organizational or charter documents, or (ii)
        conflict with, or constitute a default (or an event that with notice or lapse
        of
        time or both would become a default) under, result in the creation of any
        Lien
        upon any of the properties or assets of the Company or any Subsidiary, or
        give
        to others any rights of termination, amendment, acceleration or cancellation
        (with or without notice, lapse of time or both) of, any agreement, credit
        facility, debt or other instrument (evidencing a Company or Subsidiary debt
        or
        otherwise) or other understanding to which the Company or any Subsidiary
        is a
        party or by which any property or asset of the Company or any Subsidiary
        is
        bound or affected, or (iii) subject to the Required Approvals, conflict with
        or
        result in a violation of any law, rule, regulation, order, judgment, injunction,
        decree or other restriction of any court or governmental authority to which
        the
        Company or a Subsidiary is subject (including federal and state securities
        laws
        and regulations), or by which any property or asset of the Company or a
        Subsidiary is bound or affected; except in the case of each of clauses (ii)
        and
        (iii), such as could not have or reasonably be expected to result in a Material
        Adverse Effect.

       

      
        
          
          

        

        
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      (e) Filings,
        Consents and Approvals.
        The
        Company is not required to obtain any consent, waiver, authorization or order
        of, give any notice to, or make any filing or registration with, any court
        or
        other federal, state, local or other governmental authority or other Person
        in
        connection with the execution, delivery and performance by the Company of
        the
        Transaction Documents other
        than (i) filings required pursuant to Section 4.6, (ii) the filing with the
        Commission of the Registration Statement, (iii) the notice and/or application(s)
        to each applicable Trading Market for the issuance and sale of the Notes,
        Bonus
        Shares and Warrants and the listing of the Underlying Shares for trading
        thereon
        in the time and manner required thereby and (iv) the filing of Form D with
        the
        Commission and such filings as are required to be made under applicable state
        securities laws (collectively, the “Required
        Approvals”).

       

      (f) Issuance
        of the Securities.
        The
        Securities are duly authorized and, when issued and paid for in accordance
        with
        the applicable Transaction Documents, will be duly and validly issued, fully
        paid and nonassessable, free and clear of all Liens imposed by the Company
        other
        than restrictions on transfer provided for in the Transaction Documents.
        The
        Company has reserved from its duly authorized capital stock a number of shares
        of Common Stock for issuance of the Underlying Shares at least equal to the
        Required Minimum on the date hereof. 

       

      (g) Capitalization.
        The
        capitalization of the Company is as set forth on Schedule
        3.1(g).
        The
        Company has not issued any capital stock since such filing other than pursuant
        to the exercise of employee stock options under the Company’s stock option
        plans, the issuance of shares of Common Stock to employees pursuant to the
        Company’s employee stock purchase plan and pursuant to the conversion or
        exercise of outstanding Common Stock Equivalents. No Person has any right
        of
        first refusal, preemptive right, right of participation, or any similar right
        to
        participate in the transactions contemplated by the Transaction Documents.
        Except as a result of the purchase and sale of the Securities or as set forth
        on
Schedule
        3.1(g),
        there
        are no outstanding options, warrants, script rights to subscribe to, calls
        or
        commitments of any character whatsoever relating to, or securities, rights
        or
        obligations convertible into or exercisable or exchangeable for, or giving
        any
        Person any right to subscribe for or acquire, any shares of Common Stock,
        or
        contracts, commitments, understandings or arrangements by which the Company
        or
        any Subsidiary is or may become bound to issue additional shares of Common
        Stock
        or Common Stock Equivalents. The issuance and sale of the Securities will
        not
        obligate the Company to issue shares of Common Stock or other securities
        to any
        Person (other than the Purchasers) and will not result in a right of any
        holder
        of Company securities to adjust the exercise, conversion, exchange or reset
        price under such securities. All of the outstanding shares of capital stock
        of
        the Company are validly issued, fully paid and nonassessable, have been issued
        in compliance with all federal and state securities laws, and none of such
        outstanding shares was issued in violation of any preemptive rights or similar
        rights to subscribe for or purchase securities. No further approval or
        authorization of any stockholder, the Board of Directors of the Company or
        others is required for the issuance and sale of the Securities. There are
        no
        stockholders agreements, voting agreements or other similar agreements with
        respect to the Company’s capital stock to which the Company is a party or, to
        the knowledge of the Company, between or among any of the Company’s
        stockholders.

       

      
        
          
          

        

        
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      (h) SEC
        Reports; Financial Statements.
        Since
        January 1, 2006, the Company has filed all reports required to be filed by
        it
        under the Securities Act and the Exchange Act, including pursuant to Section
        13(a) or 15(d) thereof (the foregoing materials, as amended to date, including
        the exhibits to each thereof, being collectively referred to herein as the
        “SEC
        Reports”)
        on a
        timely basis or has received a valid extension of such time of filing and
        has
        filed any such SEC Reports prior to the expiration of any such extension.
        As of
        their respective dates, the SEC Reports complied in all material respects
        with
        the requirements of the Securities Act and the Exchange Act and the rules
        and
        regulations of the Commission promulgated thereunder, and none of the SEC
        Reports, when filed, contained any untrue statement of a material fact or
        omitted to state a material fact required to be stated therein or necessary
        in
        order to make the statements therein, in light of the circumstances under
        which
        they were made, not misleading. The financial statements of the Company included
        in the SEC Reports comply in all material respects with applicable accounting
        requirements and the rules and regulations of the Commission with respect
        thereto as in effect at the time of filing. Such financial statements have
        been
        prepared in accordance with United States generally accepted accounting
        principles applied on a consistent basis during the periods involved
        (“GAAP”),
        except as may be otherwise specified in such financial statements or the
        notes
        thereto and except that unaudited financial statements may not contain all
        footnotes required by GAAP, and fairly present in all material respects the
        financial position of the Company and its consolidated Subsidiaries as of
        and
        for the dates thereof and the results of operations and cash flows for the
        periods then ended, subject, in the case of unaudited statements, to normal,
        immaterial, year-end audit adjustments.

       

      (i) Material
        Changes.
        Since
        the date of the latest audited financial statements included within the SEC
        Reports, except as specifically disclosed in the SEC Reports, (i) there has
        been
        no event, occurrence or development that has had or that could reasonably
        be
        expected to result in a Material Adverse Effect, (ii) the Company has not
        incurred any liabilities (contingent or otherwise) other than (A) trade payables
        and accrued expenses incurred in the ordinary course of business consistent
        with
        past practice and (B) liabilities not required to be reflected in the Company’s
        financial statements pursuant to GAAP or required to be disclosed in filings
        made with the Commission, (iii) the Company has not altered its method of
        accounting, (iv) the Company has not declared or made any dividend or
        distribution of cash or other property to its stockholders or purchased,
        redeemed or made any agreements to purchase or redeem any shares of its capital
        stock and (v) the Company has not issued any equity securities to any officer,
        director or Affiliate, except pursuant to existing Company stock or option
        plans. The Company does not have pending before the Commission any request
        for
        confidential treatment of information. 

       

      
        
          
          

        

        
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      (j) Litigation.
        Except
        as set forth in the SEC Reports, there is no action, suit, inquiry, notice
        of
        violation, proceeding or investigation pending or, to the knowledge of the
        Company, threatened against or affecting the Company, any Subsidiary or any
        of
        their respective properties before or by any court, arbitrator, governmental
        or
        administrative agency or regulatory authority (federal, state, county, local
        or
        foreign) (collectively, an “Action”)
        which
        (i) adversely affects or challenges the legality, validity or enforceability
        of
        any of the Transaction Documents or the Securities or (ii) could, if there
        were
        an unfavorable decision, have or reasonably be expected to result in a Material
        Adverse Effect. Except as set forth in the SEC Reports, neither the Company
        nor
        any Subsidiary, nor to the knowledge of the Company, any director or officer
        thereof, is or has been the subject of any Action involving a claim of violation
        of or liability under federal or state securities laws or a claim of breach
        of
        fiduciary duty. There has not been, and to the knowledge or reasonable
        expectation of the Company, there is not pending or contemplated, any
        investigation by the Commission involving the Company or any current or former
        director or officer of the Company. The Commission has not issued any stop
        order
        or other order suspending the effectiveness of any registration statement
        filed
        by the Company or any Subsidiary under the Exchange Act or the Securities
        Act.

       

      (k) Labor
        Relations.
        No
        material labor dispute exists or, to the knowledge of the Company, is threatened
        with respect to any of the employees of the Company which could reasonably
        be
        expected to result in a Material Adverse Effect. Neither
        the Company nor any of its Subsidiaries is a party to a collective bargaining
        agreement. 

       

      (l) Compliance.
        Neither
        the Company nor any Subsidiary (i) is in default under or in violation of
        (and
        no event has occurred that has not been waived that, with notice or lapse
        of
        time or both, would result in a default by the Company or any Subsidiary
        under),
        nor has the Company or any Subsidiary received notice of a claim that it
        is in
        default under or that it is in violation of, any indenture, loan or credit
        agreement or any other agreement or instrument to which it is a party or
        by
        which it or any of its properties is bound (whether or not such default or
        violation has been waived), (ii) is in violation of any order of any court,
        arbitrator or governmental body, or (iii) is or has been in violation of
        any
        statute, rule or regulation of any governmental authority, including without
        limitation all foreign, federal, state and local laws applicable to its business
        except in each case as could not have a Material Adverse Effect.

       

      (m) Regulatory
        Permits.
        The
        Company and the Subsidiaries possess all certificates, authorizations and
        permits issued by the appropriate federal, state, local or foreign regulatory
        authorities necessary to conduct their respective businesses as described
        in the
        SEC Reports, except where the failure to possess such permits could not have
        or
        reasonably be expected to result in a Material Adverse Effect (“Material
        Permits”),
        and
        neither the Company nor any Subsidiary has received any notice of proceedings
        relating to the revocation or modification of any Material Permit.

       

      
        
          
          

        

        
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      (n) Title
        to Assets.
        The
        Company and the Subsidiaries have good and marketable title in fee simple
        to all
        real property owned by them that is material to the business of the Company
        and
        the Subsidiaries and good and marketable title in all personal property owned
        by
        them that is material to the business of the Company and the Subsidiaries,
        in
        each case free and clear of all Liens, except for Liens as do not materially
        affect the value of such property and do not materially interfere with the
        use
        made and proposed to be made of such property by the Company and the
        Subsidiaries and Liens for the payment of federal, state or other taxes,
        the
        payment of which is neither delinquent nor subject to penalties. To the
        Company’s knowledge, any real property and facilities held under lease by the
        Company and the Subsidiaries are held by them under valid, subsisting and
        enforceable leases of which the Company and the Subsidiaries are in
        compliance.

       

      (o) Patents
        and Trademarks.
        The
        Company and the Subsidiaries have, or have rights to use, all patents, patent
        applications, trademarks, trademark applications, service marks, trade names,
        copyrights, licenses and other similar rights necessary or material for use
        in
        connection with their respective businesses as described in the SEC Reports
        and
        where the failure to have such rights could have a Material Adverse Effect
        (collectively, the “Intellectual
        Property Rights”).
        Neither the Company nor any Subsidiary has received a written notice that
        the
        Intellectual Property Rights used by the Company or any Subsidiary violates
        or
        infringes upon the rights of any Person. To the knowledge and reasonable
        expectation of the Company, all such Intellectual Property Rights are
        enforceable and there is no existing infringement by another Person of any
        of
        the Intellectual Property Rights. The Company and its Subsidiaries have taken
        reasonable security measures to protect the secrecy, confidentiality and
        value
        of all of their intellectual properties, except where failure to do so could
        not, individually or in the aggregate, reasonably be expected to have a Material
        Adverse Effect.

       

      (p) Insurance.
        The
        Company and the Subsidiaries are insured by insurers of recognized financial
        responsibility against such losses and risks and in such amounts as are prudent
        and customary in the businesses in which the Company and the Subsidiaries
        are
        engaged, including but not limited to, directors and officers insurance with
        coverage amount set forth on Schedule
        3.1(p).
        To the
        best of Company’s knowledge, such insurance contracts and policies are accurate
        and complete. Neither the Company nor any Subsidiary has any reason to believe
        that it will not be able to renew its existing insurance coverage as and
        when
        such coverage expires or to obtain similar coverage from similar insurers
        as may
        be necessary to continue its business without a significant increase in
        cost.

       

      (q) Transactions
        With Affiliates and Employees.
        Except
        as set forth in the SEC Reports, none of the officers or directors of the
        Company and, to the knowledge or reasonable expectation of the Company, none
        of
        the employees of the Company is presently a party to any transaction with
        the
        Company or any Subsidiary (other than for services as employees, officers
        and
        directors), including any contract, agreement or other arrangement providing
        for
        the furnishing of services to or by, providing for rental of real or personal
        property to or from, or otherwise requiring payments to or from any officer,
        director or such employee or, to the knowledge or reasonable expectation
        of the
        Company, any entity in which any officer, director, or any such employee
        has a
        substantial interest or is an officer, director, trustee or partner, in each
        case in excess of $100,000 other than (i) for payment of salary or consulting
        fees for services rendered, (ii) reimbursement for expenses incurred on behalf
        of the Company and (iii) for other employee benefits, including stock option
        agreements under any stock option plan of the Company.

       

      
        
          
          

        

        
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      (r) Sarbanes-Oxley;
        Internal Accounting Controls.
        The
        Company is in material compliance with all provisions of the Sarbanes-Oxley
        Act
        of 2002 which are applicable to it as of each Closing Date. The
        Company and the Subsidiaries maintain a system of internal accounting controls
        sufficient to provide reasonable assurance that (i) transactions are executed
        in
        accordance with management’s general or specific authorizations, (ii)
        transactions are recorded as necessary to permit preparation of financial
        statements in conformity with GAAP and to maintain asset accountability,
        (iii)
        access to assets is permitted only in accordance with management’s general or
        specific authorization, and (iv) the recorded accountability for assets is
        compared with the existing assets at reasonable intervals and appropriate
        action
        is taken with respect to any differences. The Company has established disclosure
        controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
        15d-15(e)) for the Company and designed such disclosure controls and procedures
        to ensure that material information relating to the Company, including its
        Subsidiaries, is made known to the certifying officers by others within those
        entities, particularly during the period in which the Company’s most recently
        filed periodic report under the Exchange Act, as the case may be, is being
        prepared. The Company’s certifying officers have evaluated the effectiveness of
        the Company’s controls and procedures as of the date prior to the filing date of
        the most recently filed periodic report under the Exchange Act (such date,
        the
“Evaluation
        Date”).
        The
        Company presented in its most recently filed periodic report under the Exchange
        Act the conclusions of the certifying officers about the effectiveness of
        the
        disclosure controls and procedures based on their evaluations as of the
        Evaluation Date. Since the Evaluation Date, there have been no significant
        changes in the Company’s internal controls (as such term is defined in Item
        307(b) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge,
        in other factors that could significantly affect the Company’s internal
        controls. 

       

      (s) Certain
        Fees.
        Except
        as set forth on Schedule
        3.1(s),
        no
        brokerage or finder’s fees or commissions are or will be payable by the Company
        to any broker, financial advisor or consultant, finder, placement agent,
        investment banker, bank or other Person with respect to the transactions
        contemplated by this Agreement. The Purchasers shall have no obligation with
        respect to any fees or with respect to any claims made by or on behalf of
        other
        Persons for fees of a type contemplated in this Section that may be due in
        connection with the transactions contemplated by this Agreement.

       

      (t) Private
        Placement.
        Assuming the accuracy of the Purchasers representations and warranties set
        forth
        in Section 3.2, no registration under the Securities Act is required for
        the
        offer and sale of the Securities by the Company to the Purchasers as
        contemplated hereby. The issuance and sale of the Securities hereunder does
        not
        contravene the rules and regulations of the Trading Market.

       

      
        
          
          

        

        
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      (u) Investment
        Company.
        The
        Company is not, and is not an Affiliate of, and immediately after receipt
        of
        payment for the Securities, will not be or be an Affiliate of, an “investment
        company” within the meaning of the Investment Company Act of 1940, as amended.
        The Company shall conduct its business in a manner so that it will not become
        subject to the Investment Company Act.

       

      (v) Listing
        and Maintenance Requirements.
        The
        Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
        Act, and the Company has taken no action designed to, or which to its knowledge
        is likely to have the effect of, terminating the registration of the Common
        Stock under the Exchange Act nor has the Company received any notification
        that
        the Commission is contemplating terminating such registration. 

       

      (w) Application
        of Takeover Protections.
        The
        Company and its Board of Directors have taken all necessary action, if any,
        in
        order to render inapplicable any control share acquisition, business
        combination, poison pill (including any distribution under a rights agreement)
        or other similar anti-takeover provision under the Company’s Certificate of
        Incorporation (or similar charter documents) or the laws of its state of
        incorporation that is or could become applicable to the Purchasers as a result
        of the Purchasers and the Company fulfilling their obligations or exercising
        their rights under the Transaction Documents, including without limitation
        as a
        result of the Company’s issuance of the Securities and the Purchasers’ ownership
        of the Securities.

       

      (x) Disclosure.
        The
        Company confirms that neither it nor any other Person acting on its behalf
        has
        provided any of the Purchasers or their agents or counsel with any information
        that constitutes or might constitute material, nonpublic information. The
        Company understands and confirms that the Purchasers will rely on the foregoing
        representations and covenants in effecting transactions in securities of
        the
        Company. 

       

      (y) Registration
        Rights.
        Other
        than each of the Purchasers and except as set forth on Schedule
        3.1(y),
        no
        Person has any right to cause the Company to effect the registration under
        the
        Securities Act of any securities of the Company.

       

      (z) No
        Integrated Offering
        Assuming
        the accuracy of the Purchasers’ representations and warranties set forth in
        Section 3.2, neither the Company, nor any of its Affiliates, nor any Person
        acting on its or their behalf has, directly or indirectly, made any offers
        or
        sales of any security or solicited any offers to buy any security, under
        circumstances that would cause this offering of the Securities to be integrated
        with prior offerings by the Company for purposes of the Securities Act or
        would
        trigger any applicable shareholder approval provisions, including, without
        limitation, under the rules and regulations of any exchange or automated
        quotation system on which any of the securities of the Company are listed
        or
        designated.

       

      
        
          
          

        

        
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      (aa) Tax
        Status.
         
        Except
        for matters that would not, individually or in the aggregate, have or reasonably
        be expected to result in a Material Adverse Effect, the Company and each
        Subsidiary has filed all necessary federal, state and foreign income and
        franchise tax returns which are true, complete and accurate in all respects
        and
        has paid or accrued all taxes shown as due thereon, and the Company has no
        knowledge of a tax deficiency which has been asserted or threatened against
        the
        Company or any Subsidiary.

       

      (bb) No
        General Solicitation.
        Neither
        the Company nor, to the knowledge of the Company, any Person acting on behalf
        of
        the Company has offered or sold any of the Securities by any form of general
        solicitation (as that term is used in Rule 501(c) under the Securities Act)
        or
        general advertising. The Company has offered the Securities for sale only
        to the
        Purchasers and certain other “accredited investors” within the meaning of Rule
        501 under the Securities Act.

       

      (cc) Foreign
        Corrupt Practices.
        Neither
        the Company, nor to the knowledge of the Company, any agent or other Person
        acting on behalf of the Company, has (i) directly or indirectly, used any
        corrupt funds for unlawful contributions, gifts, entertainment or other unlawful
        expenses related to foreign or domestic political activity, (ii) made any
        unlawful payment to foreign or domestic government officials or employees
        or to
        any foreign or domestic political parties or campaigns from corporate funds,
        (iii) failed to disclose fully any contribution made by the Company (or made
        by
        any person acting on its behalf of which the Company is aware) which is in
        violation of law, or (iv) violated in any material respect any provision
        of the
        Foreign Corrupt Practices Act of 1977, as amended

       

      (dd) Accountants.
        The
        Company’s accountants are set forth on Schedule
        3.1(dd)
        of the
        Disclosure Schedule. To the Company’s knowledge, such accountants, who the
        Company expects will express their opinion with respect to the financial
        statements to be included in the Company’s Annual Report on Form 10-KSB for the
        year ended December 31, 2006, are a registered public accounting firm as
        required by the Securities Act.

       

      (ee) Seniority.
        As of
        the Closing Date, no indebtedness or other equity of the Company is senior
        to
        the Notes in right of payment, whether with respect to interest or upon
        liquidation or dissolution, or otherwise, other than indebtedness evidenced
        by
        the Company’s outstanding 8% convertible debentures due February and March 2008
        (collectively, the “Debentures”),
        purchase money security interests (which is senior only as to underlying
        assets
        covered thereby) and capital lease obligations (which is senior only as to
        the
        property covered thereby).

       

      (ff) No
        Disagreements with Accountants and Lawyers.
        There
        are no disagreements of any kind presently existing, or reasonably anticipated
        by the Company to arise, between the accountants and lawyers formerly or
        presently employed by the Company and, except as set forth in Schedule
        3.1(ff),
        the
        Company is current with respect to any fees owed to its accountants and
        lawyers.

       

      
        
          
          

        

        
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      (gg) Acknowledgment
        Regarding Purchasers’ Purchase of Securities.
        The
        Company acknowledges and agrees that each of the Purchasers is acting solely
        in
        the capacity of an arm’s length purchaser with respect to the Transaction
        Documents and the transactions contemplated hereby. The Company further
        acknowledges that no Purchaser is acting as a financial advisor or fiduciary
        of
        the Company (or in any similar capacity) with respect to this Agreement and
        the
        transactions contemplated hereby and any advice given by any Purchaser or
        any of
        their respective representatives or agents in connection with this Agreement
        and
        the transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Securities. The Company further represents to each Purchaser
        that the Company’s decision to enter into this Agreement has been based solely
        on the independent evaluation of the transactions contemplated hereby by
        the
        Company and its representatives.

       

      (hh) Environmental
        Laws.
        The
        Company and its Subsidiaries (i) are to the Company’s knowledge in compliance
        with any and all applicable foreign, federal, state and local laws and
        regulations relating to the protection of human health and safety, the
        environment or hazardous or toxic substances or wastes, pollutants or
        contaminants (“Environmental
        Laws”),
        (ii)
        have received all permits, licenses or other approvals required of them under
        applicable Environmental Laws to conduct their respective businesses and
        (iii)
        are in compliance with all terms and conditions of any such permit, license
        or
        approval; except where such noncompliance or failure to receive permits,
        licenses or approvals referred to in clauses (i), (ii) or (iii) above could
        not
        have, or reasonably be expected to have, individually or in the aggregate,
        a
        Material Adverse Effect.

       

      (ii) Regulation
        M Compliance. 
        The Company has not, and to its knowledge no one acting on its behalf has,
        (i)
        taken, directly or indirectly, any action designed to cause or to result
        in the
        stabilization or manipulation of the price of any security of the Company
        to
        facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
        purchased, or paid any compensation for soliciting purchases of, any of the
        securities of the Company or (iii) paid or agreed to pay to any Person any
        compensation for soliciting another to purchase any other securities of the
        Company, other than, in the case of clauses (ii) and (iii), compensation
        paid to
        the Company’s placement agent in connection with the placement of the
        Securities.

       

      (jj) Solvency.
        Schedule
        3.1(jj)
        sets
        forth as of the date hereof all outstanding secured and unsecured Indebtedness
        of the Company or any Subsidiary, or for which the Company or any Subsidiary
        has
        commitments. For the purposes of this Agreement, “Indebtedness”
means
        (a) any liabilities for borrowed money or amounts owed in excess of $50,000
        (other than trade accounts payable incurred in the ordinary course of business),
        (b) all guaranties, endorsements and other contingent obligations in respect
        of
        Indebtedness of others, whether or not the same are or should be reflected
        in
        the Company’s balance sheet (or the notes thereto), except guaranties by
        endorsement of negotiable instruments for deposit or collection or similar
        transactions in the ordinary course of business; and (c) the present value
        of
        any lease payments
        in excess of $50,000 due under leases required to be capitalized in accordance
        with GAAP. Neither
        the Company nor any Subsidiary is in default with respect to any
        Indebtedness.

