COMMON STOCK PURCHASE WARRANT To Purchase __________ Shares of Common Stock of VISTULA COMMUNICATION SERVICES, INC.
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR REASONABLY ACCEPTABLE
TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON
STOCK PURCHASE WARRANT
To
Purchase __________ Shares of Common Stock of
VISTULA
COMMUNICATION SERVICES, INC.
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”)
certifies that, for value received, _____________ (the “Holder”),
is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date hereof (the
“Initial
Exercise Date”)
and on
or prior to the close of business on the fifth anniversary of the Initial
Exercise Date (the “Termination
Date”)
but
not thereafter, to subscribe for and purchase from Vistula Communication
Services, Inc., a Delaware corporation (the “Company”),
up to
______ shares (the “Warrant
Shares”)
of
Common Stock, par value $0.001 per share, of the Company (the “Common
Stock”).
The
purchase price of one share of Common Stock under this Warrant shall be equal
to
the Exercise Price, as defined in Section 2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in that certain Securities Purchase Agreement (the “Purchase
Agreement”),
dated
April __, 2007, among the Company and the purchasers signatory
thereto.
Section
2. Exercise.
a) Exercise
of Warrant.
Exercise of the purchase rights represented by this Warrant may be made at
any
time or times on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed facsimile copy
of
the Notice of Exercise annexed hereto (or such other office or agency of the
Company as it may designate by notice in writing to the registered Holder at
the
address of such Holder appearing on the books of the Company); provided,
however,
within
5 Trading Days of the date said Notice of Exercise is delivered to the Company,
the Holder shall have surrendered this Warrant to the Company and the Company
shall have received payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank. Notwithstanding anything herein to the contrary, the Holder shall not
be
required to physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the Warrant
has
been exercised in full, in which case, the Holder shall surrender this Warrant
to the Company for cancellation within 3 Trading Days of the date the final
Notice of Exercise is delivered to the Company. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. The Holder and the Company shall
maintain records showing the number of Warrant Shares purchased and the date
of
such purchases. The Company shall deliver any objection to any Notice of
Exercise Form within 1 Business Days of receipt of such notice. In the event
of
any dispute or discrepancy, the records of the Holder shall be controlling
and
determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
that, by reason of the provisions of this paragraph, following the purchase
of a
portion of the Warrant Shares hereunder, the number of Warrant Shares available
for purchase hereunder at any given time may be less than the amount stated
on
the face hereof.
1
b) Exercise
Price.
The
exercise price per share of the Common Stock under this Warrant shall be $1.00,
subject to adjustment hereunder (the “Exercise
Price”).
c) Cashless
Exercise.
If at
any time after one year from the Closing Date there is no effective Registration
Statement registering, or no current prospectus available for, the resale of
the
Warrant Shares by the Holder, then this Warrant may also be exercised at such
time by means of a “cashless exercise” in which the Holder shall be entitled to
receive a certificate for the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
| (A) |
=
the VWAP on the Trading Day immediately preceding the date of such
election;
|
| (B) |
=
the Exercise Price of this Warrant, as adjusted; and
|
| (X) |
=
the number of Warrant Shares issuable upon exercise of this Warrant
in
accordance with the terms of this Warrant by means of a cash exercise
rather than a cashless exercise.
|
Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall
be
automatically exercised via cashless exercise pursuant to this Section
2(c).
2
d) Exercise
Limitations.
The
Company shall not effect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, pursuant to Section
2 or
otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, such Holder
(together with such Holder’s Affiliates, and any other person or entity acting
as a group together with such Holder or any of such Holder’s Affiliates), would
beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by such Holder and its Affiliates shall include
the number of shares of Common Stock issuable upon exercise of this Warrant
with
respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (A) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by such
Holder or any of its Affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents) subject
to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by such Holder or any of its affiliates. Except
as set forth in the preceding sentence, for purposes of this Section 2(d),
beneficial ownership shall be calculated in accordance with Section 13(d) of
the
Exchange Act and the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to such Holder
that such calculation is in compliance with Section 13(d) of the Exchange Act
and such Holder is solely responsible for any schedules required to be filed
in
accordance therewith. To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder together with any
Affiliates) and of which portion of this Warrant is exercisable shall be in
the
sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder together
with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject the Beneficial Ownership Limitation, and the Company shall have
no
obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 2(d), in
determining the number of outstanding shares of Common Stock, a Holder may
rely
on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the Company
or the Company’s Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing to such
Holder the number of shares of Common Stock then outstanding. In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by such Holder or its Affiliates since the date as
of
which such number of outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation”
shall
be 4.99% or 9.99% per signature page of Purchase Agreement of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this Warrant.
