__________________________________________________ GLOBAL TELECOM & TECHNOLOGY, INC. __________________________________________________ SUBSCRIPTION AGREEMENT Offering of up to 1,000 Units each unit comprised of $5,000 principal amount of 10% subordinated promissory notes due 2013 and 5,000 shares of common stock price: $10,000 per unit ______________________________________________

Confidential                                           Name of Offeree: ____________

GLOBAL TELECOM & TECHNOLOGY, INC.

Offering of up to 1,000 Units

each unit comprised of

$5,000 principal amount of 10% subordinated promissory notes due 2013

and

5,000 shares of common stock

price: $10,000 per unit

______________________________________________

______________________________________________

 

 

This Subscription Agreement (the “Agreement”) is made as of the date set forth on the bottom of the signature page hereof between Global Telecom & Technology, Inc., a Virginia corporation (the “Company”), and the undersigned (the “Investor”).

 

Background:

 

The Company is offering to the Investor the opportunity to invest in Units offered by the Company (the “Units”), with each Unit consisting of $5,000 in principal amount of the Company’s subordinated promissory notes that mature on December 31, 2013 (the “Notes”) and 5,000 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”).  The Notes will be unsecured and will rank pari passu in right of payment and security to the Company’s currently outstanding no tes due February 8, 2012 and the Company’s currently outstanding notes due December 31, 2013.

 

The Units are offered in whole Unit increments at a purchase price of $10,000 per Unit.  The Company’s offer of the Units, including the Notes and the Common Stock included in each Unit, is being made only to persons who are “accredited investors” (as defined under the Securities Act of 1933, as amended (the “Securities Act”)) in a transaction exempt from registration under the Securities Act and will be limited to $1,000,000 in aggregate amount (1,000 Units).  The offering of the Units will expire on February 28, 2011, and may be terminated earlier by the Company in its sole discretion.  The decision of whether to accept any subscription will be made by the Company i n its sole discretion.

 

The proceeds to the Company will be used for general working capital purposes.

 

There is no minimum amount to be raised in this offering.

 

 

1   Subscription.  By execution and delivery of this Agreement, the Investor hereby irrevocably subscribes to purchase the number of Units set forth on the signature page of this Agreement.  The Investor understands and agrees that this subscription is irrevocable by the Investor until February 28, 2011.  Subscriptions must be for whole Units.

 

2   Closing; Deliveries.  A closing with respect to the purchase and sale of the Units (the “Closing”) shall take place on a date designated by the Company in a notice delivered to the Investor not less than two (2) business days prior to the Closing, which notice shall state the time and place of the Closing and the number of Units for which the Investor's subscription has been accepted by the Company.  For each Unit subscribed for and accepted by the Company, at the Closing, the Investor will deliver to the Company, in cash, the subscription amount for which this subscription has been accepted by the Company.  The subscription amount is the number of Units to be acquired multiplied by $10,000.  Subject to receipt of such payment, at the Closing the Company will deliver to the Investor (or will forward to the Investor if the Investor is not present at the Closing) a Note for the principal amount of Notes to be issued and sold to the Investor at the Closing and promptly after the Closing will deliver a certificate for the Common Stock to be issued and sold to the Investor at the Closing, duly registered in the Investor’s name.  The Company intends to hold a single Closing with respect to the offer and sale of the Units.

 

3   Acceptance or Rejection of Subscriptions.  The Investor agrees that the Investor’s subscription for Units is made subject to the following terms and conditions:

 

  3.1   Acceptance.   This Agreement is not binding upon the Company until the Company accepts it, which acceptance is at the sole discretion of the Company and will be evidenced by the Company’s execution of this Agreement.  The Company may reject this subscription in whole or in part, in its sole discretion, at any time prior to acceptance but only in increments of whole Units.

 

  3.2   Delivery upon Acceptance.  Upon acceptance by the Company of this subscription, in whole or in part, the Company will deliver to the Investor a fully executed copy of this Agreement.

 

  3.3   Delivery upon Rejection.  If this subscription is rejected by the Company, in whole or in part, for any reason, the Company will promptly return (subject to delay as necessary to permit funds deposited to clear) to the Investor all funds, if any, paid by the Investor for Units subscribed for but not accepted by the Company, without deduction and without interest.  If this subscription is rejected by the Company in full, rather than in part, this Agreement shall thereafter have no force or effect.

 

  3.4   Purchase Price; Payment.  At or before the Closing, the Investor will pay to the Company the subscription amount for which this subscription has been accepted by the Company.  The subscription amount is the number of Units to be acquired multiplied by $10,000.  Subscription payments will be made by wire transfer of immediately available funds to an account designated by the Company.