       

      
        
          
          

        

        
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      (kk) Employee
        Benefit Plans; ERISA.

       

      (i) Schedule
        3.1(kk)(i) sets forth a true, correct and complete list of all employee benefit
        plans, programs, policies and arrangements, whether written or unwritten
        (the
“Company
        Plans”),
        that
        the Company, any Subsidiary or any other corporation or business which is
        now or
        at the relevant time was a member of a controlled group of companies or trades
        or businesses including the Company or any Subsidiary, within the meaning
        of
        Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”),
        maintain or have maintained on behalf of current or former members, partners,
        principals, directors, officers, managers, employees, consultants or other
        personnel.

       

      (ii) There
        has
        been no prohibited transaction within the meaning of Section 406 of the Employee
        Retirement Income Security Act of 1974, as amended (“ERISA”),
        or
        Section 4975 of the Code, with respect to any of the Company Plans; (ii)
        none of
        the Company Plans is or was subject to Section 412 of the Code or Section
        302 or
        Title IV of ERISA; and (iv) each of the Company Plans has been operated and
        administered in all material respects in accordance with all applicable laws,
        including ERISA. There are no actions, suits or claims pending or threatened
        (other than routine claims for benefits), whether by participants, the Internal
        Revenue Service, the Department of Labor or otherwise, with respect to any
        Company Plan and no facts exist under which any such actions, suits or claims
        are likely to be brought or under which the Company or any Subsidiary could
        incur any liability with respect to a Company Plan other than in the ordinary
        course. None of the Company Plans is or was a multiemployer plan within the
        meaning of Section 3(37) of ERISA.

       

      (iii) Neither
        the Company nor any Subsidiary has announced, proposed or agreed to any change
        in benefits under any Company Plan or the establishment of any new Company
        Plan.
        There have been no changes in the operation or interpretation of any Company
        Plan since the most recent annual report, which would have any material effect
        on the cost of operating, maintaining or providing benefits under such Company
        Plan.

       

      (iv) Neither
        the Company nor any Subsidiary has incurred any liability for the
        misclassification of employees as leased employees or independent
        contractors.

       

      (v) Except
        as
        provided for in this Agreement and in the Transaction Documents, the
        consummation of the transactions contemplated by this Agreement, either alone
        or
        in combination with another event, will not (i) result in any individual
        becoming entitled to any increase in the amount of compensation or benefits
        or
        any additional payment from the Company or any Subsidiary (including, without
        limitation, severance, golden parachute or bonus payments or otherwise),
        or (ii)
        accelerate the vesting or timing of payment of any benefits or compensation
        payable in respect of any individual.

       

      
        
          
          

        

        
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      3.2 Representations
        and Warranties of the Purchasers.
        Each
        Purchaser hereby, for itself and for no other Purchaser, represents and warrants
        as of the date hereof and as of each Closing Date to the Company as
        follows:

       

      (a) Organization;
        Authority.
        Such
        Purchaser is an entity duly organized, validly existing and in good standing
        under the laws of the jurisdiction of its organization with full right,
        corporate or partnership power and authority to enter into and to consummate
        the
        transactions contemplated by the Transaction Documents and otherwise to carry
        out its obligations hereunder and thereunder. The execution and delivery
        of the
        Transaction Documents and the performance by such Purchaser of the transactions
        contemplated by the Transaction Documents have been duly authorized by all
        necessary corporate or similar action on the part of such Purchaser. Each
        Transaction Document to which it is a party has been duly executed by such
        Purchaser, and when delivered by such Purchaser in accordance with the terms
        hereof, will constitute the valid and legally binding obligation of such
        Purchaser, enforceable against it in accordance with its terms, except (i)
        as
        limited by general equitable principles and applicable bankruptcy, insolvency,
        reorganization, moratorium and other laws of general application affecting
        enforcement of creditors’ rights generally, (ii) as limited by laws relating to
        the availability of specific performance, injunctive relief or other equitable
        remedies and (iii) insofar as indemnification and contribution provisions
        may be
        limited by applicable law.

       

      (b) Own
        Account.
        Such
        Purchaser understands that the Securities are “restricted securities” and have
        not been registered under the Securities Act or any applicable state securities
        law and is acquiring the Securities as principal for its own account and
        not
        with a view to distributing or reselling such Securities or any part thereof,
        has no present intention of distributing any of such Securities and has no
        arrangement or understanding with any other persons regarding the distribution
        of such Securities (this representation and warranty not limiting such
        Purchaser’s right to sell the Securities pursuant to a Registration Statement or
        otherwise in compliance with applicable federal and state securities laws).
        Such
        Purchaser is acquiring the Securities hereunder in the ordinary course of
        its
        business. Such Purchaser does not have any agreement or understanding, directly
        or indirectly, with any Person to distribute any of the Securities.

       

      (c) Purchaser
        Status.
        At the
        time such Purchaser was offered the Securities, it was, and at the date hereof
        it is, and on each date on which it exercises any Warrants or converts any
        Notes
        it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1),
        (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
        institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such
        Purchaser is not required to be registered as a broker-dealer under Section
        15
        of the Exchange Act.

       

      (d) Experience
        of Such Purchaser.
        Such
        Purchaser, either alone or together with its representatives, has such
        knowledge, sophistication and experience in business and financial matters
        so as
        to be capable of evaluating the merits and risks of the prospective investment
        in the Securities, and has so evaluated the merits and risks of such investment.
        Such Purchaser is able to bear the economic risk of an investment in the
        Securities and, at the present time, is able to afford a complete loss of
        such
        investment.

       

      
        
          
          

        

        
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      (e) General
        Solicitation.
        Such
        Purchaser is not purchasing the Securities as a result of any advertisement,
        article, notice or other communication regarding the Securities published
        in any
        newspaper, magazine or similar media or broadcast over television or radio
        or
        presented at any seminar or any other general solicitation or general
        advertisement.

       

      The
        Company acknowledges and agrees that each Purchaser does not make or has
        not
        made any representations or warranties with respect to the transactions
        contemplated hereby other than those specifically set forth in this Section
        3.2.

       

      ARTICLE
        IV.

      OTHER
        AGREEMENTS OF THE PARTIES

       

      4.1 Transfer
        Restrictions.

       

      (a) The
        Securities may only be disposed of in compliance with state and federal
        securities laws. In connection with any transfer of Securities other than
        pursuant to an effective registration statement or Rule 144, to the Company
        or
        to an Affiliate of a Purchaser or in connection with a pledge as contemplated
        in
        Section 4.1(b), the Company may require the transferor thereof to provide
        to the
        Company an opinion of counsel selected by the transferor and reasonably
        acceptable to the Company, the form and substance of which opinion shall
        be
        reasonably satisfactory to the Company, to the effect that such transfer
        does
        not require registration of such transferred Securities under the Securities
        Act. As a condition of transfer, any such transferee shall agree in writing
        to
        be bound by the terms of this Agreement and shall have the rights of a Purchaser
        under this Agreement and the Registration Rights Agreement.

       

      (b) The
        Purchasers agree to the imprinting, so long as is required by this Section
        4.1(b), of a legend on any of the Securities in the following form:

       

      [NEITHER]
        THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
        EXERCISABLE] [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 SATISFACTORY TO THE COMPANY TO SUCH EFFECT, THE
        SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
        SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
        MAY BE
        PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED
        BY
        SUCH SECURITIES.

       

      
        
          
          

        

        
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      The
        Company acknowledges and agrees that a Purchaser may from time to time pledge
        pursuant to a bona fide margin agreement with a registered broker-dealer
        or
        grant a security interest in some or all of the Securities to a financial
        institution that is an “accredited investor” as defined in Rule 501(a) under the
        Securities Act and who agrees to be bound by the provisions of this Agreement
        and the Registration Rights Agreement and, if required under the terms of
        such
        arrangement, such Purchaser may transfer pledged or secured Securities to
        the
        pledgees or secured parties. Such a pledge or transfer would not be subject
        to
        approval of the Company and no legal opinion of legal counsel of the pledgee,
        secured party or pledgor shall be required in connection therewith. Further,
        no
        notice shall be required of such pledge. At the appropriate Purchaser’s expense,
        the Company will execute and deliver such reasonable documentation as a pledgee
        or secured party of Securities may reasonably request in connection with
        a
        pledge or transfer of the Securities, including, if the Securities are subject
        to registration pursuant to the Registration Rights Agreement, the preparation
        and filing of any required prospectus supplement under Rule 424(b)(3) under
        the
        Securities Act or other applicable provision of the Securities Act to
        appropriately amend the list of Selling Stockholders thereunder.

       

      (c) Certificates
        evidencing the Underlying Shares shall not contain any legend (including
        the
        legend set forth in Section 4.1(b) hereof): (i) while a registration statement
        (including the Registration Statement) covering the resale of such security
        is
        effective under the Securities Act, or (ii) following any sale of such
        Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares
        are
        eligible for sale under Rule 144(k), or (iv) if such legend is not required
        under applicable requirements of the Securities Act (including judicial
        interpretations and pronouncements issued by the staff of the Commission).
        The
        Company shall cause its counsel to issue a legal opinion to the Company’s
        transfer agent promptly after the Effective Date if required by the Company’s
        transfer agent to effect the removal of the legend hereunder. If all or any
        portion of a Note or Warrant is converted or exercised (as applicable) at
        a time
        when there is an effective registration statement to cover the resale of
        the
        Underlying Shares, or if such Underlying Shares may be sold under Rule 144(k)
        or
        if such legend is not otherwise required under applicable requirements of
        the
        Securities Act (including judicial interpretations thereof) then such Underlying
        Shares shall be issued free of all legends. The Company agrees that following
        the Effective Date or at such time as such legend is no longer required under
        this Section 4.1(c), it will, no later than five Business Days following
        the
        delivery by a Purchaser to the Company or the Company’s transfer agent of a
        certificate representing Underlying Shares, as applicable, issued with a
        restrictive legend (such fifth Business Day, the “Legend
        Removal Date”),
        deliver or cause to be delivered to such Purchaser a certificate representing
        such shares that is free from all restrictive and other legends. The Company
        may
        not make any notation on its records or give instructions to any transfer
        agent
        of the Company that enlarge the restrictions on transfer set forth in this
        Section. Certificates for Securities subject to legend removal hereunder
        shall
        be transmitted by the transfer agent of the Company to the Purchasers by
        crediting the account of the Purchaser’s prime broker with the Depository Trust
        Company System.

       

      
        
          
          

        

        
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      (d) In
        addition to such Purchaser’s other available remedies, the Company shall pay to
        a Purchaser, in cash, as partial liquidated damages and not as a penalty,
        for
        each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on
        the
        date such Securities are submitted to the Transfer Agent) delivered for removal
        of the restrictive legend and subject to Section 4.1(c), $10 per Trading
        Day
        (increasing to $20 per Trading Day 5 Trading Days after such damages have
        begun
        to accrue) for each Trading Day after the Legend Removal Date until such
        certificate is delivered without a legend. Nothing herein shall limit such
        Purchaser’s right to pursue actual damages for the Company’s failure to deliver
        certificates representing any Securities as required by the Transaction
        Documents, and such Purchaser 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.

       

      (e) Each
        Purchaser, severally and not jointly with the other Purchasers, agrees that
        the
        removal of the restrictive legend from certificates representing Securities
        as
        set forth in this Section 4.1 is predicated upon the Company’s reliance that the
        Purchaser will sell any Securities pursuant to either the registration
        requirements of the Securities Act, including any applicable prospectus delivery
        requirements, or an exemption therefrom.

       

      4.2 Acknowledgment
        of Dilution.
        The
        Company acknowledges that the issuance of the Securities may result in dilution
        of the outstanding shares of Common Stock, which dilution may be substantial
        under certain market conditions. The Company further acknowledges that its
        obligations under the Transaction Documents, including without limitation
        its
        obligation to issue the Underlying Shares pursuant to the Transaction Documents,
        are unconditional and absolute and not subject to any right of set off,
        counterclaim, delay or reduction, regardless of the effect of any such dilution
        or any claim the Company may have against any Purchaser and regardless of
        the
        dilutive effect that such issuance may have on the ownership of the other
        stockholders of the Company.

       

      4.3 Furnishing
        of Information.
        As long
        as any Purchaser owns Securities, the Company covenants to timely file (or
        obtain extensions in respect thereof and file within the applicable grace
        period) all reports required to be filed by the Company after the date hereof
        pursuant to the Exchange Act. As long as any Purchaser owns Securities, if
        the
        Company is not required to file reports pursuant to the Exchange Act, it
        will
        prepare and furnish to the Purchasers and make publicly available in accordance
        with Rule 144(c) such information as is required for the Purchasers to sell
        the
        Securities under Rule 144. The Company further covenants that it will take
        such
        further action as any holder of Securities may reasonably request, all to
        the
        extent required from time to time to enable such Person to sell such Securities
        without registration under the Securities Act within the limitation of the
        exemptions provided by Rule 144.

       

      
        
          
          

        

        
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      4.4 Integration.
        The
        Company shall not sell, offer for sale or solicit offers to buy or otherwise
        negotiate in respect of any security (as defined in Section 2 of the Securities
        Act) that would be integrated with the offer or sale of the Securities in
        a
        manner that would require the registration under the Securities Act of the
        sale
        of the Securities to the Purchasers or that would be integrated with the
        offer
        or sale of the Securities for purposes of the rules and regulations of any
        Trading Market.

       

      4.5 Conversion
        and Exercise Procedures.
        The
        form of Notice of Exercise included in the Warrants and the form of Notice
        of
        Conversion included in the Notes set forth the totality of the procedures
        required of the Purchasers in order to exercise the Warrants or convert the
        Notes. No additional legal opinion or other information or instructions shall
        be
        required of the Purchasers to exercise their Warrants or convert their Notes.
        The Company shall honor exercises of the Warrants and conversions of the
        Notes
        and shall deliver Underlying Shares in accordance with the terms, conditions
        and
        time periods set forth in the Transaction Documents.

       

      4.6 Securities
        Laws Disclosure; Publicity.
        The
        Company shall, by 5:30 p.m. Eastern time on the second Business Day following
        the date hereof, issue a Current Report on Form 8-K, disclosing the material
        terms of the transactions contemplated hereby, and shall attach the Transaction
        Documents thereto. The Company and the Placement Agent shall consult with
        each
        other in issuing any other press releases with respect to the transactions
        contemplated hereby, and neither the Company nor the Placement Agent shall
        issue
        any such press release or otherwise make any such public statement in connection
        with the transactions contemplated hereby without the prior consent of the
        Company, with respect to any such press release of the Placement Agent, or
        without
        the prior consent of each Purchaser, with respect to any such press release
        of
        the Company,
        which
        consent shall not unreasonably be withheld, except if such disclosure is
        required by law, in which case the disclosing party shall promptly provide
        the
        other party with prior notice of such public statement or communication.
        Notwithstanding the foregoing, the Company shall not publicly disclose the
        name
        of the Placement Agent, or include the name of any Purchaser in any filing
        with
        the Commission or any regulatory agency or Trading Market, without the prior
        written consent of such Purchaser, except (i) as required by federal securities
        law in connection with the registration statement contemplated by the
        Registration Rights Agreement and (ii) to the extent such disclosure is required
        by law or Trading Market regulations, in which case the Company shall provide
        the Purchasers with prior notice of such disclosure permitted under subclause
        (i) or (ii).

       

      4.7 Shareholders
        Rights Plan.
        No
        claim will be made or enforced by the Company or, to the knowledge of the
        Company, any other Person that any Purchaser is an “Acquiring Person” under any
        shareholders rights plan or similar plan or arrangement in effect or hereafter
        adopted by the Company, or that any Purchaser could be deemed to trigger
        the
        provisions of any such plan or arrangement, by virtue of receiving Securities
        under the Transaction Documents or under any other agreement between the
        Company
        and the Purchasers. The Company shall conduct its business in a manner so
        that
        it will not become subject to the Investment Company Act.

       

      
        
          
          

        

        
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      4.8 Non-Public
        Information.
        The
        Company covenants and agrees that it will not and will instruct any other
        Person
        acting on its behalf to not provide any Purchaser or its agents or counsel
        with
        any information that the Company believes constitutes material non-public
        information, unless prior thereto such Purchaser shall have executed a written
        agreement regarding the confidentiality and use of such information. The
        Company
        understands and confirms that each Purchaser shall be relying on the foregoing
        representations in effecting transactions in securities of the
        Company.

       

      4.9 Use
        of
        Proceeds.
        The
        Company shall use the net proceeds from the sale of the Securities hereunder
        substantially as set forth in Schedule 4.9 and not for the satisfaction of
        any
        portion of the Company’s debt (other than payment of trade payables or accrued
        expenses in the ordinary course of the Company’s business and prior practices),
        to redeem any Common Stock or Common Stock Equivalents or to settle any
        outstanding litigation.

       

      4.10 Reimbursement.
        If any
        Purchaser becomes involved in any capacity in any Proceeding by or against
        any
        Person who is a stockholder of the Company (except as a result of sales,
        pledges, margin sales and similar transactions by such Purchaser to or with
        any
        current stockholder), solely as a result of such Purchaser’s acquisition of the
        Securities under this Agreement (unless such action is based upon a breach
        of
        such Purchaser’s representation, warranties or covenants under the Transaction
        Documents or any agreements or understandings such Purchaser may have with
        any
        such claimant stockholder or any violations by the Purchaser of state or
        federal
        securities laws or any conduct by such Purchaser which constitutes fraud,
        gross
        negligence, willful misconduct or malfeasance), the Company will reimburse
        such
        Purchaser for its reasonable legal and other expenses (including the cost
        of any
        investigation preparation and travel in connection therewith) incurred in
        connection therewith, as such expenses are incurred. The reimbursement
        obligations of the Company under this paragraph shall be in addition to any
        liability which the Company may otherwise have, shall extend upon the same
        terms
        and conditions to any Affiliates of the Purchasers who are actually named
        in
        such action, proceeding or investigation, and partners, directors, agents,
        employees and controlling persons (if any), as the case may be, of the
        Purchasers and any such Affiliate, and shall be binding upon and inure to
        the
        benefit of any successors, assigns, heirs and personal representatives of
        the
        Company, the Purchasers and any such Affiliate and any such Person. The Company
        also agrees that neither the Purchasers nor any such Affiliates, partners,
        directors, agents, employees or controlling persons shall have any liability
        to
        the Company or any Person asserting claims on behalf of or in right of the
        Company solely as a result of acquiring the Securities under this Agreement
        except to the extent any covenant or warranty owing to the Company is
        breached.

       

      
        
          
          

        

        
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      4.11 Indemnification
        of Purchasers.
        Subject
        to the provisions of this Section 4.10, the Company will indemnify and hold
        each
        Purchaser and its directors, officers, shareholders, members, partners,
        employees and agents (and any other Persons with a functionally equivalent
        role
        of a Person holding such titles notwithstanding a lack of such title or any
        other title), each Person who controls such Purchaser (within the meaning
        of
        Section 15 of the Securities Act and Section 20 of the Exchange Act), and
        the
        directors, officers, shareholders, agents, members, partners or employees
        (and
        any other Persons with a functionally equivalent role of a Person holding
        such
        titles notwithstanding a lack of such title or any other title) of such
        controlling person (each, a “Purchaser
        Party”)
        harmless from any and all losses, liabilities, obligations, claims,
        contingencies, damages, costs and expenses, including all judgments, amounts
        paid in settlements, court costs and reasonable attorneys’ fees and costs of
        investigation that any such Purchaser Party may suffer or incur as a result
        of
        or relating to (a) any breach of any of the representations, warranties,
        covenants or agreements made by the Company in this Agreement or in the other
        Transaction Documents or (b) any action instituted against a Purchaser, or
        any
        of them or their respective Affiliates, by any stockholder of the Company
        who is
        not an Affiliate of such Purchaser, with respect to any of the transactions
        contemplated by the Transaction Documents (unless such action is based upon
        a
        breach of such Purchaser’s representation, warranties or covenants under the
        Transaction Documents or any agreements or understandings such Purchaser
        may
        have with any such claimant stockholder or any violations by the Purchaser
        of
        state or federal securities laws or any conduct by such Purchaser which
        constitutes fraud, gross negligence, willful misconduct or malfeasance).
        If any
        action shall be brought against any Purchaser Party in respect of which
        indemnity may be sought pursuant to this Agreement, such Purchaser Party
        shall
        promptly notify the Company in writing, and the Company shall have the right
        to
        assume the defense thereof with counsel of its own choosing. Any Purchaser
        Party
        shall have the right to employ separate counsel in any such action and
        participate in the defense thereof, but the fees and expenses of such counsel
        shall be at the expense of such Purchaser Party except to the extent that
        (i)
        the employment thereof has been specifically authorized by the Company in
        writing, (ii) the Company has failed after a reasonable period of time to
        assume
        such defense and to employ counsel or (iii) in such action there is, in the
        reasonable opinion of such separate counsel, a material conflict on any material
        issue between the position of the Company and the position of such Purchaser
        Party. The Company will not be liable to any Purchaser Party under this
        Agreement (i) for any settlement by a Purchaser Party effected without the
        Company’s prior written consent, which shall not be unreasonably withheld or
        delayed; or (ii) to the extent, but only to the extent that a loss, claim,
        damage or liability is attributable to any Purchaser Party’s breach of any of
        the representations, warranties, covenants or agreements made by the Purchasers
        in this Agreement or in the other Transaction Documents.

       

      4.12 Reservation
        and Listing of Securities.

       

      (a) The
        Company shall maintain a reserve from its duly authorized shares of Common
        Stock
        for issuance pursuant to the Transaction Documents in such amount as may
        be
        required to fulfill its obligations in full under the Transaction
        Documents.

       

      (b) If,
        on
        any date, the number of authorized but unissued (and otherwise unreserved)
        shares of Common Stock is less than the Required Minimum on such date, then
        the
        Board of Directors of the Company shall use commercially reasonable efforts
        to
        amend the Company’s certificate or articles of incorporation to increase the
        number of authorized but unissued shares of Common Stock to at least the
        Required Minimum at such time, as soon as possible and in any event not later
        than the 90th day after such date.

       

      
        
          
          

        

        
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      (c) The
        Company shall, if then applicable: (i) in the time and manner required by
        the
        Trading Market or if the Common Stock is listed on another Trading Market,
        promptly prepare and file with such Trading Market an additional shares listing
        application covering a number of shares of Common Stock at least equal to
        the
        Required Minimum on the date of such application, (ii) take all steps necessary
        to cause such shares of Common Stock to be approved for listing on the Trading
        Market as soon as possible thereafter, (iii) provide to the Purchasers evidence
        of such listing, and (iv) maintain the listing of such Common Stock on any
        date
        at least equal to the Required Minimum on such date on such Trading Market
        or
        another Trading Market.

       

      4.13 Participation
        in Future Financing.
        

       

      (a) From
        the
        date hereof until the date that is the 12 month anniversary of the Closing
        Date,
        upon any issuance by the Company or any of its Subsidiaries of Common Stock
        or
        Common Stock Equivalents (a “Subsequent
        Financing”),
        each
        Purchaser shall have the right to participate in up to an amount of the
        Subsequent Financing equal to 100% of the Subsequent Financing (the
“Participation
        Maximum”)
        on the
        same terms, conditions and price provided for in the Subsequent
        Financing.