The
Beneficial Ownership Limitation provisions of this Section 2(d) may be waived
by
such Holder, at the election of such Holder, upon not less than 61 days’ prior
notice to the Company to change the Beneficial Ownership Limitation to 9.99%
of
the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of this Warrant,
and the provisions of this Section 2(d) shall continue to apply. Upon such
a
change by a Holder of the Beneficial Ownership Limitation from such 4.99%
limitation to such 9.99% limitation, the Beneficial Ownership Limitation may
not
be further waived by such Holder. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 2(d) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitations contained
in this paragraph shall apply to a successor holder of this
Warrant.
3
e) Mechanics
of Exercise.
i. Authorization
of Warrant Shares.
The
Company covenants that all Warrant Shares which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of the
purchase rights represented by this Warrant, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
ii. Delivery
of Certificates Upon Exercise.
Certificates for shares purchased hereunder shall be transmitted by the transfer
agent of the Company to the Holder by crediting the account of the Holder’s
prime broker with the Depository Trust Company through its Deposit Withdrawal
Agent Commission (“DWAC”)
system
if the Company is a participant in such system, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise within
3 Trading Days from the delivery to the Company of the executed Notice of
Exercise, surrender of this Warrant and payment of the aggregate Exercise Price
as set forth above (“Warrant
Share Delivery Date”).
This
Warrant shall be deemed to have been exercised on the date the Exercise Price
is
received by the Company. The Warrant Shares shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed
to have become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the Exercise
Price (or by cashless exercise, if permitted) and all taxes required to be
paid
by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance
of
such shares, have been paid.
iii. Delivery
of New Warrants Upon Exercise.
If this
Warrant shall have been exercised in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Shares, deliver
to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.
4
iv. Rescission
Rights.
If the
Company fails to cause its transfer agent to transmit to the Holder a
certificate or certificates representing the Warrant Shares pursuant to this
Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder will have
the right to rescind such exercise.
v. Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.
In
addition to any other rights available to the Holder, if the Company fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Holder of the Warrant Shares which
the Holder anticipated receiving upon such exercise (a “Buy-In”),
then
the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required
to
deliver to the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion
of
the Warrant and equivalent number of Warrant Shares for which such exercise
was
not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect
to
an attempted exercise of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock
upon
exercise of the Warrant as required pursuant to the terms hereof.
5
vi. No
Fractional Shares or Scrip.
No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. As to any fraction of a share which Holder would
otherwise be entitled to purchase upon such exercise, the Company shall pay
a
cash adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price.
vii. Charges,
Taxes and Expenses.
Issuance of certificates for Warrant Shares shall be made without charge to
the
Holder for any issue or transfer tax or other incidental expense in respect
of
the issuance of such certificate, all of which taxes and expenses shall be
paid
by the Company, and such certificates shall be issued in the name of the Holder
or in such name or names as may be directed by the Holder; provided,
however,
that in
the event certificates for Warrant Shares are to be issued in a name other
than
the name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
viii. Closing
of Books.
The
Company will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
f) Call
Provision.
Subject
to the provisions of Section 2(d) and this Section 2(f), if, after the Effective
Date, (i) the VWAP for each of 20 consecutive Trading Days (the “Measurement
Period,”
which
20 consecutive Trading Day period shall not have commenced until after the
Effective Date) exceeds $2.50, subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the Original Issue Date, (ii) the average
daily volume for such Measurement Period exceeds 100,000 shares of Common Stock
per Trading Day (subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like after the Initial Exercise
Date)
and (iii) the Holder is not in possession of any information that constitutes,
or might constitute, material non-public information which was provided by
the
Company, then the Company may, within 1 Trading Day of the end of such
Measurement Period, call for cancellation of all or any portion of this Warrant
for which a Notice of Exercise has not yet been delivered (such right, a
“Call”)
for
consideration equal to $0.001 per Share. To exercise this right, the Company
must deliver to the Holder an irrevocable written notice (a “Call
Notice”),
indicating therein the portion of unexercised portion of this Warrant to which
such notice applies. If the conditions set forth below for such Call are
satisfied from the period from the date of the Call Notice through and including
the Call Date (as defined below), then any portion of this Warrant subject
to
such Call Notice for which a Notice of Exercise shall not have been received
by
the Call Date will be cancelled at 6:30 p.m. (New York City time) on the tenth
Trading Day after the date the Call Notice is received by the Holder (such
date
and time, the “Call
Date”).