 

4   Representations by the Investor.  In consideration of the Company's acceptance of the Investor’s subscription and recognizing the Company’s reliance thereon, the Investor represents and warrants to the Company that:

 

  4.1   Accredited Investor.  The Investor is an “accredited investor” as that term is defined under the Securities Act.  The basis of the Investor’s status as an accredited investor is designated on Attachment A hereto.

 

  4.2   Investment Intent.  The Investor will acquire the Units for the Investor’s own account as principal, not as a nominee or agent, and no other person or entity will have a direct beneficial interest in the Units.  The Investor will acquire the Units (and the Notes and Common Stock included therein) for investment and not with a view to, or for, the sale or distribution thereof or the granting of any participation therein, and the Investor has no present intention of distributing or selling to others any of such Units (or the Notes and Common Stock included therein) or granting any participation therein.

 

  4.3   Restrictions on Transfer.  The Investor is aware of the limited provisions for transferability of the Units.  The Investor has no need for liquidity in this investment, can afford a complete loss of the investment in the Units and can afford to hold the investment in the Units for an indefinite period of time.

 

  4.4   Private Offering.  The Investor acknowledges that this offering and sale of the Units is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act.

 

  4.5   Investment Experience and Qualification.  The Investor has such knowledge and experience in financial and business matters that the Investor is capable of evaluating the merits and risks of the Investor’s investment in the Company and is able to bear such risks, and has obtained, in the Investor’s judgment, sufficient information from the Company or its authorized representatives to evaluate the merits and risks of such investment.  The Investor has evaluated the risks of investing in the Units, u nderstands there are substantial risks of loss incidental to the purchase of the Units, and has determined that the Units are a suitable investment for the Investor.  The Investor’s investment in the Units is consistent with the investment purposes, objectives and cash flow requirements of the Investor and will not adversely affect the Investor’s overall need for diversification and liquidity.  The Investor has the financial ability to bear the economic risk of this investment, including a total loss of this investment, and has no need for liquidity with respect to this investment.

 

  4.6   Receipt and Review of Company Materials.  The Investor acknowledges that no offering documents have been prepared by the Company in connection with this offering of the Units.  The Investor has received, carefully read and understands this Agreement, including the risk factors described on Attachment B, and the form of Note previously provided to the Investor.  In addition, the Investor has been provided an opportunity to obtain any ad ditional information reasonably requested by the Investor concerning the offering, the Company, the Units and all other information reasonably requested to the extent the Company possesses such information or can acquire it without unreasonable effort or expense, and the Investor has been given the opportunity to ask questions of, and receive answers from, the Company concerning the terms and conditions of the offering and other matters pertaining to this investment.

 

  4.7   Independent Review.  In making the decision to purchase the Units, the Investor has relied solely upon the Investor’s own independent investigations and the advice of the Investor’s attorney, accountant, tax and other business advisors to the extent the Investor deems necessary or appropriate.  The Investor is not relying on the Company or any of its directors, officers, employees, stockholders, affiliates, advisors, representatives or any other person or entity with respect to the legal, tax and other economic considerations involved in this investment.  No representations or warranties have been made to the Investor by the Company or any of its directors, officers, employees, affiliates, advisors or representatives, and in subscribing for the Units, other than those set forth in this Agreement, and the Investor is not relying upon any such representations or warranties.

 

  4.8   Investment Decisions.  The Investor is not a pension or profit sharing plan or trust, or a retirement system, or beneficially owned by any such plan, trust or system.

 

  4.9   Address; Authority.  The Investor’s address set forth on the signature page of this Agreement is the Investor’s correct home address, or if the Investor is an entity, its principal office address and the Investor has no present intention of changing such address.  If the Investor is an entity: (a) the Investor is duly authorized to execute, deliver and perform this Agreement and has the full power and authority under its governing instruments to execute, deliver and perform this Agreement, (b) the Investor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, if applicable, (c) the Investor has full power and authority to enter into this Agreement and the execution, delivery and performance of this Agreement have been duly authorized by all necessary action and (d) the Investor has not been organized for the purpose of subscribing for the Units.  This Agreement has been duly executed and delivered by the Investor, and constitutes the legal, valid and binding obligation of the Investor, enforceable against the Investor in accordance with its terms.

 

  4.10   No Contravention.  The execution, delivery and performance of this Agreement by the Investor requires no action by or with respect to, or filing with, any governmental body, agency or official.  The execution, delivery and performance of this Agreement by the Investor does not contravene, or constitute a breach of or default under (a) any provision of applicable law or regulation; or (b) any agreement, judgment, injunction, order, decree or other instrument binding upon the Investor or any of the Investor 217;s assets.