       

      (b) At
        least
        5 Trading Days prior to the closing of the Subsequent Financing, the Company
        shall deliver to each Purchaser a written notice of its intention to effect
        a
        Subsequent Financing (“Pre-Notice”),
        which
        Pre-Notice shall ask such Purchaser if it wants to review the details of
        such
        financing (such additional notice, a “Subsequent
        Financing Notice”).
        Upon
        the request of a Purchaser, and only upon a request by such Purchaser, for
        a
        Subsequent Financing Notice, the Company shall promptly, but no later than
        1
        Trading Day after such request, deliver a Subsequent Financing Notice to
        such
        Purchaser. The Subsequent Financing Notice shall describe in reasonable detail
        the proposed terms of such Subsequent Financing, the amount of proceeds intended
        to be raised thereunder and the Person or Persons through or with whom such
        Subsequent Financing is proposed to be effected and shall include a term
        sheet
        or similar document relating thereto as an attachment.

       

      (c) Any
        Purchaser desiring to participate in such Subsequent Financing must provide
        written notice to the Company by not later than 5:30 p.m. (New York City
        time)
        on the 5th
        Trading
        Day after all of the Purchasers have received the Pre-Notice that the Purchaser
        is willing to participate in the Subsequent Financing, the amount of the
        Purchaser’s participation, and that the Purchaser has such funds ready, willing,
        and available for investment on the terms set forth in the Subsequent Financing
        Notice. If the Company receives no notice from a Purchaser as of such
        5th
        Trading
        Day, such Purchaser shall be deemed to have notified the Company that it
        does
        not elect to participate. 

       

      (d) If
        by
        5:30 p.m. (New York City time) on the 5th
        Trading
        Day after all of the Purchasers have received the Pre-Notice, notifications
        by
        the Purchasers of their willingness to participate in the Subsequent Financing
        (or to cause their designees to participate) is, in the aggregate, less than
        the
        total amount of the Subsequent Financing, then the Company may effect the
        remaining portion of such Subsequent Financing on the terms and with the
        Persons
        set forth in the Subsequent Financing Notice. 

       

      
        
          
          

        

        
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      (e) If
        by
        5:30 p.m. (New York City time) on the 5th
        Trading
        Day after all of the Purchasers have received the Pre-Notice, the Company
        receives responses to a Subsequent Financing Notice from Purchasers seeking
        to
        purchase more than the aggregate amount of the Participation Maximum, each
        such
        Purchaser shall have the right to purchase its Pro Rata Portion (as defined
        below) of the Participation Maximum.  “Pro
        Rata Portion”
means
        the ratio of (x) the Subscription Amount of Securities purchased on the Closing
        Date by a Purchaser participating under this Section 4.13 and (y) the sum
        of the
        aggregate Subscription Amounts of Securities purchased on the Closing Date
        by
        all Purchasers participating under this Section 4.13.

       

      (f) Notwithstanding
        the foregoing, this Section 4.13 shall not apply in respect of (i) an Exempt
        Issuance or (ii) an underwritten public offering of Common Stock.

       

      4.14 Subsequent
        Equity Sales.
        

       

      (a) From
        the
        date hereof until 45 days after the Effective Date, neither the Company nor
        any
        Subsidiary shall issue shares of Common Stock or Common Stock Equivalents
        except
        pursuant to conversion of the Company’s currently outstanding convertible
        securities or exercise of currently outstanding rights to acquire Common
        Stock.

       

      (b) From
        the
        date hereof until such time as no Purchaser holds any of the Securities,
        the
        Company shall be prohibited from effecting or entering into an agreement
        to
        effect any Subsequent Financing involving a Variable Rate Transaction.
“Variable
        Rate Transaction”
means
        a
        transaction in which the Company issues or sells (i) any debt or equity
        securities that are convertible into, exchangeable or exercisable for, or
        include the right to receive additional shares of Common Stock either (A)
        at a
        conversion, exercise or exchange rate or other price that is based upon and/or
        varies with the trading prices of or quotations for the shares of Common
        Stock
        at any time after the initial issuance of such debt or equity securities,
        or (B)
        with a conversion, exercise or exchange price that is subject to being reset
        at
        some future date after the initial issuance of such debt or equity security
        or
        upon the occurrence of specified or contingent events directly or indirectly
        related to the business of the Company or the market for the Common Stock
        or
        (ii) enters into any agreement, including, but not limited to, an equity
        line of
        credit, whereby the Company may sell securities at a future determined
        price.

       

      (c) Notwithstanding
        the foregoing, this Section 4.14 shall not apply in respect of an Exempt
        Issuance, except that no Variable Rate Transaction shall be an Exempt
        Issuance. 

       

      4.15 Most
        Favored Nation Provision.
        From
        the date hereof until the one year anniversary of the Closing Date, any time
        the
        Company effects a Subsequent Financing, each Purchaser may elect, in its
        sole
        discretion, to exchange all or some of the Notes then held by it for any
        securities issued in a Subsequent Financing based on the outstanding principal
        amount of the Note plus accrued but unpaid interest and other fees owed and
        the
        effective price at which such securities were sold in such Subsequent
        Placement.

       

      
        
          
          

        

        
          -27-

          
            

          

        

        
          
          

        

      

       

      4.16 Equal
        Treatment of Purchasers.
        No
        consideration shall be offered or paid to any person to amend or consent
        to a
        waiver or modification of any provision of any of the Transaction Documents
        unless the same consideration is also offered to all of the parties to the
        Transaction Documents. Further, the Company shall not make any payment of
        principal or interest on the Notes in amounts which are disproportionate
        to the
        respective principal amounts outstanding on the Notes at any applicable time.
        For clarification purposes, this provision constitutes a separate right granted
        to each Purchaser by the Company and negotiated separately by each Purchaser,
        and is intended to treat for the Company the Note holders as a class and
        shall
        not in any way be construed as the Purchasers acting in concert or as a group
        with respect to the purchase, disposition or voting of Securities or
        otherwise.

       

      4.17 Bonus
        Shares.
        The
        Company shall take any and all action requested by a Purchaser, including
        providing any legal opinions, in order to cause the transfer of the Bonus
        Shares
        to such Purchaser.

       

      ARTICLE
        V.

      MISCELLANEOUS

       

      5.1 Termination.
        This
        Agreement may be terminated by any Purchaser, by written notice to the other
        parties, if the Closing has not been consummated on or before April 15, 2007;
        provided that no such termination will affect the right of any party to sue
        for
        any breach by the other party (or parties).

       

      5.2 Fees
        and Expenses.
        At the
        Closing, the Company has agreed to reimburse Little Wing LP (“Little
        Wing”)
        for
        its legal fees and expenses. Except as expressly set forth in the Transaction
        Documents to the contrary, each party shall pay the fees and expenses of
        its
        advisers, counsel, accountants and other experts, if any, and all other expenses
        incurred by such party incident to the negotiation, preparation, execution,
        delivery and performance of this Agreement. The Company shall pay all transfer
        agent fees, stamp taxes and other taxes and duties levied in connection with
        the
        delivery of any Securities.

       

      5.3 Entire
        Agreement.
        The
        Transaction Documents, together with the exhibits and schedules thereto,
        contain
        the entire understanding of the parties with respect to the subject matter
        hereof and supersede all prior agreements and understandings, oral or written,
        with respect to such matters, which the parties acknowledge have been merged
        into such documents, exhibits and schedules.

       

      5.4 Notices.
        Any and
        all notices or other communications or deliveries required or permitted to
        be
        provided hereunder shall be in writing and shall be deemed given and effective
        on the earliest of (a) the date of transmission, if such notice or communication
        is delivered via facsimile at the facsimile number set forth on the signature
        pages attached hereto prior to 5:30 p.m. (New York City time) on a Business
        Day,
        (b) the next Business Day after the date of transmission, if such notice
        or
        communication is delivered via facsimile at the facsimile number set forth
        on
        the signature pages attached hereto on a day that is not a Business Day or
        later
        than 5:30 p.m. (New York City time) on any Business Day, (c) the second Business
        Day following the date of mailing, if sent by U.S. nationally recognized
        overnight courier service, or (d) upon actual receipt by the party to whom
        such
        notice is required to be given. The address for such notices and communications
        shall be as set forth on the signature pages attached hereto.

       

      
        
          
          

        

        
          -28-

          
            

          

        

        
          
          

        

      

       

      5.5 Amendments;
        Waivers.
        No
        provision of this Agreement may be waived or amended except in a written
        instrument signed, in the case of an amendment, by the Company and the
        Purchasers (or their permitted transferees) holding at least 75% of the
        principal amount of the Notes then outstanding in the aggregate or, in the
        case
        of a waiver, by the party against whom enforcement of any such waiver is
        sought.
        No waiver of any default with respect to any provision, condition or requirement
        of this Agreement shall be deemed to be a continuing waiver in the future
        or a
        waiver of any subsequent default or a waiver of any other provision, condition
        or requirement hereof, nor shall any delay or omission of either party to
        exercise any right hereunder in any manner impair the exercise of any such
        right.

       

      5.6 Headings.
        The
        headings herein are for convenience only, do not constitute a part of this
        Agreement and shall not be deemed to limit or affect any of the provisions
        hereof. The language used in this Agreement will be deemed to be the language
        chosen by the parties to express their mutual intent, and no rules of strict
        construction will be applied against any party.

       

      5.7 Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their successors and permitted assigns. The Company may not assign this
        Agreement or any rights or obligations hereunder without the prior written
        consent of each Purchaser. Any Purchaser may assign any or all of its rights
        under this Agreement to any Person to whom such Purchaser assigns or transfers
        any Securities, provided such transferee agrees in writing to be bound, with
        respect to the transferred Securities, by the provisions hereof that apply
        to
        the “Purchasers”.

       

      5.8 No
        Third-Party Beneficiaries.
        This
        Agreement is intended for the benefit of the parties hereto and their respective
        successors and permitted assigns and is not for the benefit of, nor may any
        provision hereof be enforced by, any other Person, except as otherwise set
        forth
        in Section 4.11.

       

      5.9 Governing
        Law.
        All
        questions concerning the construction, validity, enforcement and interpretation
        of the Transaction Documents 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 this Agreement and any other Transaction Documents
        (whether brought against a party hereto or its respective affiliates, directors,
        officers, shareholders, employees or agents) shall be commenced exclusively
        in
        the state and federal courts sitting in the City of New York. Each party
        hereby
        irrevocably submits to the exclusive jurisdiction of the state and federal
        courts sitting in the City of New York, borough of Manhattan 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,
        that
        such suit, action or proceeding is 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 Agreement 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. THE
        PARTIES HERETO EACH WAIVE ALL RIGHTS TO A TRIAL BY JURY.
        If
        either party shall commence an action or proceeding to enforce any provisions
        of
        the Transaction Documents, 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.

       

      
        
          
          

        

        
          -29-

          
            

          

        

        
          
          

        

      

       

      5.10 Survival.
        The
        representations and warranties contained herein shall survive each Closing
        and
        the delivery, exercise and/or conversion of the Securities, as applicable
        for
        the applicable statute of limitations.

       

      5.11 Execution.
        This
        Agreement may be executed in two or more counterparts, all of which when
        taken
        together shall be considered one and the same agreement and shall become
        effective when counterparts have been signed by each party and delivered
        to the
        other party, it being understood that both parties need not sign the same
        counterpart. In the event that any signature is delivered by facsimile
        transmission, such signature shall create a valid and binding obligation
        of the
        party executing (or on whose behalf such signature is executed) with the
        same
        force and effect as if such facsimile signature page were an original
        thereof.

       

      5.12 Severability.
        If any
        provision of this Agreement is held to be invalid or unenforceable in any
        respect, the validity and enforceability of the remaining terms and provisions
        of this Agreement shall not in any way be affected or impaired thereby and
        the
        parties will attempt to agree upon a valid and enforceable provision that
        is a
        reasonable substitute therefor, and upon so agreeing, shall incorporate such
        substitute provision in this Agreement.

       

      5.13 Rescission
        and Withdrawal Right.
        Notwithstanding anything to the contrary contained in (and without limiting
        any
        similar provisions of) the Transaction Documents, if any Purchaser exercises
        a
        right, election, demand or option under a Transaction Documents and the Company
        does not timely perform its related obligations within the periods therein
        provided, such Purchaser may rescind or withdraw, in its sole discretion
        from
        time to time upon written notice to the Company, any relevant notice, demand
        or
        election in whole or in part without prejudice to its future actions and
        rights;
provided,
        however,
        in the
        case of a rescission of a conversion of a Note or exercise of a Warrant,
        the
        Purchaser shall be required to return any shares of Common Stock subject
        to any
        such rescinded conversion or exercise notice.

       

      5.14 Replacement
        of Securities.
        If any
        certificate or instrument evidencing any Securities is mutilated, lost, stolen
        or destroyed, the Company shall issue or cause to be issued in exchange and
        substitution for and upon cancellation thereof, or in lieu of and substitution
        therefor, a new certificate or instrument, but only upon receipt of evidence
        reasonably satisfactory to the Company of such loss, theft or destruction
        and
        customary and reasonable indemnity, if requested. The applicants for a new
        certificate or instrument under such circumstances shall also pay any reasonable
        third-party costs associated with the issuance of such replacement
        Securities.

       

      
        
          
          

        

        
          -30-

          
            

          

        

        
          
          

        

      

       

      5.15 Remedies.
        In
        addition to being entitled to exercise all rights provided herein or granted
        by
        law, including recovery of damages, each of the Purchasers and the Company
        will
        be entitled to specific performance under the Transaction Documents. The
        parties
        agree that monetary damages may not be adequate compensation for any loss
        incurred by reason of any breach of obligations described in the foregoing
        sentence and hereby agrees to waive in any action for specific performance
        of
        any such obligation the defense that a remedy at law would be
        adequate.

       

      5.16 Payment
        Set Aside.
        To the
        extent that the Company makes a payment or payments to any Purchaser pursuant
        to
        any Transaction Documents or a Purchaser enforces or exercises its rights
        thereunder, and such payment or payments or the proceeds of such enforcement
        or
        exercise or any part thereof are subsequently invalidated, declared to be
        fraudulent or preferential, set aside, recovered from, disgorged by or are
        required to be refunded, repaid or otherwise restored to the Company, a trustee,
        receiver or any other person under any law (including, without limitation,
        any
        bankruptcy law, state or federal law, common law or equitable cause of action),
        then to the extent of any such restoration the obligation or part thereof
        originally intended to be satisfied shall be revived and continued in full
        force
        and effect as if such payment had not been made or such enforcement or setoff
        had not occurred.

       

      5.17 Usury.
        To the
        extent it may lawfully do so, the Company hereby agrees not to insist upon
        or
        plead or in any manner whatsoever claim, and will resist any and all efforts
        to
        be compelled to take the benefit or advantage of, usury laws wherever enacted,
        now or at any time hereafter in force, in connection with any claim, action
        or
        proceeding that may be brought by any Purchaser in order to enforce any right
        or
        remedy under any Transaction Documents. Notwithstanding any provision to
        the
        contrary contained in any Transaction Documents, it is expressly agreed and
        provided that the total liability of the Company under the Transaction Documents
        for payments in the nature of interest shall not exceed the maximum lawful
        rate
        authorized under applicable law (the “Maximum
        Rate”),
        and,
        without limiting the foregoing, in no event shall any rate of interest or
        default interest, or both of them, when aggregated with any other sums in
        the
        nature of interest that the Company may be obligated to pay under the
        Transaction Documents exceed such Maximum Rate. It is agreed that if the
        maximum
        contract rate of interest allowed by law and applicable to the Transaction
        Documents is increased or decreased by statute or any official governmental
        action subsequent to the date hereof, the new maximum contract rate of interest
        allowed by law will be the Maximum Rate applicable to the Transaction Documents
        from the effective date forward, unless such application is precluded by
        applicable law. If under any circumstances whatsoever, interest in excess
        of the
        Maximum Rate is paid by the Company to any Purchaser with respect to
        indebtedness evidenced by the Transaction Documents, such excess shall be
        applied by such Purchaser to the unpaid principal balance of any such
        indebtedness or be refunded to the Company, the manner of handling such excess
        to be at such Purchaser’s election.

       

      
        
          
          

        

        
          -31-

          
            

          

        

        
          
          

        

      

       

      5.18 Independent
        Nature of Purchasers’ Obligations and Rights.
        The
        obligations of each Purchaser under any Transaction Documents are several
        and
        not joint with the obligations of any other Purchaser, and no Purchaser shall
        be
        responsible in any way for the performance of the obligations of any other
        Purchaser under any Transaction Documents. Nothing contained herein or in
        any
        Transaction Documents, and no action taken by any Purchaser pursuant thereto,
        shall be deemed to constitute the Purchasers as a partnership, an association,
        a
        joint venture or any other kind of entity, or create a presumption that the
        Purchasers are in any way acting in concert or as a group with respect to
        such
        obligations or the transactions contemplated by the Transaction Documents.
        Each
        Purchaser shall be entitled to independently protect and enforce its rights,
        including without limitation the rights arising out of this Agreement or
        out of
        the other Transaction Documents, and it shall not be necessary for any other
        Purchaser to be joined as an additional party in any proceeding for such
        purpose. Each Purchaser has been represented by its own separate legal counsel
        in their review and negotiation of the Transaction Documents. The Company
        has
        elected to provide all Purchasers with the same terms and Transaction Documents
        for the convenience of the Company and not because it was required or requested
        to do so by the Purchasers.

       

      5.19 Liquidated
        Damages.
        The
        Company’s obligations to pay any partial liquidated damages or other amounts
        owing under the Transaction Documents is a continuing obligation of the Company
        and shall not terminate until all unpaid partial liquidated damages and other
        amounts have been paid notwithstanding the fact that the instrument or security
        pursuant to which such partial liquidated damages or other amounts are due
        and
        payable shall have been canceled. 

       

      5.20 Construction.
        The
        parties agree that each of them and/or their respective counsel has reviewed
        and
        had an opportunity to revise the Transaction Documents and, therefore, the
        normal rule of construction to the effect that any ambiguities are to be
        resolved against the drafting party shall not be employed in the interpretation
        of the Transaction Documents or any amendments hereto.

       

      (Signature
        Pages Follow)

       

      
        
          
          

        

        
          -32-

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
        Agreement to be duly executed by their respective authorized signatories
        as of
        the date first indicated above.

      

        
          	 VISTULA
                  COMMUNICATIONS SERVICES, INC.	 	
                  Address
                    for Notice:

                
	 	 	 
	By:	
                  /s/
                    Rupert Galliers-Pratt

                	 	
                   

                
	 	
                  
                    

                    Name:
                      Rupert Galliers-Pratt
Title:
                    President and Chief Executive Officer

                	 	
                  405
                    Park Avenue, Suite 801

                  New
                    York, NY 10022

                  ATTN:
                    Chief Executive Officer

                  Fax:

                
	 With
                  a copy to (which shall not constitute notice):	 	 
	 	 	 	 
	
                   Foley
                    Hoag LLP

                  155
                    Seaport Boulevard

                  Boston,
                    MA 02210

                  Attn:
                    Paul Bork, Esq.

                  Fax:
                    617.832.7000

                	 	 

        

      

       

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
        PAGE FOR PURCHASER FOLLOWS]

       

      
        
          
          

        

        
          -33-

          
            

          

        

        
          
          

        

      

      [PURCHASER
        SIGNATURE PAGES TO VISTULA SECURITIES PURCHASE AGREEMENT]

      

      IN
        WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
        to be duly executed by their respective authorized signatories as of the
        date
        first indicated above.

       

      Name
        of
        Purchaser: JMG
        Capital Partners, LP       

      Signature
        of Authorized Signatory of Purchaser: /s/
        Jonathan Glaser    

      Name
        of
        Authorized Signatory: Jonathan
        Glaser       

      Title
        of
        Authorized Signatory: Member
        Manager of the General Partner

      
        Email
          Address of Purchaser: ________________________________________________________________

      

       

      Address
        for Notice of Purchaser:

      11601
        Wilshire Blvd. Ste 2180

      Los
        Angeles, CA 90005

       

      Address
        for Delivery of Securities for Purchaser (if not same as
        above):
 

      Closing
        Subscription Amount: $400,000

      Warrant
        Shares: 400,000

      

      EIN
        Number: 

      

      Blocker
        Provision Election: Please choose from one of the two options
        below:

      

      (check
        one)

      o My
        Warrant and Note shall contain a 4.99% blocker provision.

      x My
        Warrant and Note shall contain a 9.99% blocker provision.

       

      
        
          
          

        

        
          -34-

          
            

          

        

        
          
          

        

      

      [PURCHASER
        SIGNATURE PAGES TO VISTULA SECURITIES PURCHASE AGREEMENT]

      

      IN
        WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
        to be duly executed by their respective authorized signatories as of the
        date
        first indicated above.

       

      Name
        of
        Purchaser: JMG
        Triton Offshore Fund, Ltd.      

      Signature
        of Authorized Signatory of Purchaser: /s/
        Jonathan Glaser    

      Name
        of
        Authorized Signatory: Jonathan
        Glaser       

      Title
        of
        Authorized Signatory: Member
        Manager of the Investment Manager

      
        Email
          Address of Purchaser: ________________________________________________________________ 

      

       

      Address
        for Notice of Purchaser:

      11601
        Wilshire Blvd. Ste 2180

      Los
        Angeles, CA 90005

       

      Address
        for Delivery of Securities for Purchaser (if not same as above):

       

      Closing
        Subscription Amount: $400,000

      Warrant
        Shares: 400,000

      

      EIN
        Number: 

      

      Blocker
        Provision Election: Please choose from one of the two options
        below:

      

      (check
        one)

      o My
        Warrant and Note shall contain a 4.99% blocker provision.

      x My
        Warrant and Note shall contain a 9.99% blocker provision.

       

      
        
          
          

        

        
          -35-

          
            

          

        

        
          
          

        

      

      [PURCHASER
        SIGNATURE PAGES TO VISTULA SECURITIES PURCHASE AGREEMENT]

      

      IN
        WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
        to be duly executed by their respective authorized signatories as of the
        date
        first indicated above.

       

      Name
        of
        Purchaser: Bushido
        Capital Master Fund, LP       

      Signature
        of Authorized Signatory of Purchaser: /s/
        Ronald S. Dagar    

      Name
        of
        Authorized Signatory: Ronald
        S.
        Dagar       

      Title
        of
        Authorized Signatory: Director 

      
        Email
          Address of Purchaser: ________________________________________________________________

       

      Address
        for Notice of Purchaser:

      145
        East
        57th
        Street,
        11th
        Floor

      New
        York,
        NY 10022

      

      Address
        for Delivery of Securities for Purchaser (if not same as above):

      

      Closing
        Subscription Amount: $50,000

      Warrant
        Shares: 50,000

      

      EIN
        Number: 

      

      Blocker
        Provision Election: Please choose from one of the two options
        below:

      

      (check
        one)

      x My
        Warrant and Note shall contain a 4.99% blocker provision.

      o My
        Warrant and Note shall contain a 9.99% blocker provision.

       

      
        
          
          

        

        
          -36-

          
            

          

        

        
          
          

        

      

      [PURCHASER
        SIGNATURE PAGES TO VISTULA SECURITIES PURCHASE AGREEMENT]

      

      IN
        WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
        to be duly executed by their respective authorized signatories as of the
        date
        first indicated above.

       

      Name
        of
        Purchaser: JANA
        Piranha Master Fund, Ltd.      

      Signature
        of Authorized Signatory of Purchaser: /s/
        Marc
        Lehmann    

      Name
        of
        Authorized Signatory: Marc
        Lehmann       

      Title
        of
        Authorized Signatory: Partner,
        JANA Partners LLC

      
        Email
          Address of Purchaser: ________________________________________________________________

       

      Address
        for Notice of Purchaser:

      c/o
        JANA
        Partners LLC

      200
        Park
        Ave, Suite 3300

      New
        York,
        NY 10166

      Attention:
        Marc Lehmann

      

      Address
        for Delivery of Securities for Purchaser (if not same as above):

      Goldman
        Sachs, fbo JANA Partners

      One
        New
        York Plaza

      New
        York,
        NY 10004

      Attention:
        Tomie Akin, 44th
        Floor

      

      Closing
        Subscription Amount: $650,000

      Warrant
        Shares: 650,000

      

      EIN
        Number: 

      

      Blocker
        Provision Election: Please choose from one of the two options
        below:

      

      (check
        one)

      o My
        Warrant and Note shall contain a 4.99% blocker provision.

      x My
        Warrant and Note shall contain a 9.99% blocker provision.