Any
unexercised portion of this Warrant to which the Call Notice does not pertain
will be unaffected by such Call Notice. In furtherance thereof, the Company
covenants and agrees that it will honor all Notices of Exercise with respect
to
Warrant Shares subject to a Call Notice that are tendered through 6:30 p.m.
(New
York City time) on the Call Date. The parties agree that any Notice of Exercise
delivered following a Call Notice which calls less than all the Warrants shall
first reduce to zero the number of Warrant Shares subject to such Call Notice
prior to reducing the remaining Warrant Shares available for purchase under
this
Warrant. For example, if (x) this Warrant then permits the Holder to acquire
100
Warrant Shares, (y) a Call Notice pertains to 75 Warrant Shares, and (z) prior
to 6:30 p.m. (New York City time) on the Call Date the Holder tenders a Notice
of Exercise in respect of 50 Warrant Shares, then (1) on the Call Date the
right
under this Warrant to acquire 25 Warrant Shares will be automatically cancelled,
(2) the Company, in the time and manner required under this Warrant, will have
issued and delivered to the Holder 50 Warrant Shares in respect of the exercises
following receipt of the Call Notice, and (3) the Holder may, until the
Termination Date, exercise this Warrant for 25 Warrant Shares (subject to
adjustment as herein provided and subject to subsequent Call Notices). Subject
again to the provisions of this Section 2(f), the Company may deliver subsequent
Call Notices for any portion of this Warrant for which the Holder shall not
have
delivered a Notice of Exercise. Notwithstanding anything to the contrary set
forth in this Warrant, the Company may not deliver a Call Notice or require
the
cancellation of this Warrant (and any such Call Notice shall be void), unless,
from the beginning of the Measurement Period through the Call Date, (i) the
Company shall have honored in accordance with the terms of this Warrant all
Notices of Exercise delivered by 6:30 p.m. (New York City time) on the Call
Date, and (ii) the Registration Statement shall be effective as to all Warrant
Shares and the prospectus thereunder available for use by the Holder for the
resale of all such Warrant Shares, and (iii) the Common Stock shall be listed
or
quoted for trading on the Trading Market, and (iv) there is a sufficient number
of authorized shares of Common Stock for issuance of all Securities under the
Transaction Documents, and (v) the issuance of the shares shall not cause a
breach of any provision of 2(d) herein. The Company’s right to call the Warrants
under this Section 2(f) shall be exercised ratably among the Holders based
on
each Holder’s initial purchase of Warrants.
6
Section
3. Certain Adjustments.
a) Stock
Dividends and Splits.
If the
Company, at any time while this Warrant is outstanding: (A) pays a stock
dividend or otherwise make a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this Warrant),
(B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then
in each case the Exercise Price shall be multiplied by a fraction of which
the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event and the number of shares issuable upon exercise
of
this Warrant shall be proportionately adjusted such that the aggregate Exercise
Price of this Warrant shall remain unchanged. Any adjustment made pursuant
to
this Section 3(a) shall become effective immediately after the record date
for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in
the case of a subdivision, combination or re-classification.
7
b) Subsequent
Equity Sales.
If the
Company or any Subsidiary thereof, as applicable, at any time while this Warrant
is outstanding, shall sell or grant any option to purchase, or sell or grant
any
right to reprice, or otherwise dispose of or issue (or announce any offer,
sale,
grant or any option to purchase or other disposition) any Common Stock or Common
Stock Equivalents entitling any Person to acquire shares of Common Stock, at
an
effective price per share less than the then Exercise Price (such lower price,
the “Base
Share Price”
and
such issuances collectively, a “Dilutive
Issuance”)
(if
the holder of the Common Stock or Common Stock Equivalents so issued shall
at
any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with such
issuance, be entitled to receive shares of Common Stock at an effective price
per share which is less than the Exercise Price, such issuance shall be deemed
to have occurred for less than the Exercise Price on such date of the Dilutive
Issuance), then the Exercise Price shall be reduced and only reduced to equal
the Base Share Price and the number of Warrant Shares issuable hereunder shall
be increased such that the aggregate Exercise Price payable hereunder, after
taking into account the decrease in the Exercise Price, shall be equal to the
aggregate Exercise Price prior to such adjustment. Such adjustment shall be
made
whenever such Common Stock or Common Stock Equivalents are issued; provided,
however,
if the
Exercise Price is adjusted due to the issuance of Common Stock Equivalents
and
all of such Common Stock Equivalents expire pursuant to their own terms before
they are exercised, exchanged and/or converted, an upward adjustment will be
made such that the Exercise Price will no longer reflect the issuance of such
Common Stock Equivalents; provided,
further,
such
upward adjustment shall only be effective upon at least 20 days prior written
notice to the Holder of such upward adjustment. The Company shall notify the
Holder in writing, no later than the Trading Day following the issuance of
any
Common Stock or Common Stock Equivalents subject to this section, indicating
therein the applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms (such notice the “Dilutive
Issuance Notice”).