 

  4.11   NASD Affiliation.  The Investor acknowledges that if he or she is a Registered Representative of an NASD member firm, he or she must give such firm the notice required by the NASD’s rules.

 

  4.12   No Finder.  The Investor has not retained any finder, broker, agent, financial advisor or other intermediary in connection with the transactions contemplated by this Agreement.

 

  4.13   Forward Looking Statements.  Certain information included in the Transaction Summary constitute “forward-looking statements.” All such statements should be read in connection with the Company’s disclosures regarding forward looking statements in its reports filed with the Securities Exchange Commission.  The Investor is cautioned not to place undue reliance on any forward-looking statements contained in the Transaction Summary.

 

  4.14   Survival.  The foregoing representations, warranties and agreements shall survive the Closing.

 

5   Representations by the Company.  The Company hereby represents and warrants to the Investor that:

 

  5.1   Organization.  The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Virginia and has all requisite power and authority to own, lease, and operate its properties and assets, and to carry on its business as now conducted and as proposed to be conducted.

 

  5.2   Authorization; Enforcement.  The Company has the requisite corporate power and authority to execute and perform its obligations under this Agreement and to issue the Notes and the Common Stock comprising the Units.  All corporate action on the part of the Company's directors and stockholders necessary for (a) the authorization, execution, delivery and performance of this Agreement and (b) the authorization, issuance, sale and delivery of the Notes and the Common Stock has been taken.  This Agreement has been duly and validly executed and delivered on behalf of the Company and,

 

 

  5.3   Validly Issued and Fully Paid.   The Common Stock, as issued, sold and delivered in accordance with the terms of this Agreement for the consideration described in this Agreement, shall be duly and validly issued, fully paid and non-assessable.  The Notes, as issued, sold and delivered in accordance with the terms of this Agreement for the consideration described in this Agreement, will be the valid and binding agreement of the Company enforceable against the Company in accordance with their terms.

 

  5.4   No Violations.  The Company is not in violation or default of any provision of its certificate of incorporation or by-laws.  The execution, delivery and performance of this Agreement (and the consummation of the transactions contemplated hereunder, including execution and delivery of the Notes and delivery of the Common Stock) by the Company does not (and will not with notice or lapse of time or both) conflict with, result in the breach of, or constitute (a) a default under the certificate of i ncorporation or by-laws of the Company, or any order, injunction, or judgment applicable to the Company, or (b) a material default under (i) any note, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which the Company is a party or by which it is bound or to which its it or any of its assets are subject or (ii) any statute, decree, rule or regulation of any court, regulatory authority or governmental body applicable to the Company.

 

  5.5   Consents.  No consent or approval by any person, entity or public authority is required to authorize, or is required in connection with, the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated hereunder by the Company.

 

  5.6   Exempt Offering.  Subject in part to the truth and accuracy of each of the Investor’s representations in Section 4, the Company's offer, sale and issuance of the Units to the Investor is being made in reliance upon the exemptions from registration provided under the Securities Act and comparable state securities law.  Neither the Company nor any authorized agent acting on its behalf has taken any action that would cause the loss of such ex emptions.

 

6   Transfer Restrictions.  The Investor understands that the Units, and the Notes and the Common Stock comprising the Units, have not been registered under the Securities Act; that the Units, the Notes and the Common Stock will be issued on the basis of the exemption provided by Section 4(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder relating to transactions by an issuer not involving any public offering and under similar exemptions under certain state securities laws; that t his transaction has not been reviewed by, passed on or submitted to any Federal or state agency or self-regulatory organization; and that the Company's reliance thereon is based in part upon the representations made by the Investor in this Agreement.  The Investor acknowledges that the Investor is familiar with the nature of the limitations imposed by the Securities Act and the rules and regulations thereunder on the transfer of  securities.  In particular, the Investor agrees that no sale, assignment or transfer of the Units, the Notes or the Common Stock shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (a) such sale, assignment or transfer is registered under the Securities Act, it being understood that the Units, the Notes and the Common Stock are not currently registered for sale and that the Company has no obligation or intention to so register the Units, the Notes or the Common Stock, (b) the Units, Notes and/or Common Stock are sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Securities Act, or (c) such sale, assignment, or transfer is otherwise exempt from registration under the Securities Act.