       

      
        
          
          

        

        
          -37-

          
            

          

        

        
          
          

        

      

      [PURCHASER
        SIGNATURE PAGES TO VISTULA SECURITIES PURCHASE AGREEMENT]

      

      IN
        WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
        to be duly executed by their respective authorized signatories as of the
        date
        first indicated above.

       

      Name
        of
        Purchaser: Little
        Wing LP         

      Signature
        of Authorized Signatory of Purchaser: /s/
        Parker L. Quillen    

      Name
        of
        Authorized Signatory: Parker
        L.
        Quillen       

      Title
        of
        Authorized Signatory: Sole
        Managing Member, Quilcap Mgmt., LLC,    

       Quilcap
        Mgmt. LLC as Investment Manager

      
        Email
          Address of Purchaser: ________________________________________________________________

       

      Address
        for Notice of Purchaser:

      145
        East
        57th
        Street,
        10th
        Floor

      New
        York,
        NY 10022

      

      Address
        for Delivery of Securities for Purchaser (if not same as above):

      

      Closing
        Subscription Amount: $595,500

      Warrant
        Shares: 595,500

      

      EIN
        Number: 

      

      Blocker
        Provision Election: Please choose from one of the two options
        below:

      

      (check
        one)

         o My
        Warrant and Note shall contain a 4.99% blocker provision. 

      x My
        Warrant and Note shall contain a 9.99% blocker provision.

       

      
        
          
          

        

        
          -38-

          
            

          

        

        
          
          

        

      

      [PURCHASER
        SIGNATURE PAGES TO VISTULA SECURITIES PURCHASE AGREEMENT]

      

      IN
        WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
        to be duly executed by their respective authorized signatories as of the
        date
        first indicated above.

       

      Name
        of
        Purchaser: Tradewinds
        Fund Ltd.         

      Signature
        of Authorized Signatory of Purchaser: /s/
        Parker L. Quillen    

      Name
        of
        Authorized Signatory: Parker
        L.
        Quillen       

      Title
        of
        Authorized Signatory: Sole
        Managing Member, Quilcap Mgmt., LLC

      
        Email
          Address of Purchaser: ________________________________________________________________

          

      Address
        for Notice of Purchaser:

      145
        East
        57th
        Street,
        10th
        Floor

      New
        York,
        NY 10022

      

      Address
        for Delivery of Securities for Purchaser (if not same as above):

       

      Closing
        Subscription Amount: $104,500

      Warrant
        Shares: 104,500

      

      EIN
        Number: 

      

      Blocker
        Provision Election: Please choose from one of the two options
        below:

      

      (check
        one)

      o My
        Warrant and Note shall contain a 4.99% blocker provision.

      x My
        Warrant and Note shall contain a
        9.99% blocker provision.

       

      
        
          
          

        

        
          -39-

          
            

          

        

        
          
          

        

      

      [PURCHASER
        SIGNATURE PAGES TO VISTULA SECURITIES PURCHASE AGREEMENT]

      

      IN
        WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
        to be duly executed by their respective authorized signatories as of the
        date
        first indicated above.

       

      Name
        of
        Purchaser: Betty
        B.
        Evans         

      Signature
        of Authorized Signatory of Purchaser: /s/
        Betty
        B. Evans by Whitney S. Quillen 

       her
        attorney in fact    

      Name
        of
        Authorized Signatory: Whitney
        S. Quillen       

      Title
        of
        Authorized Signatory: Power
        of
        Attorney (attorney in fact)

      
        Email
          Address of Purchaser: ________________________________________________________________

      

          

      Address
        for Notice of Purchaser:

      145
        East
        57th
        Street,
        10th
        Floor

      New
        York,
        NY 10022

      

      Address
        for Delivery of Securities for Purchaser (if not same as above):

      

      Closing
        Subscription Amount: $50,000

      Warrant
        Shares: 50,000

      

      EIN
        Number: 

      

      Blocker
        Provision Election: Please choose from one of the two options
        below:

      

      (check
        one)

      x My
        Warrant and Note shall contain a 4.99% blocker provision.  

      o My
        Warrant and Note shall contain a
        9.99% blocker provision.

       

      
        
          
          

        

        
          -40-

          
            

          

        

        
          
          

        

      

      [PURCHASER
        SIGNATURE PAGES TO VISTULA SECURITIES PURCHASE AGREEMENT]

      

      IN
        WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
        to be duly executed by their respective authorized signatories as of the
        date
        first indicated above.

       

      Name
        of
        Purchaser: GSSF
        Master Fund, LP        

      Signature
        of Authorized Signatory of Purchaser: /s/
        E. B.
        Lyon IV     

      Name
        of
        Authorized Signatory: E.
        B.
        Lyon IV       

      Title
        of
        Authorized Signatory: Authorized
        Agent

      
        Email
          Address of Purchaser: ________________________________________________________________

           

      Address
        for Notice of Purchaser:

      100
        Crescent Court, Suite 490

      Dallas,
        Texas 75201

      

      Address
        for Delivery of Securities for Purchaser (if not same as above):

      

      Closing
        Subscription Amount: $100,000.00

      Warrant
        Shares: 100,000

      

      EIN
        Number: 

      

      Blocker
        Provision Election: Please choose from one of the two options
        below:

      

      (check
        one)  

      o My
        Warrant and Note shall contain a
        4.99% blocker provision. 

      x My
        Warrant and Note shall contain a
        9.99% blocker provision.

       

      
        
          
          

        

        
          -41-

          
            

          

        

        
          
          

        

      

      [PURCHASER
        SIGNATURE PAGES TO VISTULA SECURITIES PURCHASE AGREEMENT]

      

      IN
        WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
        to be duly executed by their respective authorized signatories as of the
        date
        first indicated above.

       

      Name
        of
        Purchaser: Stratford
        Partners, LP        

      Signature
        of Authorized Signatory of Purchaser: /s/
        Chad
        Comiteau    

      Name
        of
        Authorized Signatory: Chad
        Comiteau       

      Title
        of
        Authorized Signatory: General
        Partner

      
        Email
          Address of Purchaser: ________________________________________________________________

      

           

      Address
        for Notice of Purchaser:

      237
        Park
        Avenue

      Suite
        900

      New
        York,
        NY 10017

      

      Address
        for Delivery of Securities for Purchaser (if not same as above):

      

      Closing
        Subscription Amount: $150,000

      Warrant
        Shares: 150,000

      

      EIN
        Number: 

      

      Blocker
        Provision Election: Please choose from one of the two options
        below:

      

      (check
        one)

      o My
        Warrant and Note shall contain a 4.99% blocker provision.

      o My
        Warrant and Note shall contain a 9.99% blocker provision.

       

      
        
          
          

        

        
          -42-

          
            

          

        

        
          
          

        

      

      Exhibit
        A

      

      Form
        of 12% Convertible Note

       

      [See
        Exhibit 4.1 of this filing.]

       

      
        
          
          

        

        
          -43-

          
            

          

        

        
          
          

        

      

      Exhibit
        B

      

      Form
        of Registration Rights Agreement

       

      [See
        Exhibit 10.2 of this filing.]

       

      
        
          
          

        

        
          -44-

          
            

          

        

        
          
          

        

      

      Exhibit
        C

      

      Form
        of Warrant

       

      [See
        Exhibit 4.2 of this filing.]

       

      
        
          
          

        

        
          -45-

          
            

          

        

        
          
          

        

      

      Exhibit
        D

      

      Form
        of Legal Opinion

       

      FOLEY
        HOAG LLP

      ATTORNEYS
        AT LAW

      

      April
        6,
        2007

      

      To:
         Each
        of
        the Purchasers under the Securities Purchase Agreement

       

      Re: Securities
        Purchase Agreement

      

      Ladies
        and Gentlemen:

       

      We
        have
        acted as counsel for Vistula Communications Services, Inc., a Delaware
        corporation (the “Company”),
        in
        connection with the negotiation of the Securities Purchase Agreement by and
        among the purchasers signatory thereto (the “Purchasers”)
        and
        the Company dated as of even date herewith (the “Purchase
        Agreement”),
        the
        Registration Rights Agreement between the Purchasers and the Company dated
        as of
        even date herewith (the “Registration
        Rights Agreement”),
        and
        the Escrow Agreement between the Purchasers, the escrow agent and the Company
        dated as of even date herewith (the “Escrow
        Agreement”).
        The
        Purchase Agreement provides for the issuance and sale by the Company of up
        to
        $2,500,000 in aggregate principal amount of convertible notes (the “Notes”)
        and
        warrants to purchase up to 2,500,000 shares of the Common Stock, $.001 par
        value
        per share (the “Common
        Stock”),
        of
        the Company (the “Warrants”)
        (the
        shares of Common Stock issued or issuable pursuant to the exercise of the
        Warrants and conversion of the Notes are collectively referred to herein
        as the
“Underlying
        Shares”)
        (the
        Escrow Agreement, Purchase Agreement, Registration Rights Agreement, Notes
        and
        Warrants are collectively referred to herein as the “Agreements”).
        All
        terms used herein have the meanings defined for them in the Purchase Agreement
        unless otherwise defined herein.

       

      This
        opinion is furnished to you pursuant to the Purchase Agreement. In rendering
        the
        opinions expressed below, we have examined originals or copies of: (i) the
        Agreements, (ii) the Company’s Certificate of Incorporation, as amended through
        the date hereof (“Certificate
        of Incorporation”),
        and
        (iii) the Company’s By-laws, as in effect on the date hereof (the “By-laws”),
        and
        we have examined and considered such corporate records, certificates and
        matters
        of law as we have deemed appropriate as a basis for our opinions set forth
        below. In rendering the opinions expressed below, we have relied, as to factual
        matters, upon the representations and warranties of the Company contained
        in the
        Agreements.

       

      Based
        upon and subject to the foregoing, we are of the opinion that:

       

      1. The
        Company is a corporation duly organized and validly existing under the laws
        of
        the State of Delaware and has all requisite corporate power and authority
        to
        carry on its business and to own, lease and operate its properties and assets,
        in each case, as described in the SEC Reports. Vistula USA, Inc. is a
        corporation duly organized and validly existing under the laws of the State
        of
        Delaware and has all requisite corporate power and authority to carry on
        its
        business and to own, lease and operate its properties and assets. As disclosed
        in the Schedules to the Purchase Agreement, neither the Company nor Vistula
        USA,
        Inc. is in good standing in Delaware. 

       

      
        
          
          

        

        
          -46-

          
            

          

        

        
          
          

        

      

       

      2. The
        Company has the requisite corporate power and authority to enter into and
        perform its obligations under the Agreements and to issue the Notes, the
        Warrants and the Underlying Shares. The execution and delivery of the Agreements
        by the Company and the consummation by it of the transactions contemplated
        thereby have been duly authorized by all necessary corporate action and no
        further consent or authorization of the Company or its Board of Directors
        or
        stockholders is required. Each of the Agreements has been duly executed and
        delivered by the Company, and the Notes and Warrants have been duly executed,
        issued and delivered by the Company and each of the Agreements constitutes
        valid
        and binding obligations of the Company enforceable against the Company in
        accordance with their respective terms. 

       

      3. The
        execution, delivery and performance of the Agreements by the Company and
        the
        consummation by the Company of the transactions contemplated thereby, including,
        without limitation, the issuance of the Notes, the Warrants and the Underlying
        Shares, do not and will not (i) result in a violation of the Company’s
        Certificate of Incorporation or By-Laws; (ii) except as disclosed in the
        Disclosure Schedules, conflict with, or constitute a material default (or
        an
        event that with notice or lapse of time or both would become a material default)
        under, any material agreement, indenture or instrument listed as exhibits
        in the
        SEC Reports to which the Company is a party, except for such conflicts and
        defaults, as would not, individually or in the aggregate, have a Material
        Adverse Effect or for which a consent and waiver have been obtained; or (iii)
        result in a violation of the Delaware General Corporation Law or any federal
        or
        Massachusetts law, rule or regulation applicable to the Company or by which
        any
        property or asset of the Company is bound or affected, except for such
        violations as would not, individually or in the aggregate, have a Material
        Adverse Effect. To our knowledge, the Company is not in violation of any
        terms
        of its Certificate of Incorporation or By-laws. 

       

      4. Assuming
        the accuracy of the representations and warranties made by the Purchasers
        in the
        Purchase Agreement, the
        issuance of the Notes, the Warrants and the Underlying Shares in accordance
        with
        the Purchase Agreement will be exempt from registration under the Securities
        Act
        of 1933, as amended. Upon conversion of the Notes or exercise of the Warrants
        in
        accordance with their respective terms, the Underlying Shares, will be duly
        and
        validly issued, fully paid and nonassessable, and free of any liens,
        encumbrances and preemptive or similar rights contained in the Company’s
        Certificate of Incorporation or By-laws or, to our knowledge, in any agreement
        to which the Company is a party.

       

      5. We
        have
        not been engaged to devote substantive attention to any actions, suits,
        proceedings or investigations that are pending against the Company or its
        properties. To our knowledge, except as disclosed in the SEC Reports or the
        Schedules to the Purchase Agreement, the Company is not a party to or subject
        to
        the provisions of any order, writ, injunction, judgment or decree of any
        court
        or government agency or instrumentality.

       

      
        
          
          

        

        
          -47-

          
            

          

        

        
          
          

        

      

       

      6. As
        of the
        date hereof, the authorized capital stock of the Company consists of 200,000,000
        shares of Common Stock of which shares 66,964,898 are outstanding and 10,000,000
        shares of undesignated Preferred Stock of which none are outstanding. The
        Bonus
        Shares have been duly authorized and are fully paid and non-assessable.

       

      7. Assuming
        the accuracy of the representations and warranties made by the Purchasers
        in the
        Purchase Agreement, the transfer of the Bonus Shares in accordance with the
        Purchase Agreement will be exempt from registration with the Securities Act.
        

       

      The
        opinions expressed herein are subject to the following assumptions, limitations,
        qualifications and exceptions:

       

      (a) We
        have
        made such legal and factual examinations and inquiries as we have deemed
        advisable or necessary for the purpose of rendering this opinion.

       

      (b) We
        have
        examined, among other things, originals or copies of such corporate records
        of
        the Company, certificates of public officials and such other documents and
        questions of law that we consider necessary or advisable for the purpose
        of
        rendering this opinion. In such examination we have assumed the genuineness
        of
        all signatures or original documents, the authenticity and completeness of
        all
        documents submitted to us as originals, the conformity to original documents
        of
        all copies submitted to us as copies thereof, the legal capacity of natural
        persons, and the due execution and delivery of all documents (except as to
        due
        execution and delivery by the Company) where due execution and delivery are
        a
        prerequisite to the effectiveness thereof.

       

      (c) As
        used
        in this opinion, the expression “to our knowledge” refers to the current actual
        knowledge of the attorneys of this firm who have worked on matters for the
        Company solely in connection with the Agreements and the transactions
        contemplated thereby.

       

      (d)
         For
        purposes of this opinion, we have assumed that you have all requisite power
        and
        authority, and have taken any and all necessary corporate action, to execute
        and
        deliver the Agreements, and we are assuming that the representations and
        warranties made by the Purchasers in the Agreements and pursuant thereto
        are
        true and correct.  

       

      (e) Our
        opinion is based upon our knowledge of the facts as of the date hereof and
        assumes no event will take place in the future which would affect the opinions
        set forth herein other than future events contemplated by the Agreements.
        We
        assume no duty to communicate with you with respect to any change in law
        or
        facts which comes to our attention hereafter.

       

      (f) In
        rendering the opinion in paragraph 1 with respect to legal existence of the
        Company in the State of Delaware, we have relied solely upon a certificate
        of
        the Secretary of State of Delaware and we express such opinion as of the
        date of
        such certificate. In rendering the opinion in paragraph 1 with respect to
        legal
        existence of Vistula USA, Inc. in the State of Delaware, we have relied solely
        upon a certificate of the Secretary of State of Delaware and we express such
        opinion as of the date of such certificate. We express no opinion as to the
        tax
        good standing of the Company or any of its subsidiaries.

       

      
        
          
          

        

        
          -48-

          
            

          

        

        
          
          

        

      

       

      (g)
         In
        rendering the opinion in paragraph 5, we have relied upon a certificate of
        the
        Chief Financial Officer and Chairman of the Board of the Company (the
“Certificate”)
        without further investigation. In particular, we have not searched the dockets
        of the courts or government agencies or instrumentalities of any
        jurisdictions.

       

      (h) In
        rendering the opinion expressed in paragraph 6 with respect to capitalization,
        we have relied upon the Certificate without further investigation.

       

      We
        have
        made such examination of Massachusetts law, federal law, and the Delaware
        General Corporation Law as we have deemed necessary for the purpose of this
        opinion. In rendering opinions concerning the Delaware General Corporation
        Law,
        we have, with your consent, relied exclusively upon a review of published
        statutes. In rendering opinions respecting the enforceability of the Agreements,
        we have assumed, with your consent and without any research or other
        confirmation, that the laws of the State of New York are identical in all
        respects to the laws of The Commonwealth of Massachusetts. We express no
        opinion
        herein as to the laws of any jurisdiction other than The Commonwealth of
        Massachusetts, the federal laws of the United States of America and the Delaware
        General Corporation Law. 

       

      The
        opinions expressed herein are qualified to the extent that (1) the
        enforceability of any provisions of the Agreements or any instrument or of
        any
        right granted thereunder may be subject to or affected by any bankruptcy,
        reorganization, insolvency, fraudulent conveyance, moratorium or other similar
        law of general application relating to or affecting the rights or remedies
        of
        creditors generally, which law may be in effect from time to time, (2) the
        remedy of specific performance or any other equitable remedy may be unavailable
        or may be withheld as a matter of judicial discretion, (3) equitable principles
        and principles of public policy may be applied in construing or enforcing
        the
        provisions of the Agreements or of any other agreement, instrument or document,
        and (4) the enforceability, validity or binding effect of any remedial provision
        of the Agreements may be limited by applicable law which may limit particular
        rights and remedies but not so as to interfere materially with the practical
        realization of the benefits intended to be provided to you by the Agreements.
        In
        addition, the opinions expressed herein are subject to the qualification
        that
        the enforcement of any of your rights are in all cases subject to the your
        implied duty of good faith and fair dealing.

       

      We
        express no opinion herein as to the validity or enforceability of any provision
        of the Agreements or any other instrument or document to the extent that
        such
        provision purports to (1) constitute a waiver by the Company of any statutory
        right except where advance waiver is expressly permitted by the relevant
        statute; (2) require the Company to indemnify or to hold harmless you or
        any
        other person or entity from the consequences of any negligent or other wrongful
        act or omission of you or such other person or entity; (3) provide for
        indemnification or contribution by the Company in connection with the
        Agreements, the transactions contemplated thereby or otherwise to the extent
        such indemnification or contribution may be limited by applicable laws or
        as a
        matter of public policy; or (4) constitute a waiver of any right to a hearing
        on
        or adjudication of any issue or the right to trial by jury. We express no
        opinion with respect to whether any of the provisions of the Agreements or
        the
        transactions contemplated by the Agreements comply with the usury laws of
        any
        jurisdiction.

       

      
        
          
          

        

        
          -49-

          
            

          

        

        
          
          

        

      

       

      This
        opinion shall be interpreted in accordance with the Legal Opinions Principles
        issued by the Committee on Legal Opinions of the American Bar Association’s
        Business Law Section as published in 53 Business Lawyer 831 (May
        1998).

       

      This
        opinion is furnished to the Purchasers solely for their benefit in connection
        with the transactions described above and, except as otherwise expressly
        set
        forth herein, may not be relied upon by any other person or for any other
        purpose without our prior written consent, except that the opinions expressed
        in
        paragraph (4) and (7) above may be relied upon by Continental Stock Transfer
        & Trust Company as Transfer Agent.

      
        	 	 	 
	 	
                Very
                  truly yours,

              
	 	 
	 	
                FOLEY
                  HOAG LLP

              
	 
 	 
 	 
 
	
              	By:  	 
	 	
                
A
                Partner

      

       

      
        
          
          

        

        
          -50-

          
            

          

        

        
          
          

        

      

      Exhibit
        E

      

      Form
        of Escrow Agreement

       

      [See
        Exhibit 10.5 of this filing.]

       

      
        
          
          

        

        
          -51-

          
            

          

        

        
          
          

        

      

       

      Disclosure
        Schedules

      

      Delivered
        Pursuant to

      

      Securities
        Purchase Agreement

      

      By
        and Among

      

      Vistula
        Communications Services, Inc. and the Purchasers Named
        Therein

      

      April
        6, 2007

       

      
        
          
          

        

        
          -52-

          
            

          

        

        
          
          

        

      

       

      The
        following are the Disclosure Schedules of Vistula Communications Services,
        Inc.,
        a Delaware corporation, (the “Company”) to the Securities Purchase Agreement by
        and between the Company and the Purchasers named therein, dated of even date
        herewith (the “Agreement”). Unless otherwise stated, capitalized terms used but
        not otherwise defined herein shall have the meanings given them in the
        Agreement. 

      

      These
        Disclosure Schedules are arranged in sections and paragraphs corresponding
        to
        the number and lettered sections and paragraphs contained in Section 3.1
        of the
        Agreement and the disclosure in any section or paragraph shall qualify other
        sections and paragraphs in Section 3.1 of the Agreement.

       

      These
        Disclosure Schedules and the information and disclosures contained in these
        Disclosure Schedules are intended only to qualify and limit the representations
        and warranties of the Company contained in the Agreement and shall not be
        deemed
        to expand in any way the scope or effect of any such representations or
        warranties.

      

      The
        headings contained in the Disclosure Schedules are included for convenience
        only
        and are not intended to limit the effect of the disclosures contained in
        the
        Disclosure Schedules or to expand the scope of the information required to
        be
        disclosed in the Disclosure Schedules. 

      

      Any
        reference to or listing, description, disclosure or other inclusion of any
        item
        or other matter in the Disclosure Schedules shall not be construed to mean
        that
        such item or other matter is required to be referred to, listed, described,
        disclosed or otherwise so included in the Disclosure Schedules, nor shall
        it be
        deemed to be an admission or acknowledgement, in and of itself, that such
        information is material or that such information has or would have a Material
        Adverse Effect. 

       

      
        
          
          

        

        
          -53-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(a)

      

      Subsidiaries

      

      The
        Company has the following wholly-owned subsidiaries: 

      

      Vistula
        Limited, a company incorporated under the laws of England and Wales

      

      Goodman
        Blue Limited, a company incorporated under the laws of England and
        Wales

      

      Cardlink
        Services Limited, a company incorporated under the laws of Scotland

      

      Vistula
        Telecom Limited, a company incorporated under the laws of England and
        Wales

      

      Vistula
        USA, Inc., a company incorporated under the laws of the State of
        Delaware

       

      The
        Company has one subsidiary which is partially owned at 60% ownership which
        is
        listed below: 

      

      Vistula
        Communications SA (Pty) Ltd., a company incorporated under the laws of South
        Africa

       

      
        
          
          

        

        
          -54-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(b)

      

      Organization
        and Qualification

      

      Vistula
        Limited is not in good standing with Companies House in the United Kingdom.
        Vistula Limited failed to file accounts for the 2005 fiscal year due to the
        preparer holding the accounts for payment of at least a meaningful portion
        of
        amounts owed to them for these preparations and other services. The Company
        expects that the delinquent accounts will be finalized and filed with Companies
        House by June 30, 2007. No taxes are due and a small late penalty fee may
        be
        due. 