For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share Price
regardless of whether the Holder accurately refers to the Base Share Price
in
the Notice of Exercise. Notwithstanding the foregoing, no adjustments, Alternate
Consideration nor notices shall be made, paid or issued under this Section
3 in
respect of an Exempt Issuance. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the Company shall
be
deemed to have issued Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities may be converted
or exercised in the case of a Variable Rate Transaction (as defined in the
Purchase Agreement).
8
c) Subsequent
Rights Offerings.
If the
Company, at any time while the Warrant is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to Holders)
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the VWAP at the record date mentioned below, then the
Exercise Price shall be multiplied by a fraction, of which the denominator
shall
be the number of shares of the Common Stock outstanding on the date of issuance
of such rights or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the numerator shall be the
number of shares of the Common Stock outstanding on the date of issuance of
such
rights or warrants plus the number of shares which the aggregate offering price
of the total number of shares so offered (assuming receipt by the Company in
full of all consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately
after
the record date for the determination of stockholders entitled to receive such
rights, options or warrants.
d) Pro
Rata Distributions.
If the
Company, at any time prior to the Termination Date, shall distribute to all
holders of Common Stock (and not to Holders of the Warrants) evidences of its
indebtedness or assets (including cash and cash dividends) or rights or warrants
to subscribe for or purchase any security other than the Common Stock (which
shall be subject to Section 3(b)), then in each such case the Exercise Price
shall be adjusted by multiplying the Exercise Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the VWAP
determined as of the record date mentioned above, and of which the numerator
shall be such VWAP on such record date less the then per share fair market
value
at such record date of the portion of such assets or evidence of indebtedness
so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
9
e) Fundamental
Transaction.
If, at
any time while this Warrant is outstanding, (A) the Company effects any merger
or consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series
of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(each “Fundamental
Transaction”),
then,
upon any subsequent exercise of this Warrant, the Holder shall have the right
to
receive, for each Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, the number
of shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the “Alternate
Consideration”)
receivable as a result of such merger, consolidation or disposition of assets
by
a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event. For purposes of any such exercise,
the determination of the Exercise Price shall be appropriately adjusted to
apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value
of
any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice
as
to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. To the extent necessary to effectuate
the foregoing provisions, any successor to the Company or surviving entity
in
such Fundamental Transaction shall issue to the Holder a new warrant consistent
with the foregoing provisions and evidencing the Holder’s right to exercise such
warrant into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this Section
3(e) and insuring that this Warrant (or any such replacement security) will
be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
as amended, or (3) a Fundamental Transaction involving a person or entity not
traded on a national securities exchange, the Nasdaq Global Select Market,
the
Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any successor
entity shall pay at the Holder’s option, exercisable at any time concurrently
with or within 30 days after the consummation of the Fundamental Transaction,
an
amount of cash equal to the value of this Warrant as determined in accordance
with the Black-Scholes option pricing formula using an expected volatility
equal
to the 100 day historical price volatility obtained from the HVT function on
Bloomberg L.P. as of the trading day immediately prior to the public
announcement of the Fundamental Transaction.
f) Calculations.
All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. The number of shares of Common
Stock outstanding at any given time shall not include shares of Common Stock
owned or held by or for the account of the Company, and the description of
any
such shares of Common Stock shall be considered on issue or sale of Common
Stock. For purposes of this Section 3, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the sum of
the
number of shares of Common Stock (excluding treasury shares, if any) issued
and
outstanding.
10
g) Voluntary
Adjustment By Company.
The
Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate
by
the Board of Directors of the Company.
h) Notice
to Holders.
i. Adjustment
to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company
shall promptly mail to each Holder a notice setting forth the Exercise Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
ii. Notice
to Allow Exercise by ▇▇▇▇▇▇.
If (A)
the Company shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a special nonrecurring cash dividend on
or
a redemption of the Common Stock; (C) the Company shall authorize the granting
to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in connection
with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of
the
assets of the Company, of any compulsory share exchange whereby the Common
Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding
up of
the affairs of the Company; then, in each case, the Company shall cause to
be
mailed to the Holder at its last addresses as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date
on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date
as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined
or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record
shall
be entitled to exchange their shares of the Common Stock for securities, cash
or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided,
that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to exercise this Warrant during the
20-day period commencing on the date of such notice to the effective date of
the
event triggering such notice.