 

7   Legends and Stop Transfer Notice.

 

  7.1   Legend.  The Investor acknowledges that the certificate or certificates evidencing any Notes or Common Stock shall bear the following or a substantially similar legend and such other legends as may be required by state blue sky laws:

 

THE SECURITIES REPRESENTED BY THIS [NOTE/CERTIFICATE] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER SUCH ACT AND SUCH STATE LAWS OR A WRITTEN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION FOR SUCH SALE, OFFER, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER ASSIGNMENT IS AVAILABLE UNDER SUCH ACT AND SUCH STATE LAWS.

 

  7.2   Stop-Transfer Notices.  The Investor agrees that in order to ensure compliance with the restrictions referred to herein the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

 

  7.3   Refusal to Transfer.  The Company shall not be required (a) to transfer on its books any Notes or Common Stock that have been purportedly sold, assigned or otherwise transferred in violation of any of the provisions of this Agreement or (b) to treat as owner of such Note or Common Stock, or to accord any right related to the ownership thereof to, any purchaser, assignee or other transferee to whom such Notes or Common Stock purportedly shall have been so transferred.

 

8   Indemnification.  The Investor agrees to indemnify and hold harmless the Company and its officers, directors, employees and stockholders and its and their affiliates, agents and other representatives, against any loss, liability, claim, damage, cost or expense (including attorneys' fees, taxes and penalties) that may result, directly or indirectly, from any misrepresentation by the Investor or breach by the Investor of any warranty, condition, covenant or agreement set forth in this Agreement.

 

9   Miscellaneous.

 

  9.1   Notices.  All notices and other communications provided for in this Agreement shall be in writing and shall be delivered personally, mailed by registered or certified mail, return receipt requested and postage prepaid, or mailed by a recognized overnight courier service, in each case if to the Investor, at the Investor’s address set forth on the signature page of this Agreement, and if to the Company to: Global Telecom & Technology, Inc., 8484 Westpark Drive, Suite 720, McLean, Virginia 22102, Attn: Chief Fin ancial Officer or, in either case, to such other address as the Investor or the Company may designate to the other in writing.  Each notice or other communication transmitted in the manner described in this Section 9.1(a) shall be deemed to have been given and received for all purposes: (a) upon personal delivery to the party to be notified, (b) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (c) on the next business day after deposit with a recognized overnight courier.

 

  9.2   Governing Law.  THIS AGREEMENT, ALL TRANSACTIONS CONTEMPLATED HEREBY, ALL RELATIONSHIPS BETWEEN THE PARTIES HEREUNDER AND ALL DISPUTES BETWEEN THE PARTIES ARISING OUT OF OR WITH RESPECT TO ANY OF THE FOREGOING SHALL BE GOVERNED BY THE LAWS OF THE STATE OF VIRGINIA, WITHOUT GIVING

 

 

 

  9.3   Consent to Jurisdiction.  EACH PARTY AGREES THAT ANY AND ALL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY RELATIONSHIPS BETWEEN THE PARTIES HEREUNDER AND ANY DISPUTES BETWEEN THE PARTIES ARISING OUT OF OR WITH RESPECT TO ANY OF THE FOREGOING SHALL BE COMMENCED AND PROSECUTED EXCLUSIVELY IN THE FEDERAL AND STATE COURTS LOCATED IN THE STATE OF VIRGINIA, ENCOMPASSING FAIRFAX COUNTY, AND ANY APPELLATE COURTS THEREFROM (COLLECTIVELY, THE “VIRGINIA COURTS”).  EACH PARTY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY TRANSACTIONS CONTEMPLATED HEREBY, ANY RELATIONSHIPS BETWEEN THE PARTIES HEREUNDER AND ANY DISPUTES BETWEEN THE PARTIES ARISING OUT OF OR WITH RESPECT TO ANY OF THE FOREGOING IN ANY OF THE VIRGINIA COURTS.  EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH PROCEEDING IN ANY OF THE VIRGINIA COURTS.  EACH PARTY CONSENTS AND SUBMITS TO THE EXCLUSIVE PERSONAL JURISDICTION OF ANY OF THE VIRGINIA COURTS IN RESPECT OF ANY SUCH PROCEEDING.

 

  9.4   Waiver of Jury Trial.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY TRANSACTIONS CONTEMPLATED HEREBY, ANY RELATIONSHIPS BETWEEN THE PARTIES HEREUNDER AND ANY DISPUTES BETWEEN THE PARTIES ARISING OUT OF OR WITH RESPECT TO ANY OF THE FOREGOING WILL INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUCH PROCEEDING.