      

      Both
        Vistula Limited and Goodman Blue are not in good standing with the Inland
        Revenue in the United Kingdom. Both entities owe past taxes for PAYE (Pay
        As You
        Earn) which is the equivalent to the IRS’s FICA, Unemployment, and other taxes
        withheld from employee paychecks and is the part of an employee’s salary that
        represents their withholdings and should be paid directly to the government
        at
        the same time staff is paid. Vistula Limited is approximately £10,000 (USD
        20,000) behind and Goodman Blue is approximately £35,000 (USD 70,000) behind. If
        the respective entities do not pay their respective delinquencies by Tuesday,
        April 3, 2007, Inland Revenue bailiffs may come to the offices of Vistula
        Limited and Goodman Blue to seize assets to secure the outstanding debts.
        This
        means that desks, chairs and PC’s may be seized; however the value of these
        assets may be less than the amounts owed. 

      

      Vistula
        Communications Services, Inc. has not filed its Delaware Franchise Tax Return,
        has not paid its 2006 Delaware Franchise Tax and is not in good standing
        with
        the State of Delaware. The Company expects that the filing will be made and
        the
        amounts and penalties due in respect of this filing of approximately $15,000
        will be paid within two weeks of the Closing Date.

      

      Vistula
        Communications Services, Inc. and Vistula USA, Inc. have not filed extensions
        for their 2006 Federal and State Corporate Income Tax returns, are not in
        good
        standing with the states of New York and Massachusetts and are not in good
        standing with the IRS. The Company expects to file the respective extensions,
        pay amounts due and penalties due in respect of these filings, and estimates
        that approximately $2,500 will be paid within two weeks of the Closing Date
        for
        the required filings to bring the Company into good standing. 

       

      
        
          
          

        

        
          -55-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(d)

      

      No
        Conflicts

      

      On
        October 11, 2006, the Company entered into a Purchase Agreement for all ordinary
        shares of Goodman Blue Limited, a UK company, from the sole shareholder,
        Scott
        Lee Goodwin (“Goodwin”), for 2,500,000 common shares subject to an option (or
“Put”) held by Goodwin to require the Company to repurchase the shares for $1.00
        each or $2,500,000. The Put was extended to March 21, 2007 for 1,400,000
        shares
        (“First Put Option”) at $1.00 each and extended to August 31, 2007 for 1,100,000
        shares (“Second Put Option”) at $1.00 each. The Put option for March 21, 2007
        was not exercised; however the Company has verbally agreed to consider an
        alternate solution for both the First Put Option and the Second Put
        Option.

       

      
        
          
          

        

        
          -56-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(g)

      

      Capitalization

      

      The
        authorized capital stock of the Company consists of 200,000,000 shares of
        Common
        Stock, $.001 par value per share, and 10,000 shares of undesignated Preferred
        Stock, $.001 par value per share. There are currently issued and outstanding
        66,964,898 shares of Common Stock. Included in the list of issued and
        outstanding stock is the 2,500,000 shares of common stock issued to Scott
        Lee
        Goodwin that are described in Schedule 3.1(d). The common stock listed below
        was
        issued and outstanding to the following stockholders as of December 31,
        2006*:

      

      
        	
                BARBARA
                  BADI

              	 	 	
                50,000

              	 
	
                BALTIC
                  ASSET MANAGEMENT

              	 	 	
                680,000

              	 
	
                ENOS
                  BANDA

              	 	 	
                100,000

              	 
	
                WENSLEY
                  BARKER III

              	 	 	
                25,000

              	 
	
                BARRON
                  INTERNATIONAL HOLDING LIMITED

              	 	 	
                1,350,000

              	 
	
                BARRON
                  INTERNATIONAL HOLDING LTD

              	 	 	
                2,000,000

              	 
	
                BERGGRUEN
                  HOLDINGS NORTH AMERICAN LTD

              	 	 	
                1,499,000

              	 
	
                ADAM
                  BISHOP

              	 	 	
                500,000

              	 
	
                JEANETTE
                  BISHOP

              	 	 	
                6,000

              	 
	
                BLS
                  FUTURES LIMITED

              	 	 	
                400,000

              	 
	
                BRANTRIDGE
                  ESTATES LIMITED

              	 	 	
                2,500,000

              	 
	
                ANDREW
                  BRUDENELL-BRUCE

              	 	 	
                15,000

              	 
	
                BUSTER
                  BURKE LIMITED

              	 	 	
                250,000

              	 
	
                CEDE
                  & CO (FAST)

              	 	 	
                11,864,208

              	 
	
                CITIGROUP
                  GLOBAL MARKETS INC

              	 	 	
                2,000

              	 
	
                EVAN
                  COLLINS

              	 	 	
                50,000

              	 
	
                COULOMB
                  LTD

              	 	 	
                150,000

              	 
	
                CRT
                  CAPITAL GROUP LLC

              	 	 	
                1,100,000

              	 
	
                DIALECTIC
                  ANTITHESIS PARTNERS LP

              	 	 	
                125,000

              	 
	
                DIALECTIC
                  CAPITAL PARTNERS LP

              	 	 	
                125,000

              	 
	
                A
                  G
                  EDWARDS & SONS INC

              	 	 	
                8,840

              	 
	
                EXECUTIVE
                  MANAGEMENT SERVICES LIMITED

              	 	 	
                5,250,000

              	 
	
                ALEXANDRA
                  GALLIERS-PRATT

              	 	 	
                1,080,000

              	 
	
                FREDERICK
                  GALLIERS-PRATT

              	 	 	
                900,000

              	 
	
                GEORGE
                  GALLIERS-PRATT

              	 	 	
                1,350,000

              	 
	
                ISABELLA
                  GALLIERS-PRATT

              	 	 	
                450,000

              	 
	
                RUPERT
                  GALLIERS-PRATT

              	 	 	
                630,000

              	 
	
                GERLACH
                  & CO

              	 	 	
                22,500

              	 
	
                GOLDMAN
                  SACHS & CO

              	 	 	
                970,000

              	 
	
                SCOTT
                  LEE GOODWIN *

              	 	 	
                2,500,000

              	 
	
                MATTHEW
                  GOULD

              	 	 	
                250,000

              	 
	
                MOHAMMED
                  HABIB

              	 	 	
                100,000

              	 
	
                J
                  DOUGLAS HARVEY

              	 	 	
                25,000

              	 
	
                HERMITAGE
                  CAPITAL CORP

              	 	 	
                100,000

              	 
	
                ALEXANDER
                  HESKETH

              	 	 	
                15,000

              	 
	
                INDIGO
                  VENTURES LLC

              	 	 	
                1,500,000

              	 
	
                JANA
                  PIRANHA MASTER FUND LTD

              	 	 	
                2,000,000

              	 
	
                JMG
                  CAPITAL PARTNERS LP

              	 	 	
                1,000,000

              	 
	
                JMG
                  TRITON OFFSHORE FUND LTD

              	 	 	
                1,000,000

              	 
	
                STEVEN
                  KENDALL

              	 	 	
                5,000

              	 
	
                KRISTEN
                  KULIGA

              	 	 	
                200

              	 
	
                LITTLE
                  WING LP

              	 	 	
                196,500

              	 
	
                LOEB
                  PARTNERS CORPORATION

              	 	 	
                2,000,000

              	 
	
                MICHAEL
                  MANDER

              	 	 	
                15,000

              	 
	
                MAURETANIA
                  PARTNERS L P

              	 	 	
                250,000

              	 
	
                MORGAN
                  STANLEY & CO INCORPORATED

              	 	 	
                1,000

              	 
	
                MRS
                  PARTNERS LLC

              	 	 	
                125,000

              	 
	
                NARRAGANSETT
                  OFFSHORE LTD

              	 	 	
                1,040,000

              	 
	
                NARRAGANSETT
                  I LP

              	 	 	
                960,000

              	 
	
                NATIONAL
                  INVESTOR SERVICES

              	 	 	
                600

              	 
	
                NETYANTRA
                  INC

              	 	 	
                14,550,000

              	 
	
                OLYMPIC
                  CORPORATE HOLDINGS LIMITED

              	 	 	
                175,000

              	 
	
                ONETA
                  ASSOCIATES INC

              	 	 	
                2,620,000

              	 
	
                OPPENHEIMER
                  & CO INC

              	 	 	
                35,500

              	 
	
                PENSON
                  FINANCIAL SERVICES INC

              	 	 	
                50

              	 
	
                RUSH
                  & CO

              	 	 	
                10,000

              	 
	
                SANDLER
                  CAPITAL STRUCTURE

              	 	 	
                250,000

              	 
	
                SDS
                  CAPITAL GROUP SPC LTD

              	 	 	
                100,000

              	 
	
                SF
                  CAPITAL PARTNERS LTD

              	 	 	
                1,000,000

              	 
	
                ROSEMARY
                  SHARP

              	 	 	
                150,000

              	 
	
                WILLIAM
                  TENANT

              	 	 	
                45,000

              	 
	
                NICK
                  TOPHAM

              	 	 	
                35,000

              	 
	
                TRADEWINDS
                  FUND LTD

              	 	 	
                53,500

              	 
	
                TRIBECA
                  GLOBAL CONVERTIBLE

              	 	 	
                800,000

              	 
	
                ANTHONY
                  WARRENDER

              	 	 	
                160,000

              	 
	
                KEVIN
                  WEST

              	 	 	
                100,000

              	 
	
                GEORGE
                  YOUNG

              	 	 	
                345,000

              	 
	
                TOTAL

              	 	 	
                66,964,898

              	 

      

      
         

        *
          Shares
          issued to Scott Lee Goodwin may be required to be repurchased by the Company
          under an option held by Scott Lee Goodwin pursuant to the Purchase Agreement
          for
          the acquisition of Goodman Blue Limited. This is further described in Schedule
          3.1(d). 

         

      

      
        
          
          

        

        
          -57-

          
            

          

        

        
          
          

        

      

       

      No
        shares
        of Preferred Stock are issued and outstanding. 

      

      There
        are
        currently options issued and outstanding to purchase a total of 11,826,050
        shares of Common Stock as follows:

      

      
        	
                Unexercised
                  Options Granted to:

              	 	
                #
                  of Options

              	 	
                Strike
                  Price

              	 	
                Expiration
                  Date

              	 
	
                Adam
                  Bishop

              	 	 	
                500,000
                  

              	 	
                $

              	
                0.45

              	 	 	
                07/07/15

              	 
	
                Adam
                  Bishop

              	 	 	
                750,000
                  

              	 	
                $

              	
                1.50

              	 	 	
                12/23/15

              	 
	
                Adam
                  Bishop

              	 	 	
                150,000
                  

              	 	
                $

              	
                1.25

              	 	 	
                04/12/16

              	 
	
                Anthony
                  Warrender

              	 	 	
                15,000
                  

              	 	
                $

              	
                0.05

              	 	 	
                05/05/09

              	 
	
                Anthony
                  Warrender

              	 	 	
                225,000
                  

              	 	
                $

              	
                0.45

              	 	 	
                07/07/15

              	 
	
                Anthony
                  Warrender

              	 	 	
                250,000
                  

              	 	
                $

              	
                1.50

              	 	 	
                12/23/15

              	 
	
                Anthony
                  Warrender

              	 	 	
                50,000
                  

              	 	
                $

              	
                1.25

              	 	 	
                04/12/16

              	 
	
                Auris
                  Consulting Ltd.

              	 	 	
                95,000
                  

              	 	
                $

              	
                1.30

              	 	 	
                12/07/15

              	 
	
                Enrique
                  Lopez-Negrete

              	 	 	
                250,000
                  

              	 	
                $

              	
                1.19

              	 	 	
                02/15/16

              	 
	
                Executive
                  Management Services Limited(1)

              	 	 	
                650,000
                  

              	 	
                $

              	
                0.45

              	 	 	
                07/07/15

              	 
	
                Executive
                  Management Services Limited(1)

              	 	 	
                4,000,000
                  

              	 	
                $

              	
                1.50

              	 	 	
                12/23/15

              	 
	
                Executive
                  Management Services Limited(1)

              	 	 	
                800,000
                  

              	 	
                $

              	
                1.25

              	 	 	
                04/12/16

              	 
	
                Fernando
                  Aparicio

              	 	 	
                90,000
                  

              	 	
                $

              	
                1.19

              	 	 	
                02/15/16

              	 
	
                George
                  R. Vaughn

              	 	 	
                50,000
                  

              	 	
                $

              	
                0.45

              	 	 	
                07/07/15

              	 
	
                George
                  R. Vaughn

              	 	 	
                100,000
                  

              	 	
                $

              	
                1.50

              	 	 	
                12/23/15

              	 
	
                George
                  R. Vaughn

              	 	 	
                20,000
                  

              	 	
                $

              	
                1.25

              	 	 	
                04/12/16

              	 
	
                Ian
                  Cope

              	 	 	
                250,000
                  

              	 	
                $

              	
                1.42

              	 	 	
                01/05/16

              	 
	
                Ian
                  Cope

              	 	 	
                250,000
                  

              	 	
                $

              	
                1.50

              	 	 	
                12/23/15

              	 
	
                Ian
                  Cope

              	 	 	
                50,000
                  

              	 	
                $

              	
                1.25

              	 	 	
                04/12/16

              	 
	 	 	 	 	 	 	 	 	 	 	 
	
                Ian
                  Cope

              	 	 	
                20,000
                  

              	 	
                $

              	
                0.32

              	 	 	
                02/05/17

              	 
	
                J.
                  Keith Markley

              	 	 	
                778,050
                  

              	 	
                $

              	
                1.18

              	 	 	
                04/11/16

              	 
	
                J.
                  Marcus Payne

              	 	 	
                150,000
                  

              	 	
                $

              	
                0.45

              	 	 	
                07/07/15

              	 
	
                J.
                  Marcus Payne

              	 	 	
                250,000
                  

              	 	
                $

              	
                1.50

              	 	 	
                12/23/15

              	 
	
                J.
                  Marcus Payne

              	 	 	
                50,000
                  

              	 	
                $

              	
                1.25

              	 	 	
                04/12/16

              	 
	
                Jack
                  Early

              	 	 	
                250,000
                  

              	 	
                $

              	
                1.18

              	 	 	
                04/11/16

              	 
	
                Jared
                  P. Taylor

              	 	 	
                8,000
                  

              	 	
                $

              	
                0.45

              	 	 	
                07/14/15

              	 
	
                Jared
                  P. Taylor

              	 	 	
                200,000
                  

              	 	
                $

              	
                0.65

              	 	 	
                07/27/16

              	 
	 	 	 	 	 	 	 	 	 	 	 
	
                Jared
                  P. Taylor

              	 	 	
                50,000
                  

              	 	
                $

              	
                0.32

              	 	 	
                02/05/17

              	 
	
                Jeremy
                  Strong

              	 	 	
                50,000
                  

              	 	
                $

              	
                0.45

              	 	 	
                07/07/15

              	 
	
                Luis
                  Toruno

              	 	 	
                30,000
                  

              	 	
                $

              	
                0.42

              	 	 	
                12/04/16

              	 
	 	 	 	 	 	 	 	 	 	 	 
	
                Mark
                  Bole

              	 	 	
                10,000
                  

              	 	
                $

              	
                0.32

              	 	 	
                02/05/17

              	 
	
                Nicholas
                  Topham

              	 	 	
                250,000
                  

              	 	
                $

              	
                1.30

              	 	 	
                12/14/15

              	 
	
                Nicholas
                  Topham

              	 	 	
                250,000
                  

              	 	
                $

              	
                1.50

              	 	 	
                12/23/15

              	 
	
                Nicholas
                  Topham

              	 	 	
                50,000
                  

              	 	
                $

              	
                1.25

              	 	 	
                04/12/16

              	 
	 	 	 	 	 	 	 	 	 	 	 
	
                Nicholas
                  Topham

              	 	 	
                25,000
                  

              	 	
                $

              	
                0.32

              	 	 	
                02/05/17

              	 
	
                Nicholas
                  Topham

              	 	 	
                100,000
                  

              	 	
                $

              	
                0.45

              	 	 	
                07/07/15

              	 
	
                Nigel
                  Downton

              	 	 	
                10,000
                  

              	 	
                $

              	
                0.45

              	 	 	
                07/07/15

              	 
	
                Olympic
                  Corporate Holdings Limited(2)

              	 	 	
                500,000
                  

              	 	
                $

              	
                1.50

              	 	 	
                12/23/15

              	 
	
                Olympic
                  Corporate Holdings Limited(2)

              	 	 	
                100,000
                  

              	 	
                $

              	
                1.25

              	 	 	
                04/12/16

              	 
	
                Oscar
                  Brito

              	 	 	
                95,000
                  

              	 	
                $

              	
                0.45

              	 	 	
                07/15/15

              	 
	 	 	 	 	 	 	 	 	 	 	 
	
                Rod
                  Jones

              	 	 	
                10,000
                  

              	 	
                $

              	
                0.32

              	 	 	
                02/05/17

              	 
	
                Rosemary
                  Sharp

              	 	 	
                45,000
                  

              	 	
                $

              	
                0.42

              	 	 	
                12/04/16

              	 
	 	 	 	 	 	 	 	 	 	 	 
	
                Total
                  Options Unexercised

              	 	 	
                11,826,050
                  

              	 	 	 	 	 	 	 

      

       

      
        	 	
                (1)

              	
                Rupert
                  Galliers-Pratt,
                  the Company’s Chairman, President and Chief Executive Officer, holds
                  indirect voting and investment control over shares held by Executive
                  Management Services Limited.

              

      

       

      
        	 	
                (2)

              	
                J.
                  Marcus Payne, one of the Company’s directors, is a director of
                  Olympic
                  Corporate Holdings Limited.

              

      

       

      
        
          
          

        

        
          -58-

          
            

          

        

        
          
          

        

      

       

      These
        options were issued under the Company’s Amended and Restated 2004 Stock
        Incentive Plan.

      

      The
        Company has issued the following convertible promissory notes (collectively,
        the
“Rothschild Notes”) to the J. Rothschild Assurance Self Invested Personal
        Pension Plan No. 2 (the “Pension Plan”), the sole beneficiary of which is the
        Company’s Chairman, Rupert Galliers-Pratt:

      

      1.
        Principal amount of $125,000 issued on July 12, 2004

      

      2.
        Principal amount of $150,000 issued on August 11, 2004

      

      The
        Rothschild Notes have a one year term, accrue interest at the rate of 7%
        per
        annum and are convertible into shares of the Company’s common stock at the price
        of $1.50 per share. Interest accrued on the Rothschild Notes is also convertible
        into shares of common stock at $1.50 per share.
        The
        Pension Plan has agreed to extend the maturity dates of the Rothschild Notes
        until June 30, 2007. As of December 31, 006 the balance due on the Rothschild
        Notes (including accrued interest) was $204,943. This amount is convertible
        into
        shares of common stock at a price of $1.50 per share. 

      

      On
        December 13, 2005, the Company entered into a Consultant, Representative
        and
        Professional Services Agreement with Quest Telecommunications, Inc. (“Quest”)
        pursuant to which the Company agreed to pay certain amounts and issue shares
        of
        the Company’s common stock upon the signing of a definitive agreement with
        Saigon Post and Telecommunications Services Corporation (“SPT”). The
        Company entered into a distribution and marketing agreement with SPT with
        respect to the V-CubeTM on July 3, 2006. Upon signing this agreement, the Company
        was obligated to issue to Quest 300,000 shares of the Company’s common stock and
        to pay to Quest $150,000 in cash, plus a continuing commission of thirty
        percent
        of the license fees received from SPT in connection with the licensing and
        distribution of the V-CubeTM in certain geographic areas (net of sales, use and
        value added taxes, if any, payable by us in connection with such license
        fees).
        Although an agreement with SPT has been signed, the Company does not expect
        to
        pay the $150,000 in cash or the continuing commission of thirty percent of
        the
        license fees received from SPT, due to SPT’s indication of its intent to enter
        into a license purchase and maintenance agreement in lieu of the distribution
        and marketing agreement and a reported delay in SPT’s ability to launch the
        product due to the local government’s approval process. The Company does expect
        to issue the 300,000 shares of common stock to Quest once Quest signs and
        delivers an investment representation letter to the Company. 

       

      
        
          
          

        

        
          -59-

          
            

          

        

        
          
          

        

      

      

      The
        Company has issued the following warrants which are currently exercisable
        by the
        holder. The list of warrant holders, strike price, the number of warrants
        remaining and the expiration of each warrant issued is as follows: 

      

      
        	
                Warrant
                  Holders

              	 	
                Price
                  

              	 	
                Remaining
                  Warrants

              	 	
                Expiration
                  Date

              	 
	
                Alana
                  Barksdale

              	 	
                $

              	
                1.34

              	 	 	
                7,836
                  

              	 	 	
                03/30/11

              	 
	
                Axiom
                  Capital Management, Inc.

              	 	
                $

              	
                1.00

              	 	 	
                65,400
                  

              	 	 	
                03/04/10

              	 
	
                Axiom
                  Capital Management, Inc.

              	 	
                $

              	
                1.50

              	 	 	
                3,469
                  

              	 	 	
                10/31/10

              	 
	
                Bergguen
                  Holdings North America Ltd.

              	 	
                $

              	
                1.00

              	 	 	
                1,200,000
                  

              	 	 	
                05/22/11

              	 
	
                BLS
                  Futures, Ltd.

              	 	
                $

              	
                1.34

              	 	 	
                447,760
                  

              	 	 	
                03/30/11

              	 
	
                Bushido
                  Capital Master Fund, L.P.

              	 	
                $

              	
                1.50

              	 	 	
                500,000
                  

              	 	 	
                10/31/10

              	 
	
                CRT
                  (for 5/22/2006 financing)

              	 	
                $

              	
                1.00

              	 	 	
                1,467,000
                  

              	 	 	
                05/22/11

              	 
	
                CRT
                  (for Financial Advisory Agreement)

              	 	
                $

              	
                1.00

              	 	 	
                250,000
                  

              	 	 	
                02/14/09

              	 
	
                CRT
                  Capital Group LLC

              	 	
                $

              	
                1.00

              	 	 	
                1,080,000
                  

              	 	 	
                05/22/11

              	 
	
                David
                  Siegel

              	 	
                $

              	
                1.00

              	 	 	
                52,125
                  

              	 	 	
                03/04/10

              	 
	
                David
                  Siegel

              	 	
                $

              	
                1.50

              	 	 	
                1,181
                  

              	 	 	
                10/31/10

              	 
	
                David
                  Vynerib

              	 	
                $

              	
                1.00

              	 	 	
                20,625
                  

              	 	 	
                03/04/10

              	 
	
                Dialectic
                  Antithesis Partners LP

              	 	
                $

              	
                1.00

              	 	 	
                100,000
                  

              	 	 	
                05/22/11

              	 
	
                Dialectic
                  Capital Partners LP

              	 	
                $

              	
                1.00

              	 	 	
                100,000
                  

              	 	 	
                05/22/11

              	 
	
                DKR
                  Soundshore Oasis Holding Fund Ltd

              	 	
                $

              	
                1.00

              	 	 	
                3,325,000
                  

              	 	 	
                02/18/10

              	 
	
                DKR
                  Soundshore Strategic Holding Fund Ltd

              	 	
                $

              	
                1.00

              	 	 	
                175,000
                  

              	 	 	
                02/18/10

              	 
	
                Edward
                  Neugeboren

              	 	
                $

              	
                1.00

              	 	 	
                25,000
                  

              	 	 	
                02/18/10

              	 
	
                Edward
                  Neugeboren

              	 	
                $

              	
                1.34

              	 	 	
                22,388
                  

              	 	 	
                03/30/11

              	 
	
                Erik
                  Brous

              	 	
                $

              	
                1.00

              	 	 	
                20,625
                  

              	 	 	
                03/04/10

              	 
	
                Evan
                  Collins

              	 	
                $

              	
                1.00

              	 	 	
                340,000
                  

              	 	 	
                05/22/11

              	 
	
                Gamma
                  Opportunity Capital Partners, LP

              	 	
                $

              	
                1.50

              	 	 	
                250,000
                  

              	 	 	
                10/28/10

              	 
	
                Gary
                  Gross

              	 	
                $

              	
                1.00

              	 	 	
                57,356
                  

              	 	 	
                03/04/10

              	 
	
                Gary
                  Gross

              	 	
                $

              	
                1.50

              	 	 	
                5,757
                  

              	 	 	
                10/31/10

              	 
	
                Goldman,
                  Sachs & Co.