11
Section
5. Transfer
of Warrant.
a) Transferability.
Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4 hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay
any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued. The minimum number of Warrant Shares
subject to this Section 5(a) shall be 100,000 per transfer.
b) New
Warrants.
This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants
in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
c) Warrant
Register.
The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant
Register”),
in
the name of the record Holder hereof from time to time. The Company may deem
and
treat the registered Holder of this Warrant as the absolute owner hereof for
the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
d) Transfer
Restrictions.
If,
at the
time
of
the surrender of this Warrant in connection with any transfer of this Warrant,
the transfer of this Warrant shall not be registered pursuant to an effective
registration
statement under the Securities Act
and
under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such transfer (i) that the Holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of counsel
reasonably acceptable to the Company (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions) to
the
effect that such transfer may be made without
registration under
the
Securities Act and under applicable state securities or blue sky laws, (ii)
that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company and (iii) that the transferee
be
an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
promulgated under the Securities Act or a qualified institutional buyer as
defined in Rule 144A(a) under the Securities Act.
12
Section
6. Miscellaneous.
a) Title
to Warrant.
Prior
to the Termination Date and subject to compliance with applicable laws and
Section 5 of this Warrant, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed. The
transferee shall sign an investment letter in form and substance reasonably
satisfactory to the Company.
b) No
Rights as Shareholder Until Exercise.
This
Warrant does not entitle the Holder to any voting rights or other rights as
a
shareholder of the Company prior to the exercise hereof. Upon the payment of
the
aggregate Exercise Price (or by means of a cashless exercise), the Warrant
Shares so purchased shall be and be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the later of the
date
of such surrender or payment.
c) Loss,
Theft, Destruction or Mutilation of Warrant.
The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which, in the case of the Warrant, shall not include the posting of any bond),
and upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
d) Saturdays,
Sundays, Holidays, etc.
If the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or a legal holiday,
then such action may be taken or such right may be exercised on the next
succeeding day not a Saturday, Sunday or legal holiday.
e) Authorized
Shares.
The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise
of
any purchase rights under this Warrant. The Company further covenants that
its
issuance of this Warrant shall constitute full authority to its officers who
are
charged with the duty of executing stock certificates to execute and issue
the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action
as
may be necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may be listed.
13
Except
and to the extent as waived or consented to by the Holder, the Company shall
not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this
Warrant, but will at all times in good faith assist in the carrying out of
all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company will
(a) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value,
(b)
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares upon the exercise of this Warrant, and (c) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant.
Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
f) Jurisdiction.
All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.
g) Restrictions.
The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.
h) Nonwaiver
and Expenses.
No
course of dealing or any delay or failure to exercise any right hereunder on
the
part of Holder shall operate as a waiver of such right or otherwise prejudice
Holder’s rights, powers or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which results
in
any material damages to the Holder, the Company shall pay to Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys’ fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto
or
in otherwise enforcing any of its rights, powers or remedies
hereunder.
i) Notices.
Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.
14
j) Limitation
of Liability.
No
provision hereof, in the absence of any affirmative action by Holder to exercise
this Warrant or purchase Warrant Shares, and no enumeration herein of the rights
or privileges of Holder, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the
Company.
k) Remedies.
Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of
the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
l) Successors
and Assigns.
Subject
to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by any such Holder
or
holder of Warrant Shares.
m) Amendment.
This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
n) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
o) Headings.
The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.
********************
15
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated:
April __, 2007
| VISTULA COMMUNICATIONS SERVICES, INC. | ||
| |
|
|
| By: | ||
|
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ |
||
|
Title:
Chief Financial Officer
|
||
16
NOTICE
OF EXERCISE
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full),
and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
o
in lawful money of the
United States; or
o
the cancellation of such number of
Warrant Shares as is necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the maximum number
of
Warrant Shares purchasable pursuant to the cashless exercise procedure set
forth
in subsection 2(c).
(3) Please
issue a certificate or certificates representing said Warrant Shares in the
name
of the undersigned or in such other name as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor.
The
undersigned is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name
of
Investing Entity:
________________________________________________________________________
Signature
of Authorized Signatory of Investing Entity:
_________________________________________________
Name
of
Authorized Signatory:
___________________________________________________________________
Title
of
Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form
and supply required information.
Do
not
use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
_______________________________________________
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated:
______________, _______
Holder’s
Signature: _____________________________
Holder’s
Address: _____________________________
_____________________________
Signature
Guaranteed: ___________________________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.