              	 	
                $

              	
                1.00

              	 	 	
                800,000
                  

              	 	 	
                05/22/11

              	 
	
                Gryphon
                  Master Fund, L.P.

              	 	
                $

              	
                1.50

              	 	 	
                1,000,000
                  

              	 	 	
                10/03/10

              	 
	
                GSSF
                  Master Fund, L.P.

              	 	
                $

              	
                1.50

              	 	 	
                499,999
                  

              	 	 	
                10/03/10

              	 
	
                Indigo
                  Securities

              	 	
                $

              	
                1.00

              	 	 	
                536,375
                  

              	 	 	
                03/04/10

              	 
	
                Indigo
                  Securities

              	 	
                $

              	
                1.50

              	 	 	
                140,376
                  

              	 	 	
                10/31/10

              	 
	
                J.
                  Douglas Harvey

              	 	
                $

              	
                1.00

              	 	 	
                20,000
                  

              	 	 	
                05/22/11

              	 
	
                Jana
                  Piranha Master Fund, Ltd.

              	 	
                $

              	
                1.00

              	 	 	
                3,200,000
                  

              	 	 	
                05/22/11

              	 
	
                JMG
                  Capital Partners, LP

              	 	
                $

              	
                1.00

              	 	 	
                800,000
                  

              	 	 	
                05/22/11

              	 
	
                JMG
                  Triton Offshore Fund, Ltd.

              	 	
                $

              	
                1.00

              	 	 	
                800,000
                  

              	 	 	
                05/22/11

              	 
	
                Keith
                  Barksdale

              	 	
                $

              	
                1.00

              	 	 	
                25,000
                  

              	 	 	
                02/18/10

              	 
	
                Keith
                  Barksdale

              	 	
                $

              	
                1.34

              	 	 	
                7,836
                  

              	 	 	
                03/30/11

              	 
	
                Little
                  Wing LP

              	 	
                $

              	
                1.50

              	 	 	
                414,400
                  

              	 	 	
                10/07/10

              	 
	
                Little
                  Wing LP

              	 	
                $

              	
                1.00

              	 	 	
                157,200
                  

              	 	 	
                05/22/11

              	 
	
                Marcel
                  Martins

              	 	
                $

              	
                1.50

              	 	 	
                606
                  

              	 	 	
                10/31/10

              	 
	
                Marcelo
                  Martins

              	 	
                $

              	
                1.00

              	 	 	
                21,369
                  

              	 	 	
                03/04/10

              	 
	
                Mason
                  Barksdale

              	 	
                $

              	
                1.34

              	 	 	
                7,836
                  

              	 	 	
                03/30/11

              	 
	
                Mauretania
                  Partners, LP

              	 	
                $

              	
                1.00

              	 	 	
                200,000
                  

              	 	 	
                05/22/11

              	 
	
                Michael
                  S Urban & Sherrie Urban

              	 	
                $

              	
                1.00

              	 	 	
                9,500
                  

              	 	 	
                02/18/10

              	 
	
                Michael
                  S Urban & Sherrie Urban

              	 	
                $

              	
                1.50

              	 	 	
                40,500
                  

              	 	 	
                10/31/10

              	 
	
                Murray
                  Chernick

              	 	
                $

              	
                1.50

              	 	 	
                250,000
                  

              	 	 	
                10/31/10

              	 
	
                Narragansett
                  I, LP

              	 	
                $

              	
                1.00

              	 	 	
                768,000
                  

              	 	 	
                05/22/11

              	 
	
                Narragansett
                  Offshore, Ltd.

              	 	
                $

              	
                1.00

              	 	 	
                832,000
                  

              	 	 	
                05/22/11

              	 
	
                Oxford
                  Capital Management, LLC

              	 	
                $

              	
                1.00

              	 	 	
                100,000
                  

              	 	 	
                02/18/10

              	 
	
                Paul
                  Lisiak

              	 	
                $

              	
                1.34

              	 	 	
                22,388
                  

              	 	 	
                03/30/11

              	 
	
                Peyton
                  Barksdale

              	 	
                $

              	
                1.34

              	 	 	
                7,836
                  

              	 	 	
                03/30/11

              	 
	
                Plainfield
                  Special Situations Master Fund Limited

              	 	
                $

              	
                1.00

              	 	 	
                400,000
                  

              	 	 	
                05/22/11

              	 
	
                Professional
                  Traders Fund, LLC

              	 	
                $

              	
                1.50

              	 	 	
                150,000
                  

              	 	 	
                10/31/10

              	 
	
                Richard
                  & Joanne Kane

              	 	
                $

              	
                1.34

              	 	 	
                13,433
                  

              	 	 	
                03/30/11

              	 
	
                Robert
                  Rosenberg

              	 	
                $

              	
                1.00

              	 	 	
                28,625
                  

              	 	 	
                03/04/10

              	 
	
                Robert
                  Rosenberg

              	 	
                $

              	
                1.50

              	 	 	
                8,136
                  

              	 	 	
                10/31/10

              	 
	
                Rubenstein
                  Investor Relations

              	 	
                $

              	
                0.45

              	 	 	
                100,000
                  

              	 	 	
                03/01/10

              	 
	
                Sandler
                  Capital Structure Opportunities Mast Fund, Ltd.

              	 	
                $

              	
                1.00

              	 	 	
                300,000
                  

              	 	 	
                05/22/11

              	 
	
                Scott
                  Craven

              	 	
                $

              	
                1.00

              	 	 	
                200,000
                  

              	 	 	
                02/18/10

              	 
	
                SDS
                  Capital Group SPC Ltd

              	 	
                $

              	
                1.00

              	 	 	
                80,000
                  

              	 	 	
                05/22/11

              	 
	
                SF
                  Capital Partners Ltd.

              	 	
                $

              	
                1.00

              	 	 	
                800,000
                  

              	 	 	
                05/22/11

              	 
	
                Stratford
                  Partners, LP

              	 	
                $

              	
                1.00

              	 	 	
                600,000
                  

              	 	 	
                02/18/10

              	 
	
                Tradewinds
                  Fund Ltd

              	 	
                $

              	
                1.50

              	 	 	
                85,600
                  

              	 	 	
                10/07/10

              	 
	
                Tradewinds
                  Fund Ltd.

              	 	
                $

              	
                1.00

              	 	 	
                42,800
                  

              	 	 	
                05/22/11

              	 
	
                Tribecca
                  Global Convertible Investments, Ltd.

              	 	
                $

              	
                1.00

              	 	 	
                1,000,000
                  

              	 	 	
                05/22/11

              	 
	
                Valor
                  Capital Management LP

              	 	
                $

              	
                1.00

              	 	 	
                750,000
                  

              	 	 	
                02/18/10

              	 
	
                Wensley
                  Barker III

              	 	
                $

              	
                1.00

              	 	 	
                20,000
                  

              	 	 	
                05/22/11

              	 
	
                William
                  F. Williams

              	 	
                $

              	
                1.34

              	 	 	
                22,388
                  

              	 	 	
                03/30/11

              	 
	
                Total
                  Warrants Outstanding

              	 	 	 	 	 	
                24,778,725
                  

              	 	 	 	 

      

       

       

      
        
          
          

        

        
          -60-

          
            

          

        

        
          
          

        

      

       

      The
        Company currently has convertible notes on its books of $6,300,000. A detailed
        list of the Debenture holders is as follows: 

       

      
        	
                Debenture
                  Holder

              	 	
                Convertible
                  Note Balance 

              	 	
                Strike
                  Price

              	 	
                #
                  of Shares

              	 	
                Maturity
                  Date

              	 
	
                Bushido
                  Capital Master Fund, L.P.

              	 	 	
                500,000.00
                  

              	 	
                $

              	
                0.75

              	 	 	
                666,667
                  

              	 	 	
                02/18/08

              	 
	
                Gamma
                  Opportunity Capital Partners, LP

              	 	 	
                250,000.00
                  

              	 	
                $

              	
                0.75

              	 	 	
                333,333
                  

              	 	 	
                02/18/08

              	 
	
                Gryphon
                  Master Fund, L.P.

              	 	 	
                999,999.75
                  

              	 	
                $

              	
                0.75

              	 	 	
                1,333,333
                  

              	 	 	
                02/18/08

              	 
	
                GSSF
                  Master Fund, L.P.

              	 	 	
                499,999.50
                  

              	 	
                $

              	
                0.75

              	 	 	
                666,666
                  

              	 	 	
                02/18/08

              	 
	
                Little
                  Wing LP

              	 	 	
                414,400.21
                  

              	 	
                $

              	
                0.75

              	 	 	
                552,534
                  

              	 	 	
                02/18/08

              	 
	
                Stratford
                  Partners, LP

              	 	 	
                600,000.00
                  

              	 	
                $

              	
                0.75

              	 	 	
                800,000
                  

              	 	 	
                02/18/08

              	 
	
                Tradewinds
                  Fund Ltd

              	 	 	
                85,600.04
                  

              	 	
                $

              	
                0.75

              	 	 	
                114,133
                  

              	 	 	
                02/18/08

              	 
	
                DKR
                  Soundshore Oasis Holding Fund Ltd

              	 	 	
                2,778,750.00
                  

              	 	
                $

              	
                0.75

              	 	 	
                3,705,000
                  

              	 	 	
                03/04/08

              	 
	
                DKR
                  Soundshore Strategic Holding Fund Ltd

              	 	 	
                146,250.00
                  

              	 	
                $

              	
                0.75

              	 	 	
                195,000
                  

              	 	 	
                03/04/08

              	 
	
                Edward
                  Neugeboren

              	 	 	
                24,999.75
                  

              	 	
                $

              	
                0.75

              	 	 	
                33,333
                  

              	 	 	
                03/04/08

              	 
	 	 	 	
                6,299,999.25
                  

              	 	 	 	 	 	
                8,399,999
                  

              	 	 	 	 

      

       

      The
        Company will be obligated to pay certain fees and/or issue certain warrants
        to
        Oceana Partners LLC in connection with the sale of the convertible notes
        and
        warrants.  A cash fee of 8% of the gross purchase price from new investors,
        estimated to be $52,000, and a five year warrant to purchase up to 1,300,000
        shares of common stock at an exercise price of $1.00 per share.

      

      The
        Company will be obligated to pay certain fees and/or issue certain warrants
        to
        W. Quillen Securities (“WQS”) in connection with the sale of the convertible
        notes and warrants. A cash fee of 8% of the gross purchase price received
        from
        any investors introduced to the Company by WQS, estimated to be $4,000, and
        a
        five year warrant to purchase up to 100,000 shares of common stock at an
        exercise price of $1.00 per share.

      

      The
        Company may be obligated to pay certain fees and/or issue certain warrants
        to
        Source Capital Group, Inc. (“SCG”) in connection with the sale of the
        convertible notes and warrants in accordance with the Source Capital Engagement
        Letter. The Company has requested a waiver from SCG of such fees and/or warrants
        and SCG has orally agreed to waive any fee in connection with the sale of
        the
        convertible notes and warrants. The Company expects that a written agreement
        regarding this waiver will be obtained from SCG soon.

      

      In
        consideration for, and as a condition to, the execution and delivery of a
        waiver
        by the Company’s Debenture holders, pursuant to which the Debenture holders (i)
        waive any late fee(s) associated with any overdue payment of interest, and
        (ii)
        confirm that an event of default does not exist with respect to the debentures,
        the Company may be obligated to reduce the exercise price of replacement
        warrants that were issued to the Debenture holders pursuant to a Warrant
        Exercise Agreement dated October 3, 2005 from $1.50 per share to $1.00 per
        share. The Company has also agreed to include full ratchet anti-dilution
        provisions in the $1.00 warrants. 

      

      As
        a
        result of the re-pricing of these warrants, the Company expects the exercise
        price of 559,701 existing warrants to be adjusted pursuant to their
        weighted-average anti-dilution provisions. These warrants currently have
        an
        exercise price of $1.34. The actual adjustment will be dependent upon the
        size of the offering, and is believed not to be significant in comparison
        to the
        number of warrants currently outstanding or in comparison to the fully diluted
        number of commons shares. 

      

      See
        Schedule 3.1(d) for a description of a put option held by Scott Lee
        Goodwin.

       

      
        
          
          

        

        
          -61-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(i)

      

      Material
        Changes

       

      See
        Schedule 3.1(g) for a description of the Rothschild Notes.

      

      See
        Schedule 3.1(d) for a description of a put option held by Scott Lee
        Goodwin.

       

      
        
          
          

        

        
          -62-

          
            

          

        

        
          
          

        

      

      

      Schedule
        3.1(j)

      

      Litigation

      

      The
        Company is delinquent in its rent payments for an apartment in London used
        by
        NetYantra consultants. The landlord of the property has demanded payment
        and is
        seeking a County Court Judgement. The Company believes it will avoid any
        judgement provided it is able to make a payment by Friday, April 6, 2007.
        

      

      Both
        Vistula Limited and Goodman Blue are not in good standing with the Inland
        Revenue in the United Kingdom. Both entities owe past taxes for PAYE (Pay
        As You
        Earn) which is the equivalent to the IRS’s FICA, Unemployment, and other taxes
        withheld from employee paychecks and is the part of an employee’s salary that
        represents their withholdings and should be paid directly to the government
        at
        the same time staff is paid. Vistula Limited is approximately £10,000 (USD
        20,000) behind and Goodman Blue is approximately £35,000 (USD 70,000) behind. If
        the respective entities do not pay their respective delinquencies by Tuesday,
        April 3, 2007, Inland Revenue bailiffs may come to the offices of Vistula
        Limited and Goodman Blue to seize assets to secure the outstanding debts.
        This
        means that desks, chairs and PC’s may be seized; however the value of these
        assets may be less than the amounts owed. 

      

      On
        September 8, 2006, the Company sent a letter to Auris Consulting, Ltd. (“Auris”)
        and Sandro Grimaldi (“S. Grimaldi”) regarding a Consulting Agreement dated
        December 7, 2005 and a separate letter to Global Access Partners, Inc. (“Global
        Access”) and Alex Grimaldi (“A. Grimaldi”) regarding a Consulting Agreement,
        dated December 6, 2005, (together the “Consulting Agreements”) which stated that
        the Company considered Auris and Global Access to be in material default
        under
        the terms of their respective Consulting Agreements. As a result of
        non-compliance with numerous requests by the Company for items agreed to
        in the
        Consulting Agreements, the Company gave notice to Auris and Global Access
        that
        it was suspending all payments under the respective Consulting Agreements
        effective immediately. 

      

      In
        a
        letter dated September 6, 2006, the Law Offices of Glantz and Glantz, P.A.
        wrote
        on behalf of Alejandro (Alex) Grimaldi (“Grimaldi”) with regard to the
        possibility of a lawsuit being filed against the Company for its failure
        to
        compensate Grimaldi according to the Consulting Agreement dated December
        6,
        2005. The letter demanded that in order to resolve the matter without resorting
        to further legal action the Company compensate Grimaldi according to the
        terms
        of the contract. The Company intends to defend any such lawsuit filed by
        Grimaldi. The Company has not had any further communication from the Grimaldis
        and is not expecting them to initiate any proceedings.

       

      
        
          
          

        

        
          -63-

          
            

          

        

        
          
          

        

      

      

      Schedule
        3.1(k)

      

      Labor
        Relations

      

      Due
        to
        the Company’s cash position, it has become delinquent with respect to several
        compensation payments owed to its employees, consultants and officers in
        the
        United States and in the United Kingdom. The Company has estimated that as
        of
        March 30, 2007, it owes $511,000 to its employees, consultants and officers,
        of
        which $380,000 is expected to be paid immediately following the Closing Date.
        The estimated amounts owed include overdue PAYE taxes due the UK. 

      

      The
        Company has previously paid for the services provided by a team of consultants
        at NetYantra, the developer of the V-Cube software. Due to non-payment for
        services from December 2006 through March 2007 NetYantra has informed the
        Company that it has given notice to its employees that operations will cease
        in
        one month. The Company’s Chairman, Rupert Galliers-Pratt, and Vinod Sankar, a
        Director of NetYantra, are in discussions to reduce the number of consultants
        from approximately 30 to 10 or fewer, with the objective of maintaining an
        adequate number of consultants to support the Northamber distribution
        agreement.

      

      Effective
        December 15, 2006, J. Keith Markley resigned from all positions he held with
        the
        Company. Upon his resignation, Mr. Markley was entitled to payments totalling
        $290,000 as per the terms of his employment agreement. The Company has not
        discussed this payment with Mr. Markley but intends to negotiate delay of
        this
        payment until January 2008 and has reflected this delay in the Company’s budget
        figures disclosed. 

       

      
        
          
          

        

        
          -64-

          
            

          

        

        
          
          

        

      

      

      Schedule
        3.1(l)

      

      Compliance

      

      Pursuant
        to the terms of the Company’s outstanding 8% Convertible Debentures (the
“Debentures”), the Company is required to make quarterly interest payments. The
        Company has not made the interest payment that was due on December 31, 2006.
        The
        Company has not received any notices of default from any of the Debenture
        holders. Immediately following the Closing Date the Company will pay
        approximately $260,000 to the Debenture holders as payment for the interest
        due
        on December 31, 2006 and March 31, 2007, for the December interest payment
        as
        well as an additional $130,000 for interest due on March 31, 2007. The Company
        has requested waivers from the Debenture holders whereby the holders (i)
        waive
        any Late Fee(s) associated with any overdue payment of interest, and (ii)
        confirm that the holder has not given the Company a notice of any Event of
        Default in respect of the Debentures and that no Event of Default now, or
        with
        the passage of time, exists with respect to the Debentures. 

      

      The
        Company’s subsidiary, Goodman Blue Limited, has a Small Business Loan,
        guaranteed by the UK Secretary of State pursuant to Section 8 of the Industrial
        Development Act of 1982. A payment made on this loan resulted in an overdraft
        of
        one of Goodman Blue’s bank accounts of approximately USD 18,000. Payment to
        replenish this overdraft is expected to be made directly following the Closing
        Date. 

      

      The
        Company’s subsidiary Vistula Limited, is overdrawn on one of its bank accounts
        by approximately USD 6,000. Payment to replenish this overdraft is expected
        to
        be made directly following the Closing Date.

      

      The
        Company is delinquent with respect to approximately $14,000 in lease payments
        for its principal office in New York.  The Company is delinquent with
        respect to approximately GBP6,000 ($12,000) in lease payments for an apartment
        in London that is used by consultants of NetYantra.  The full amounts of
        these respective delinquencies are expected to be paid immediately following
        the
        Closing Date.  The Company is also delinquent with respect to approximately
        $18,000 in lease payments related to the Company's switching facility in
        Los
        Angeles, of which a portion of this amount is expected to paid immediately
        following the Closing Date.

       

      
        
          
          

        

        
          -65-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(n)

      

      Title
        to Assets

       

      The
        Company expects to enter into an Agreement whereby it will sell its UK Lucent
        Switch used in the Company’s wholesale voice services business in exchange for
        the buyer (i) assuming the Telehouse lease and all associated costs, including,
        without limitation the costs of the circuits, power, and running the switching
        equipment (ii) operating the Switch, (iii) allowing the Company to use the
        switch for three years at no cost to the Company and (iv) assuming any billing
        processes previously performed by one of the Company’s employees, who will
        continue to be available to the Company. The Agreement is expected to be
        effective retroactively as of January 1, 2007.

      

      The
        Company’s Sonus switch located in Los Angeles had an equipment failure and has
        not been working as of January 31, 2007. Due to the Company’s cash position and
        minimal revenue as a result of this switch, the switch has not been repaired.
        Any traffic has been re-routed to the UK switching facility in
        London.

       

      
        
          
          

        

        
          -66-

          
            

          

        

        
          
          

        

      

      Schedule
        3.1(o)

      

      Patents
        and Trademarks

      

      The
        Company has not yet filed a trademark application in the United Status or
        in any
        other jurisdiction to register the trademark the names V-Cube or Order-to-Cash
        (“O2C”) which it is currently using to market and distribute the Company’s
        V-Cube VoIP platform. 

       

      
        
          
          

        

        
          -67-

          
            

          

        

        
          
          

        

      

      

      Schedule
        3.1(p)

      

      Insurance

      

      The
        Company is currently carrying Directors and Officers insurance underwritten
        by
        Navigators, which expires on April 27, 2007, with coverage of $5,000,000
        and an
        extension of the same policy with coverage for an additional $5,000,000.
        The
        company has paid the premium in full through the expiration date. The premium
        for the renewal of this insurance is due by April 27, 2007 and is expected
        to be
        approximately $150,000 or more. 

      

      The
        Company also carries property and casualty insurance underwritten by St.
        Paul
        Travelers for both its US domestic and its foreign operations which expires
        on
        October 17, 2007. The company is invoiced quarterly and is current with invoices
        related to this coverage. 

      

      The
        recently acquired UK company, Goodman Blue Limited, had an existing insurance
        agreement which expires on August 8, 2007. This policy is paid in full through
        the expiration date. 

       

      
        
          
          

        

        
          -68-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(q)

      

      Transactions
        with Affiliates and Employees

       

      See
        Schedule 3.1(g) for a description of the Rothschild Notes.

       

      
        
          
          

        

        
          -69-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(r)

      

      Sarbanes-Oxley;
        Internal Accounting Controls

      

      As
        the
        Company is an S-B (Small Business) filer, it is not yet required to be fully
        compliant with the Sarbanes-Oxley Act of 2002; however, the Company is compliant
        with respect to the areas under which it is presently required to be compliant.
        The Company has included in its budget reasonable amounts to fund assistance
        from an outside consulting firm with experience in developing and implementing
        controls and procedures for companies similar to Vistula and its Subsidiaries,
        in order to comply with the current requirements of the Sarbanes-Oxley Act
        of
        2002 as at December 31, 2007 and thereafter, or as otherwise required.

       

      
        
          
          

        

        
          -70-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(s)

      

      Certain
        Fees

      

      The
        Company will be obligated to pay certain fees and/or issue certain warrants
        to
        Oceana Partners LLC in connection with the sale of the convertible notes
        and
        warrants in accordance with the Oceana Partners Engagement Letter. 

      

      The
        Company may be obligated to pay certain fees and/or issue certain warrants
        to
        Indigo Securities LLC in connection with the sale of the convertible notes
        and
        warrants in accordance with the Indigo Placement Agreement. The Company intends
        to request from Indigo a waiver of such fees and/or warrants, absent which
        the
        terms of the agreement would require payment of a minimum fee of $300,000
        and 6%
        cashless warrants on any monies raised. 

      

      The
        Company may be obligated to pay certain fees and/or issue certain warrants
        to
        Source Capital Group, Inc. (“SCG”) in connection with the sale of the
        convertible notes and warrants in accordance with the Source Capital Engagement
        Letter. The Company intends to request from SCG a waiver of such fees and/or
        warrants, absent which the terms of the agreement would require payment of
        6%
        cash, which is to be paid from the proceeds, and 6% warrants.

       

      
        
          
          

        

        
          -71-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(x)

      

      Disclosure

      

      Forward-Looking
        Statements

       

      This
        Schedule 3.1(x) includes certain statements, budgets, estimates, projections
        and
        other forward-looking statements with respect to the anticipated future
        performance of Vistula Communications Services, Inc. The statements,
        budgets, estimates, projections and other forward-looking statements, which
        have
        not been reviewed or examined by the Company’s independent auditors, are based
        upon various assumptions by management made on a reasonable basis and in
        good
        faith that may not prove to be correct. Such assumptions are inherently subject
        to significant uncertainties and contingencies, many of which are beyond
        the
        Company’s control. No assurance is given, that the Company can or will attain
        such results. Actual results are likely to vary, perhaps materially, from
        the
        Company’s projections due, at least in part, to the Risk Factors cited in the
        Company’s Form 10K-SB for the year ended December 31, 2005. 

       

      
        	
                Vistula
                  Communications Services, Inc.

              	 	 	 
	 	 	 	 	 	 	 
	
                Consolidated
                  Budget 

              	 	 	 	 	 

      

       

      
        	 	 	
                2007

              	
                 

              	
                2007

              	
                 

              	
                2007

              	
                 

              	
                2007

              	
                 

              	
                YTD

              	
                 

              
	
                 

              	
                 

              	
                Q1

              	
                 

              	
                Q2

              	
                 

              	
                Q3

              	
                 

              	
                Q4

              	
                 

              	
                2007

              	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
                Revenues

              	 	 	
                290,013
                  

              	 	 	
                1,457,135
                  

              	 	 	
                4,020,758
                  

              	 	 	
                4,248,351
                  

              	 	 	
                10,016,257
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Cost
                  of revenues

              	 	 	
                271,950
                  

              	 	 	
                623,486
                  

              	 	 	
                1,116,704
                  

              	 	 	
                1,214,614
                  

              	 	 	
                3,226,755
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Gross
                  margin

              	 	 	
                18,063
                  

              	 	 	
                833,649
                  

              	 	 	
                2,904,054
                  

              	 	 	
                3,033,737
                  

              	 	 	
                6,789,503
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Selling,
                  general & administrative

              	 	 	
                1,247,527
                  

              	 	 	
                1,292,447
                  

              	 	 	
                1,322,567
                  

              	 	 	
                1,257,457
                  

              	 	 	
                5,119,999
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Results
                  from operations (excludes all non-cash items)

              	 	 	
                (1,229,463

              	
                )

              	 	
                (458,799

              	
                )

              	 	
                1,581,486
                  

              	 	 	
                1,776,280
                  

              	 	 	
                1,669,504
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Cash
                  flow from bridge & other financing (net), (repaid Feb
                  2009)

              	 	 	
                3,000,000
                  

              	 	 	 	 	 	 	 	 	 	 	 	
                3,000,000
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Adjustment
                  for current creditors and accrue Dec. 2007.

              	 	 	
                (543,188

              	
                )

              	 	
                (351,937

              	
                )

              	 	
                (351,937

              	
                )

              	 	
                98,940
                  

              	 	 	
                (1,148,121

              	
                )

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Capital
                  expenditures

              	 	 	
                (76,800

              	
                )

              	 	
                -
                  

              	 	 	
                -
                  

              	 	 	
                -
                  

              	 	 	
                (76,800

              	
                )

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                NetYantra
                  acquisition

              	 	 	
                -
                  

              	 	 	
                -
                  

              	 	 	
                -
                  

              	 	 	
                (350,000

              	
                )

              	 	
                (350,000

              	
                )

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Budgeted
                  quarterly cash 

              	 	 	
                1,150,549
                  

              	 	 	
                (810,736

              	
                )

              	 	
                1,229,549
                  

              	 	 	
                1,525,220
                  

              	 	 	
                3,094,583
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Budgeted
                  cumulative cash balance at quarter end

              	 	 	
                1,150,549
                  

              	 	 	
                339,813
                  

              	 	 	
                1,569,363
                  

              	 	 	
                3,094,583
                  

              	 	 	
                3,094,583
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Results
                  from operations (excludes all non-cash items)

              	 	 	
                (1,229,463

              	
                )

              	 	
                (458,799

              	
                )

              	 	
                1,581,486
                  

              	 	 	
                1,776,280
                  

              	 	 	
                1,669,504
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Non-cash
                  expenses

              	 	 	
                2,307,087
                  

              	 	 	
                2,300,961
                  

              	 	 	
                2,228,059
                  

              	 	 	
                2,228,059
                  

              	 	 	
                9,064,165
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Budget
                  Net Income (Loss)

              	 	 	
                (3,536,550

              	
                )

              	 	
                (2,759,759

              	
                )

              	 	
                (646,572

              	
                )

              	 	
                (451,779

              	
                )

              	 	
                (7,394,660

              	
                )

              

      

       

      
        
          
          

        

        
          -72-

          
            

          

        

        
          
          

        

      

       

      
        	
                Narrative
                  assumptions:

              

      

       

      
        	
                Vistula
                  Communications Services, Inc.

              	 	 	 
	 	 	 	 	 	 	 
	
                Consolidated
                  Budget 

              	 	 	 	 	 

      

      
        	 	 	
                2008

              	 	
                2008

              	 	
                2008

              	 	
                2008

              	 	
                YTD

              	 
	 	 	
                Q1

              	 	
                Q2

              	 	
                Q3

              	 	
                Q4

              	 	
                2008

              	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
                Revenues

              	 	 	
                6,065,655
                  

              	 	 	
                6,838,838
                  

              	 	 	
                7,391,698
                  

              	 	 	
                8,159,150
                  

              	 	 	
                28,455,340
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Cost
                  of revenues

              	 	 	
                1,510,979
                  

              	 	 	
                1,887,795
                  

              	 	 	
                2,216,573
                  

              	 	 	
                2,593,348
                  

              	 	 	
                8,208,695
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Gross
                  margin

              	 	 	
                4,554,675
                  

              	 	 	
                4,951,043
                  

              	 	 	
                5,175,125
                  

              	 	 	
                5,565,801
                  

              	 	 	
                20,246,645
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Selling,
                  general & administrative

              	 	 	
                2,210,385
                  

              	 	 	
                1,814,285
                  

              	 	 	
                1,689,385
                  

              	 	 	
                1,506,385
                  

              	 	 	
                7,220,440
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Results
                  from operations (excludes all non-cash items)

              	 	 	
                2,344,290
                  

              	 	 	
                3,136,758
                  

              	 	 	
                3,485,740
                  

              	 	 	
                4,059,416
                  

              	 	 	
                13,026,205
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Cash
                  flow from bridge & other financing (net), (repaid Feb
                  2009)

              	 	 	
                (225,600

              	
                )

              	 	 	 	 	
                -
                  

              	 	 	 	 	 	
                (225,600

              	
                )

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Adjustment
                  for current creditors and accrue Dec. 2007.

              	 	 	
                (450,877

              	
                )

              	 	 	 	 	 	 	 	
                473,420
                  

              	 	 	
                22,543
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Capital
                  expenditures

              	 	 	
                -
                  

              	 	 	
                -
                  

              	 	 	
                -
                  

              	 	 	
                -
                  

              	 	 	
                -
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                NetYantra
                  acquisition

              	 	 
	  	 	 
	  	 	 
	  	 	 
	  	 	 
	  	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Budgeted
                  quarterly cash 

              	 	 	
                1,667,813
                  

              	 	 	
                3,136,758
                  

              	 	 	
                3,485,740
                  

              	 	 	
                4,532,836
                  

              	 	 	
                12,823,148
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Budgeted
                  cumulative cash balance at quarter end

              	 	 	
                1,667,813
                  

              	 	 	
                4,804,571
                  

              	 	 	
                8,290,311
                  

              	 	 	
                12,823,148
                  

              	 	 	
                12,823,148
                  

              	 
	
                 

              	 	 	 	 	 	 	 	 	 	 	 	 	 *	 	
                15,917,731
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Results
                  from operations (excludes all non-cash items)

              	 	 	
                2,344,290
                  

              	 	 	
                3,136,758
                  

              	 	 	
                3,485,740
                  

              	 	 	
                4,059,416
                  

              	 	 	
                13,026,205
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Non-cash
                  expenses

              	 	 	
                2,167,059
                  

              	 	 	
                2,045,059
                  

              	 	 	
                2,045,059
                  

              	 	 	
                2,045,059
                  

              	 	 	
                8,302,234
                  

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Budget
                  Net Income (Loss)

              	 	 	
                177,232
                  

              	 	 	
                1,091,699
                  

              	 	 	
                1,440,682
                  

              	 	 	
                2,014,358
                  

              	 	 	
                4,723,971
                  

              	 

      

       

      
        *
          Cumulative cash including 2007 ending cash balance.

      

       

      This
        budget was completed March 14, 2007 and is subject to final review by the
        Company’s Budget and Finance Committee and approval by its Board of Directors.
        The budget assumes that the Company’s 8% Convertible Subordinated Debentures
        shall have converted to common stock prior to maturity in February and March
        2008. 

       

      The
        presentation to investors has been posted on the Company’s website.

       

      
        
          
          

        

        
          -73-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(y)

      

      Registration
        Rights

      

      Pursuant
        to the Agreement for the sale and purchase of the whole of the issued share
        capital of Goodman Blue Limited dated October 11, 2006 between the Company
        and
        Scott Lee Goodwin, the Company granted piggy back registration rights with
        respect to the 2,500,000 shares of common stock issued to Goodwin.

       

      
        
          
          

        

        
          -74-

          
            

          

        

        
          
          

        

      

      Schedule
        3.1(z)

      

      Tax
        Status

      

      See
        Schedule 3.1(b) for a description of the Company’s tax status. 

       

      
        
          
          

        

        
          -75-

          
            

          

        

        
          
          

        

      

      Schedule
        3.1(cc)

      

      Accountants

      

      PKF
        Certified Public Accountants, A Professional Corporation (“PKF”)

      29
        Broadway

      New
        York,
        NY 10006

       

      
        
          
          

        

        
          -76-

          
            

          

        

        
          
          

        

      

      

      Schedule
        3.1(ee)

      

      No
        Disagreements with Accountants or Lawyers

      

      As
        of the
        date hereof, $106,915 is payable by the Company to PKF for its outstanding
        invoiced fees and disbursements for accounting and auditing services provided
        to
        the Company. The Company intends to pay these outstanding fees and disbursements
        out of the proceeds received from the sale of the convertible notes and warrants
        under the Agreement. 

      

      As
        of the
        date hereof, $222,283, is payable by the Company to Foley Hoag LLP for its
        outstanding invoiced fees and disbursements in connection with legal services
        provided to the Company. The Company plans to negotiate a payment plan with
        Foley Hoag LLP after the proceeds from the sale of the convertible notes
        and
        warrants under the Agreement have been received. 

      

      The
        Company also is in arrears to Vaughn & Associates and Simmons Gainsford for
        consulting and accounting services provided over the past several months.
        The
        Company plans to negotiate a payment plan with each of these accounting firms
        after the proceeds from the sale of the convertible notes and warrants under
        the
        Agreement have been received.

       

      
        
          
          

        

        
          -77-

          
            

          

        

        
          
          

        

      

       

      Schedule
        3.1(jj)(i)

      

      Employee
        Benefit Plans; ERISA

      

      Vistula
        Communications Services, Inc. Amended and Restated 2004 Stock Incentive Plan
        

       

      
        
          
          

        

        
          -78-

          
            

          

        

        
          
          

        

      

       

      Schedule
        4.9

      

      Use
        of Proceeds

      

      
        	
                Use

              	 	
                (rounded)

              	 
	
                Payroll

              	 	 	
                380,000
                  

              	 
	
                NetYantra

              	 	 	
                335,000
                  

              	 
	
                Debenture
                  interest

              	 	 	
                260,000
                  

              	 
	
                Legal

              	 	 	
                250,000
                  

              	 
	
                PKF

              	 	 	
                110,000
                  

              	 
	
                SG&A
                  & overdrafts

              	 	 	
                65,000
                  

              	 
	
                Office
                  Exp.

              	 	 	
                30,000
                  

              	 
	
                Capex

              	 	 	
                30,000
                  

              	 
	
                Rent

              	 	 	
                30,000
                  

              	 
	
                CFO
                  bonus

              	 	 	
                30,000
                  

              	 
	
                Trade
                  vendors

              	 	 	
                25,000
                  

              	 
	
                Accounting

              	 	 	
                20,000
                  

              	 
	
                Tax

              	 	 	
                17,000
                  

              	 
	
                Travel
                  reimbursement

              	 	 	
                13,000
                  

              	 
	
                Subtotal

              	 	 	
                1,595,000
                  

              	 
	 	 	 
	  	 
	
                Financing
                  (estimate)

              	 	 	
                77,000
                  

              	 
	
                Subtotal

              	 	 	
                1,672,000
                  

              	 
	 	 	 
	  	 
	
                Estimated
                  balance

              	 	 	
                828,000
                  

              	 
	 	 	 	 	 
	
                Total

              	 	 	
                2,500,000
                  

              	 

      

       

      The
        amounts listed for Use are only the outstanding amounts in respect of which
        the
        Company plans on making immediate payments following the Closing Date of
        the
        financing. There are additional amounts which are recorded on the books of
        the
        Company and its subsidiaries either as accounts payable or accrued expenses
        which need to be negotiated with each individual creditor. 

       

      
        
          
          

        

        
          -79-

          
            

          

        

        
          
          

        

      

      

      The
        estimated total accounts payable and accrued expenses expected to be recorded
        by
        the Company as at March 31, 2007 is approximately $3,410,000 (which excludes
        the
        $2,500,000 Put-option from Scott Goodwin as described in Schedule 3.1(d)).
        The
        Use of proceeds detailed above is included in this figure. The details
        supporting this figure by category are as follows:

      

      
        	
                Payroll

              	 	 	
                511,000
                  

              	 
	
                Consulting

              	 	 	
                337,000
                  

              	 
	
                NetYantra

              	 	 	
                335,000
                  

              	 
	
                Legal

              	 	 	
                315,000
                  

              	 
	
                Severance

              	 	 	
                299,000
                  

              	 
	
                Debenture
                  interest

              	 	 	
                259,000
                  

              	 
	
                Trade
                  vendors

              	 	 	
                224,000
                  

              	 
	
                Audit

              	 	 	
                171,000
                  

              	 
	
                Purchaser
                  *

              	 	 	
                168,000
                  

              	 
	
                Public/Investor
                  relations

              	 	 	
                165,000
                  

              	 
	
                Accounting

              	 	 	
                95,000
                  

              	 
	
                SG&A
                  (various small items)

              	 	 	
                90,000
                  

              	 
	
                To
                  be written-off

              	 	 	
                84,000
                  

              	 
	
                Capex

              	 	 	
                69,000
                  

              	 
	
                Directors

              	 	 	
                50,000
                  

              	 
	
                Printer

              	 	 	
                39,000
                  

              	 
	
                Travel

              	 	 	
                39,000
                  

              	 
	
                Marketing

              	 	 	
                34,000
                  

              	 
	
                Interest

              	 	 	
                30,000
                  

              	 
	
                CFO
                  bonus

              	 	 	
                30,000
                  

              	 
	
                Rent

              	 	 	
                29,000
                  

              	 
	
                Small
                  Business Loan

              	 	 	
                20,000
                  

              	 
	
                Taxes
                  outstanding

              	 	 	
                17,000
                  

              	 
	
                Total

              	 	 	
                3,410,000
                  

              	 

      

       

      *
        Purchaser is described below.

      

      On
        October 12, 2006, the Company entered into agreements relating to the sale
        of
        certain customer agreements using Vistula’s Order-to-Cash (“O2C”) Managed Office
        software platform and the management of certain customer accounts utilizing
        the
        O2C software to a Purchaser.  Goodman Blue had been processing the invoice
        and collections of cash from the customers whose agreements were sold to
        the
        Purchaser. As cash was collected in from the customer Goodman Blue was supposed
        to forward on
        the
        cash to the Purchaser. Goodman Blue used this cash for its own operations
        and
        owes the Purchaser approximately GBP 75,000 (USD 147,000) for this activity
        and
        additional amounts related to other business activity from Vistula Limited.
        The
        Company intends
        to
        negotiate the cash owed to the Purchaser and other accounts payable due the
        Purchaser from Vistula Limited with the license sale price for the Purchaser’s
        use of MyOrder portal the Purchaser is contracted to buy. 

       

      
        
          
          

        

        
          -80-EXECUTION
      COPY

     

    REGISTRATION
      RIGHTS AGREEMENT

    

    This
      Registration Rights Agreement (this “Agreement”)
      is
      made and entered into as of April 6, 2007, among Vistula Communications
      Services, Inc., a Delaware corporation (the “Company”),
      and
      the purchasers signatory hereto (each such purchaser is a “Purchaser”
and
      collectively, the “Purchasers”).

    

    This
      Agreement is made pursuant to the Securities Purchase Agreement, dated as of
      the
      date hereof among the Company and the Purchasers (the “Purchase
      Agreement”).

    

    The
      Company and the Purchasers hereby agree as follows:

    

    1.
      Definitions

    

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

    

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

    

    “Effectiveness
      Date”
means,
      with respect to the initial Registration Statement required to be filed
      hereunder, the 90th
      calendar
      day (or in the case of a review, the 120th
      calendar
      day) following the date hereof and with respect to any additional Registration
      Statements which may be required pursuant to Section 3(c)(3), the 60th
      calendar
      day following the date on which an additional Registration Statement is required
      to be filed hereunder; provided,
      however,
      in the
      event the Company is notified by the Commission that the above Registration
      Statement will not be reviewed or is no longer subject to further review and
      comments, the Effectiveness Date as to such Registration Statement shall be
      the
      fifth Trading Day following the date on which the Company is so notified if
      such
      date precedes the dates required above.

    

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

    

    “Event”
shall
      have the meaning set forth in Section 2(b).

    

    “Event
      Date”
shall
      have the meaning set forth in Section 2(b).

    

    “Filing
      Date”
means,
      with respect to the initial Registration Statement required hereunder, the
      30th
      calendar
      day following the date hereof and, with respect to any additional Registration
      Statements which may be required pursuant to Section 3(c)(3), the earliest
      practical date on which the Company is permitted by SEC Guidance to file such
      additional Registration Statement related to the Registrable
      Securities.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

    

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

    

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

    

    “Initial
      Registration Statement”
means
      the initial Registration Statement filed pursuant to this
      Agreement.

    

    “Initial
      Shares”
means
      a
      number of shares of Common Stock equal to one-third of the number of shares
      of
      Common Stock issued and outstanding and held by non-affiliates of the Company
      immediately prior to the filing date of the Initial Registration
      Statement.

    

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

    

    “Placement
      Agent”
shall
      mean Oceana Partners, LLC.

    

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

    

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

    

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

    

    “Registrable
      Securities”
means
      (i) all of the shares of Common Stock issuable upon conversion in full of the
      Notes, (ii) all Warrant Shares, (iii) the Bonus Shares, (iv) any securities
      issued or issuable upon any stock split, dividend or other distribution,
      recapitalization or similar event with respect to the foregoing, and (v) any
      additional shares issuable in connection with any anti-dilution provisions
      in
      the Notes or Warrants.

    

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

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    

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

    

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

    

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

    

    “SEC
      Guidance”
means
      (i) any publicly-available written or oral guidance, comments, requirements
      or
      requests of the Commission staff and (ii) the Securities Act.

    

    2.
       Shelf
      Registration.

    

    (a)
      On
      or
      prior to each Filing Date, the Company shall prepare and file with the
      Commission a Registration Statement covering the resale of all or such portion
      of the Registrable Securities as permitted by SEC Guidance (provided that the
      Company shall use diligent efforts to advocate with the Commission for the
      registration of all of the Registrable Securities in accordance with the SEC
      Guidance, including without limitation, the Manual of Publicly Available
      Telephone Interpretations D.29) that are not then registered on an effective
      Registration Statement for an offering to be made on a continuous basis pursuant
      to Rule 415. The Registration Statement shall be on Form SB-2 and shall contain
      (unless otherwise directed by at least an 75% majority in interest of the
      Holders) substantially the “Plan
      of Distribution”
      attached hereto as Annex
      A.
      Subject
      to the terms of this Agreement, the Company shall use its best efforts to cause
      a Registration Statement to be declared effective under the Securities Act
      as
      promptly as possible after the filing thereof, but in any event prior to the
      applicable Effectiveness Date, and shall use its best efforts to keep such
      Registration Statement continuously effective under the Securities Act until
      all
      Registrable Securities covered by such Registration Statement have been sold,
      or
      may be sold without volume restrictions pursuant to Rule 144(k), as determined
      by the counsel to the Company pursuant to a written opinion letter to such
      effect, addressed and acceptable to the Company’s transfer agent and the
      affected Holders (the “Effectiveness
      Period”).
      The
      Company shall telephonically request effectiveness of a Registration Statement
      as of 5:00 p.m. New York City time on a Trading Day. The Company shall
      immediately notify the Holders via facsimile or by e-mail delivery of a “.pdf”
format data file of the effectiveness of a Registration Statement on the same
      Trading Day that the Company telephonically confirms effectiveness with the
      Commission, which shall be the date requested for effectiveness of a
      Registration Statement. The Company shall, by 9:30 a.m. New York City time
      on
      the Trading Day after the Effective Date, file a final Prospectus with the
      Commission as required by Rule 424. Failure to so notify the Holder within
      1
      Trading Day of such notification of effectiveness or failure to file a final
      Prospectus as foresaid shall be deemed an Event under Section 2(b). Notwithstanding
      any other provision of this Agreement and subject to the payment of liquidated
      damages in Section 2(b), if any SEC Guidance sets forth a limitation of the
      number of Registrable Securities permitted to be registered on a particular
      Registration Statement (and notwithstanding that the Company used diligent
      efforts to advocate with the Commission for the registration of all or a greater
      number of Registrable Securities), unless otherwise directed in writing by
      a
      Holder as to its Registrable Securities, the number of Registrable Securities
      to
      be registered on such Registration Statement will first be reduced by
      Registrable Securities represented by Warrant Shares (applied, in the case
      that
      some Warrant Shares may be registered, to the Holders on a pro rata basis based
      on the total number of unregistered Warrant Shares held by such Holders), and
      second by Registrable Securities represented by Conversion Shares (applied,
      in
      the case that some Conversion Shares may be registered, to the Holders on a
      pro
      rata basis based on the total number of unregistered Conversion Shares held
      by
      such Holders).

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    

    (b)
      If:
      (i)
      the Initial Registration Statement is not filed on or prior to its Filing Date
      (if the Company files the Initial Registration Statement without affording
      the
      Holders the opportunity to review and comment on the same as required by Section
      3(a) herein, the Company shall be deemed to have not satisfied this clause
      (i)),
      or (ii) the Company fails to file with the Commission a request for acceleration
      of a Registration Statement in accordance with Rule 461 promulgated under the
      Securities Act, within five Trading Days of the date that the Company is
      notified (orally or in writing, whichever is earlier) by the Commission that
      such Registration Statement will not be “reviewed” or not be subject to further
      review, or (iii) as to, in the aggregate among all Holders on a pro-rata basis
      based on their purchase of the Securities pursuant to the Purchase Agreement,
      a
      Registration Statement registering for resale all of the Initial Shares is
      not
      declared effective by the Commission by the Effectiveness Date of the Initial
      Registration Statement, or (iv) all of the Registrable Securities are not
      registered for resale pursuant to one or more effective Registration Statements
      on or before September 30, 2007, or (v) after the Effectiveness Date of a
      Registration Statement, such Registration Statement ceases for any reason to
      remain continuously effective as to all Registrable Securities included in
      such
      Registration Statement, or the Holders are otherwise not permitted to utilize
      the Prospectus therein to resell such Registrable Securities, for more than
      an
      aggregate of 30 calendar days during any 12-month period (which need not be
      consecutive calendar days) (any such failure or breach being referred to as
      an
“Event”,
      and
      for purposes of clause (i), (iv) or (v) the date on which such Event occurs,
      or
      for purposes of clause (ii) the date on which such five Trading Day period
      is
      exceeded, or for purposes of clause (iii) the date which such 10 calendar day
      period is exceeded, or for purposes of clause (vi) the date on which such 30
      calendar day period, as applicable, is exceeded being referred to as
“Event
      Date”),
      then,
      in addition to any other rights the Holders may have hereunder or under
      applicable law, on each such Event Date and on each monthly anniversary of
      each
      such Event Date (if the applicable Event shall not have been cured by such
      date)
      until the applicable Event is cured, the Company shall pay to each Holder an
      amount in cash, as partial liquidated damages and not as a penalty, equal to
      1.5% of the aggregate purchase price paid by such Holder pursuant to the
      Purchase Agreement for any unregistered Registrable Securities then held by
      such
      Holder. If the Company fails to pay any partial liquidated damages pursuant
      to
      this Section in full within seven days after the date payable, the Company
      will
      pay interest thereon at a rate of 18% per annum (or such lesser maximum amount
      that is permitted to be paid by applicable law) to the Holder, accruing daily
      from the date such partial liquidated damages are due until such amounts, plus
      all such interest thereon, are paid in full. The partial liquidated damages
      pursuant to the terms hereof shall apply on a daily pro rata basis for any
      portion of a month prior to the cure of an Event.

     

    
      
        
        

      

      
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    3.
      Registration
      Procedures

    

    (a)
      Company
      Obligations.
      In
      connection with the Company’s registration obligations hereunder, the Company
      shall:

    

    (1) Not
      less
      than two Trading Days prior to the initial filing of the Registration Statement,
      the Company shall (i) furnish to each Holder copies of the Registration
      Statement proposed to be filed, which Registration Statement will be subject
      to
      the review of such Holders, and (ii) cause its officers and directors, counsel
      and independent certified public accountants to respond to such inquiries as
      shall be necessary, in the reasonable opinion of respective counsel to conduct
      reasonable investigation within the meaning of the Securities Act. The Company
      shall not file the Registration Statement which the Holders of a majority of
      the
      Registrable Securities shall reasonably object in good faith, provided that,
      the
      Company is notified of such objection in writing no later than 2 Trading Days
      after the Holders have been so furnished copies of the Registration
      Statement.

    

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

    

    (3)  If
      during
      the Effectiveness Period, the number of Registrable Securities at any time
      exceeds 100% of the number of shares of Common Stock then registered in a
      Registration Statement, file as soon as reasonably practicable, but in any
      case
      prior to the applicable Filing Date, an additional Registration Statement
      covering the resale by the Holders of not less than the number of such
      Registrable Securities.

     

    
      
        
        

      

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

    

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

     

    
      
        
        

      

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

    

    (7)  Promptly
      deliver to each Holder, without charge, as many copies of the Prospectus or
      Prospectuses (including each form of prospectus) and each amendment or
      supplement thereto as such Persons may reasonably request in connection with
      resales by the Holder of Registrable Securities. Subject to the terms of this
      Agreement, the Company hereby consents to the use of such Prospectus and each
      amendment or supplement thereto by each of the selling Holders in connection
      with the offering and sale of the Registrable Securities covered by such
      Prospectus and any amendment or supplement thereto, except after the giving
      on
      any notice pursuant to Section 3(a)(3).

    

    (8)  The
      Company shall effect a filing with respect to the public offering contemplated
      by each Registration Statement (an “Issuer
      Filing”)
      with
      the National Association of Securities Dealers, Inc. (“NASD”)
      Corporate Financing Department pursuant to NASD Rule 2710(b)(10)(A)(i) within
      one Trading Day of the date that the Registration Statement is first filed
      with
      the Commission and pay the filing fee required by such Issuer Filing. The
      Company shall use commercially reasonable efforts to pursue the Issuer Filing
      until the NASD issues a letter confirming that it does not object to the terms
      of the offering contemplated by the Registration Statement as described in
      the
      Plan of Distribution attached hereto as Annex A.

    

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

    

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

     

    
      
        
        

      

      
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    (11)  Upon
      the
      occurrence of any event contemplated by this Section 3, as promptly as
      reasonably possible under the circumstances taking into account the Company’s
      good faith assessment of any adverse consequences to the Company and its
      stockholders of the premature disclosure of such event, prepare a supplement
      or
      amendment, including a post-effective amendment, to a Registration Statement
      or
      a supplement to the related Prospectus or any document incorporated or deemed
      to
      be incorporated therein by reference, and file any other required document
      so
      that, as thereafter delivered, neither a Registration Statement nor such
      Prospectus will contain an untrue statement of a material fact or omit to state
      a material fact required to be stated therein or necessary to make the
      statements therein, in light of the circumstances under which they were made,
      not misleading. If
      the
      Company notifies the Holders in accordance with clauses (ii) through (vi) of
      Section 3(a)(4) above to suspend the use of any Prospectus until the requisite
      changes to such Prospectus have been made, then the Holders shall suspend use
      of
      such Prospectus. The Company will use its best efforts to ensure that the use
      of
      the Prospectus may be resumed as promptly as is practicable. The Company shall
      be entitled to exercise its right under this Section 3(a)(11) to suspend the
      availability of a Registration Statement and Prospectus for a period not to
      exceed 20 days (which need not be consecutive days) in any 12 month
      period
      without
      incurring liability for liquidated damages pursuant to Section 2(b) (and
      the
      calendar days during which the Registration Statement is so suspended shall
      not
      count towards the number of calendar days during which the Registration
      Statement is not effective for the purposes of the Section 2(b)). Each violation
      of the Company's obligation not to suspend sales pursuant to the Registration
      Statement longer than permitted pursuant to the proviso of this Paragraph
      3(a)(11) shall be deemed an "Event" and for each such default, Purchaser shall
      be entitled to the payment provisions set forth in Paragraph 2(b).

    

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

     

    (b) Obligation
      of the Holders.

    

    (1) Each
      Holder agrees to furnish to the Company a completed Questionnaire in the form
      attached to this Agreement as Annex B (a “Selling
      Shareholder Questionnaire”)
      not
      more than ten Trading Days after the Closing Date. 

    

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

    

    (3) During
      any periods that the Company is unable to meet its obligations hereunder with
      respect to the registration of the Registrable Securities solely because any
      Holder fails to furnish the information required by Sections 3(b)(1) or 3(b)(2)
      within three Trading Days of the Company’s request, any liquidated damages that
      are accruing at such time shall be tolled and any Event that may otherwise
      occur
      solely because of such delay shall be suspended, until such information is
      delivered to the Company.

     

    
      
        
        

      

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

    

    5.
      Indemnification

    

    (a)
       Indemnification
      by the Company.
      The
      Company shall, notwithstanding any termination of this Agreement, indemnify
      and
      hold harmless each Holder, the officers, directors, members, partners, agents,
      brokers (including brokers who offer and sell Registrable Securities as
      principal as a result of a pledge or any failure to perform under a margin
      call
      of Common Stock), investment advisors and employees (and any other Persons
      with
      a functionally equivalent role of a Person holding such titles, notwithstanding
      a lack of such title or any other title) of each of them, each Person who
      controls any such Holder (within the meaning of Section 15 of the Securities
      Act
      or Section 20 of the Exchange Act) and the officers, directors, members,
      shareholders, partners, agents and employees (and any other Persons with a
      functionally equivalent role of a Person holding such titles, notwithstanding
      a
      lack of such title or any other title) of each such controlling Person, to
      the
      fullest extent permitted by applicable law, from and against any and all losses,
      claims, damages, liabilities, costs (including, without limitation, reasonable
      attorneys’ fees) and expenses (collectively, “Losses”),
      as
      incurred, arising out of or relating to any untrue or alleged untrue statement
      of a material fact contained in a Registration Statement, any Prospectus or
      any
      form of prospectus or in any amendment or supplement thereto or in any
      preliminary prospectus, or arising out of or relating to any omission or alleged
      omission of a material fact required to be stated therein or necessary to make
      the statements therein (in the case of any Prospectus or form of prospectus
      or
      supplement thereto, in light of the circumstances under which they were made)
      not misleading, except to the extent, but only to the extent, that (i) such
      untrue statements or omissions are based upon information regarding such Holder
      furnished in writing to the Company by such Holder expressly for use therein,
      or
      to the extent that such information relates to such Holder or such Holder’s
      proposed method of distribution of Registrable Securities and was reviewed
      and
      expressly approved in writing by such Holder expressly for use in a Registration
      Statement, such Prospectus or such form of Prospectus or in any amendment or
      supplement thereto (it being understood that the Holder has approved Annex
      A
      hereto for this purpose) or (ii) in the case of an occurrence of an event of
      the
      type specified in Section 3(a)(3)(ii)-(vi), the use by such Holder of an
      outdated or defective Prospectus after the Company has notified such Holder
      in
      writing that the Prospectus is outdated or defective and prior to the receipt
      by
      such Holder of the Advice contemplated in Section 6(d). The Company shall notify
      the Holders promptly of the institution, threat or assertion of any Proceeding
      arising from or in connection with the transactions contemplated by this
      Agreement of which the Company is aware.

     

    
      
        
        

      

      
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    (b)
       Indemnification
      by Holders.
      Each
      Holder shall, severally and not jointly, indemnify and hold harmless the
      Company, its directors, officers, agents and employees, each Person who controls
      the Company (within the meaning of Section 15 of the Securities Act and Section
      20 of the Exchange Act), and the directors, officers, agents or employees of
      such controlling Persons, to the fullest extent permitted by applicable law,
      from and against all Losses, as incurred, to the extent arising out of or based
      solely upon: (x) such Holder’s failure to comply with the prospectus delivery
      requirements of the Securities Act provided that the Company has complied with
      its requirements under Section 3(a)(6) to furnish current prospectuses to the
      Holder or (y) any untrue or alleged untrue statement of a material fact
      contained in any Registration Statement, any Prospectus, or any form of
      prospectus, or in any amendment or supplement thereto or in any preliminary
      prospectus, or arising out of or relating to any omission or alleged omission
      of
      a material fact required to be stated therein or necessary to make the
      statements therein not misleading (i) to the extent, but only to the extent,
      that such untrue statement or omission is contained in any information so
      furnished in writing by such Holder to the Company specifically for inclusion
      in
      such Registration Statement or such Prospectus or (ii) to the extent that (1)
      such untrue statements or omissions are based solely upon information regarding
      such Holder furnished in writing to the Company by such Holder expressly for
      use
      therein, or to the extent that such information relates to such Holder or such
      Holder’s proposed method of distribution of Registrable Securities and was
      reviewed and expressly approved in writing by such Holder expressly for use
      in
      the Registration Statement (it being understood that the Holder has approved
      Annex A hereto for this purpose), such Prospectus or such form of Prospectus
      or
      in any amendment or supplement thereto or (2) in the case of an occurrence
      of an
      event of the type specified in Section 3(a)(3)(ii)-(vi), the use by such Holder
      of an outdated or defective Prospectus after the Company has notified such
      Holder in writing that the Prospectus is outdated or defective and prior to
      the
      receipt by such Holder of the Advice contemplated in Section 6(d). In no event
      shall the liability of any selling Holder hereunder be greater in amount than
      the dollar amount of the net proceeds received by such Holder upon the sale
      of
      the Registrable Securities giving rise to such indemnification
      obligation.

     

    
      
        
        

      

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

    

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

    

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

     

    
      
        
        

      

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

    

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

    

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

    

    6.
      Miscellaneous

     

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

     

    
      
        
        

      

      
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    (b)  No
      Piggyback on Registrations.
      Except
      as set forth on Schedule
      6(b)
      attached
      hereto, neither the Company nor any of its security holders (other than the
      Holders in such capacity pursuant hereto) may include securities of the Company
      in any Registration Statement other than the Registrable Securities. The Company
      shall not file any other registration statements until all Registrable
      Securities are subject to a Registration Statement declared effective by the
      Commission, provided that this Section 6(b) shall not prohibit the Company
      from
      filing amendments to registration statements already filed.

    

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

    

    (d)  Discontinued
      Disposition.
      Each
      Holder agrees by its acquisition of such Registrable Securities that, upon
      receipt of a notice from the Company of the occurrence of any event of the
      kind
      described in Section 3(a)(3), such Holder will forthwith discontinue disposition
      of such Registrable Securities under a Registration Statement until such
      Holder’s receipt of the copies of the supplemented Prospectus and/or amended
      Registration Statement, or until it is advised in writing (the “Advice”)
      by the
      Company that the use of the applicable Prospectus may be resumed, and, in either
      case, has received copies of any additional or supplemental filings that are
      incorporated or deemed to be incorporated by reference in such Prospectus or
      Registration Statement. The Company will use its best efforts to ensure that
      the
      use of the Prospectus may be resumed as promptly as it practicable. The Company
      agrees and acknowledges that any periods during which the Holder is required
      to
      discontinue the disposition of the Registrable Securities hereunder shall be
      subject to the provisions of Section 2(b).

    

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

    

    (f)  Amendments
      and Waivers.
      The
      provisions of this Agreement, including the provisions of this sentence, may
      not
      be amended, modified or supplemented, and waivers or consents to departures
      from
      the provisions hereof may not be given, unless the same shall be in writing
      and
      signed by the Company and Holders of at least 75% of the then outstanding
      Registrable Securities. If a Registration Statement does not register all of
      the
      Registrable Securities pursuant to a waiver or amendment done in compliance
      with
      the previous sentence, then the number of Registrable Securities to be
      registered for each Holder shall be reduced pro rata among all Holders and
      each
      Holder shall have the right to designate which of its Registrable Securities
      shall be omitted from such Registration Statement. Notwithstanding the
      foregoing, a waiver or consent to depart from the provisions hereof with respect
      to a matter that relates exclusively to the rights of Holders and that does
      not
      directly or indirectly affect the rights of other Holders may be given by
      Holders of all of the Registrable Securities to which such waiver or consent
      relates; provided,
      however,
      that
      the provisions of this sentence may not be amended, modified, or supplemented
      except in accordance with the provisions of the first sentence of this Section
      6(f). 

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    

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

    

    (h)  Successors
      and Assigns.
      This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      permitted assigns of each of the parties and shall inure to the benefit of
      each
      Holder. The Company may not assign its rights or obligations hereunder without
      the prior written consent of all of the Holders of the then-outstanding
      Registrable Securities. Each Holder may assign their respective rights hereunder
      in the manner and to the Persons as permitted under the Purchase
      Agreement.

    

    (i)  No
      Inconsistent Agreements.
      Neither
      the Company nor any of its subsidiaries has entered, as of the date hereof,
      nor
      shall the Company or any of its Subsidiaries, on or after the date of this
      Agreement, enter into any agreement with respect to its Securities, that would
      have the effect of impairing the rights granted to the Holders in this Agreement
      or otherwise conflicts with the provisions hereof. Except as set forth on
Schedule
      6(i),
      neither
      the Company nor any of its subsidiaries has previously entered into any
      agreement granting any registration rights with respect to any of its securities
      to any Person that have not been satisfied in full.

    

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

    

    (k)  Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be determined in accordance with the provisions of
      the
      Purchase Agreement.

    

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

    

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

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    

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

    

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

    

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

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    

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

    
      	 	 	 
	 	
              VISTULA
                COMMUNICATIONS SERVICES, INC.

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Rupert Galliers-Pratt
	 	
              

              Name:
                Rupert Galliers-Pratt

            
	 	
              Title:
                President and Chief Executive
                Officer

            

    

    
       

      [SIGNATURE
        PAGE OF HOLDERS FOLLOWS]

       

    

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    [SIGNATURE
      PAGE OF HOLDERS TO VISTULA RRA]

     

     

    Name
      of
      Holder: JMG
      Capital Partners, LP

    Signature
      of Authorized Signatory of Holder:
      /s/
      Jonathan Glaser

    Name
      of
      Authorized Signatory: Jonathan
      Glaser

    Title
      of
      Authorized Signatory: Member
      Manager of the General Partner 

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    [SIGNATURE
      PAGE OF HOLDERS TO VISTULA RRA]

     

    Name
      of
      Holder: JMG
      Triton Offshore Fund, Ltd.

    Signature
      of Authorized Signatory of Holder:
      /s/
      Jonathan Glaser

    Name
      of
      Authorized Signatory: Jonathan
      Glaser

    Title
      of
      Authorized Signatory: Member
      Manager of the Investment Manager

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    [SIGNATURE
      PAGE OF HOLDERS TO VISTULA RRA]

     

    Name
      of
      Holder: Bushido
      Capital Master Fund, LP

    Signature
      of Authorized Signatory of Holder:
      /s/
      Ronald S. Dagar

    Name
      of
      Authorized Signatory: Ronald
      S.
      Dagar

    Title
      of
      Authorized Signatory: Director

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    [SIGNATURE
      PAGE OF HOLDERS TO VISTULA RRA]

     

    Name
      of
      Holder: JANA
      Piranha Master Fund, Ltd.

    Signature
      of Authorized Signatory of Holder:
      /s/
      Marc
      Lehmann

    Name
      of
      Authorized Signatory: Marc
      Lehmann

    Title
      of
      Authorized Signatory: Partner,
      JANA Partners LLC

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    [SIGNATURE
      PAGE OF HOLDERS TO VISTULA RRA]

     

    Name
      of
      Holder: Little
      Wing LP

    Signature
      of Authorized Signatory of Holder:
      _/s/
      Parker L. Quillen

    Name
      of
      Authorized Signatory: Parker
      L.
      Quillen

    Title
      of
      Authorized Signatory: Sole
      Managing Member, Quilcap Mgmt., LLC,   

                    
      Quilcap
      Mgmt. LLC as Investment Manager

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    [SIGNATURE
      PAGE OF HOLDERS TO VISTULA RRA]

     

    Name
      of
      Holder: Tradewinds
      Fund Ltd. 

    Signature
      of Authorized Signatory of Holder:
      /s/
      Parker L. Quillen

    Name
      of
      Authorized Signatory: Parker
      L.
      Quillen 

    Title
      of
      Authorized Signatory: Sole
      Managing Member, Quilcap Mgmt., LLC

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

     

    [SIGNATURE
      PAGE OF HOLDERS TO VISTULA RRA]

     

    Name
      of
      Holder: Betty
      B.
      Evans

    Signature
      of Authorized Signatory of Holder:
      /s/
      Betty
      B. Evans by Whitney S. Quillen 

    her
      attorney in fact 

    Name
      of
      Authorized Signatory: Whitney
      S. Quillen

    Title
      of
      Authorized Signatory: Power
      of
      Attorney (attorney in fact)

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    [SIGNATURE
      PAGE OF HOLDERS TO VISTULA RRA]

     

    Name
      of
      Holder: GSSF
      Master Fund, LP

    Signature
      of Authorized Signatory of Holder:
      :
      /s/
      E. B.
      Lyon IV

    Name
      of
      Authorized Signatory: E.
      B.
      Lyon IV

    Title
      of
      Authorized Signatory: Authorized
      Agent

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    [SIGNATURE
      PAGE OF HOLDERS TO VISTULA RRA]

     

    Name
      of
      Holder: Stratford
      Partners, LP

    Signature
      of Authorized Signatory of Holder:
      /s/
      Chad
      Comiteau

    Name
      of
      Authorized Signatory: Chad
      Comiteau

    Title
      of
      Authorized Signatory: General
      Partner

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

       

    

    ANNEX
      A

    

    Plan
      of Distribution

    

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

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      	·  	
              privately
                negotiated transactions;

            

    

     

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

            

    

     

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

            

    

     

    
      	·  	
              a
                combination of any such methods of
                sale;

            

    

     

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

            

    

     

    
      	·  	
              any
                other method permitted pursuant to applicable
                law.

            

    

     

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

     

    Broker-dealers
      engaged by the Selling Stockholders may arrange for other brokers-dealers to
      participate in sales. Broker-dealers may receive commissions or discounts from
      the Selling Stockholders (or, if any broker-dealer acts as agent for the
      purchaser of shares, from the purchaser) in amounts to be negotiated, but,
      except as set forth in a supplement to this Prospectus, in the case of an agency
      transaction not in excess of a customary brokerage commission in compliance
      with
      NADSR Rule 2440; and in the case of a principal transaction a markup or markdown
      in compliance with NASDR IM-2440. 

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

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

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

    Annex
      B

     

    VISTULA
      COMMUNICATIONS SERVICES, INC.

     

    Selling
      Securityholder Notice and Questionnaire

     

    The
      undersigned beneficial owner of common stock, par value $0.001 per share (the
      “Common
      Stock”),
      of
      Vistula Communications Services, Inc., a Delaware corporation (the “Company”),
      (the
“Registrable
      Securities”)
      understands that the Company has filed or intends to file with the Securities
      and Exchange Commission (the “Commission”)
      a
      registration statement on Form SB-2 (the “Registration
      Statement”)
      for
      the registration and resale under Rule 415 of the Securities Act of 1933, as
      amended (the “Securities
      Act”),
      of
      the Registrable Securities, in accordance with the terms of the Registration
      Rights Agreement, dated as of April 6, 2007 (the “Registration
      Rights Agreement”),
      among
      the Company and the Purchasers named therein. A copy of the Registration Rights
      Agreement is available from the Company upon request at the address set forth
      below. All capitalized terms not otherwise defined herein shall have the
      meanings ascribed thereto in the Registration Rights Agreement.

     

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

     

    NOTICE

     

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

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

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

     

    QUESTIONNAIRE

     

    1. Name.

     

    
      	 	
              (a)

            	
              Full
                Legal Name of Selling Securityholder

            

      	 	 	
            

      	 	 	_______________________________________________________________________

    

     

    
      	 	
              (b)

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

            

      	 	 	 

      	 	 	_______________________________________________________________________

    

     

    
      	 	
              (c)

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

            

      	 	 	 

      	 	 	_______________________________________________________________________

    

     

    2.
      Address for Notices to Selling Securityholder:

     

    
      	_______________________________________________________________________________________ 
	_______________________________________________________________________________________
	_______________________________________________________________________________________ 
	
              Telephone:
                _________________________________________________________________________________________ 

            
	
              Fax:
                ______________________________________________________________________________________________

            
	
              Contact
                Person:
                _____________________________________________________________________________________

            

    

    

    3.
      Beneficial Ownership of Registrable Securities:

     

    
      	 	
              (a)

            	
              Type
                and Principal Amount of Registrable Securities beneficially
                owned:

            

    

    
      	 	 	_______________________________________________________________________

    

    
      	 	 	_______________________________________________________________________

    

    
      	 	 	_______________________________________________________________________

    

    
      	 	 	 

    

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

    4.
      Broker-Dealer Status:

     

    
      	 	
              (a)

            	
              Are
                you a broker-dealer?

            

    

     

    Yes
o No
o

     

    
      	 	
              Note:

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

            

    

     

    
      	 	
              (b)

            	
              Are
                you an affiliate of a
                broker-dealer?

            

    

     

    Yes
o No
o

     

    
      	 	
              (c)

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

            

    

     

    Yes
o No
o

     

    
      	 	
              Note:

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

            

    

     

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

     

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

     

    
      	 	
              (a)

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

            

      	 	 	 

      	 	 	_______________________________________________________________________

      	 	 	_______________________________________________________________________

    

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

    6.
      Relationships with the Company:

     

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

     

    
      	 	
              State
                any exceptions here: 

            
	 	 
	 	
              _____________________________________________________________________________

            
	 	_____________________________________________________________________________

    

     

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

     

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

     

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

     

    
      	 	 	 
	Dated:	Beneficial Owner:  
	
              
                

              

            	
              
                

              

            
	 	 	 
	
            	By:  	
            
	 	
              

              Name:

            
	 	Title:

    

     

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

     

    
      
        
        

      

      
        -32-

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