 

  9.5   Counterparts.  This Agreement may be executed in counterparts.  This Agreement will become binding on the Investor upon the execution and delivery of this Agreement by the Investor, and it shall become binding upon the Investor and the Company in all respects upon execution and delivery by the Company.  Counterparts may be delivered via facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shal l be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

  9.6   Severability.  The determination by a court of competent jurisdiction that any provision of this Agreement is invalid or unenforceable shall in no way affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect in the same manner and to the same extent as if the invalid or unenforceable provision had not been contained in this Agreement.  If any such invalidity or unenforceability of a provision of this Agreement becomes known or apparent to eith er of the parties, the parties shall negotiate promptly and in good faith in an attempt to make appropriate changes and adjustments to such provisions specifically and this Agreement generally to achieve as closely as possible, consistent with applicable law, the intent and spirit of such provision specifically and this Agreement generally.

 

  9.7   Further Assurances. Each of the Company and the Investor agrees to execute such additional documents or instruments as may be reasonably necessary or desirable in order to carry out the provisions of this Agreement.

 

  9.8   Third Party Beneficiaries.  Nothing in this Agreement, express or implied, is intended to confer upon any person or entity other than the parties or their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement, except as expressly provided in this Agreement.

 

  9.9   Amendment and Waiver.  Neither this Agreement nor any provisions hereof shall be waived, modified, amended, discharged or terminated except by an instrument in writing signed by the party against whom such waiver, modification, amendment, discharge or termination is sought.  No delay or omission in exercising, or failure to exercise, any right, power or remedy accruing to either party under this Agreement, upon any breach or default of the other party under this Agreement, shall impair any such right, power o r remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of either party of any breach or default under this Agreement, or any waiver on the part of either party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement or by law or otherwise afforded to either party, shall be cumulative and not alternative.

 

  9.10   Assignability; Binding Effect.  This Agreement is not transferable or assignable by the Investor without the prior written consent of the Company, which the Company may withhold for any reason in its sole discretion.  Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

 

  9.11   Entire Agreement.  This Agreement (including the attachments hereto) contains the entire agreement of the parties with respect to the subject matter hereof, and supersedes any prior communications, understandings or agreements of the parties with respect to the subject matter hereof.

 

  9.12   Headings.  The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

  9.13   Construction.  The parties agree that this Agreement is the product of negotiations between sophisticated persons, both of whom were represented by counsel, and each of whom had an opportunity to participate in, and did participate in, the drafting of each provision hereof.  Accordingly, ambiguities in this Agreement, if any, shall not be construed strictly or in favor of or against any party but rather shall be given fair and reasonable construction without regard to the rule of contra proferentem.  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  Unless otherwise specified or the context otherwise requires, (a) references made in this Agreement to a Section or an Attachment are to a Section or an Attachment of or to this Agreement, and (b) the term “or” has the inclusive meaning represented by the term “and/or”.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import.  References to any person include the successors and permitted assigns of that person.

 

(Name of Subscriber)		(Taxpayer ID No.)
		(Plan number, if applicable)
(Address)		(Telephone Number)
Name and Taxpayer ID number of sponsor, if applicable

 

The undersigned trustee, partner, corporate officer or fiduciary certificates that he or she has full power and authority from all beneficiaries, partners or shareholders of the entity named above to execute this Subscription Agreement on behalf of the entity and to make the representations, warranties and agreements made herein on their behalf and that investment in the Securities has been affirmatively authorized by the governing board or body of such entity and is not prohibited by law or the governing documents of the entity.

 

The Investor is:  (initial one of the following)

 

o

A bank as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the "Exchange Act”); an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state,  its political subdivisions,  or any agency or instrumentality of a state or its political subdivisions, for the be nefit of its employees, if such plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;

 

o	A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;

 

o	An organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or Company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

 

o	A director or executive officer of the Company;

 

o	A natural person whose individual net worth, or joint net worth with that person's spouse, exclusive of such person’s primary residence, at the time of his or her purchase exceeds $1,000,000;

 

o	A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

 

o	A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b) (2) (ii); or

 

o	An entity in which all of the equity owners are accredited investors.  (If this alternative is checked, you must identify each equity owner and provide statements signed by each demonstrating how each qualifies as an accredited investor).

 

* * * *

 

 

 

 

 

As of September 30, 2010 our indebtedness was substantial in comparison to our available cash and our net income. Our substantial level of indebtedness could have important consequences for our business, results of operations and financial condition.  For example, a high level of indebtedness could, among other things:

 

●

make it more difficult for us to satisfy our financial obligations;

 

●

increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations;

 

●

increase the risk that a substantial decrease in cash flows from operating activities or an increase in expenses will make it difficult for us to meet our debt service requirements and will require us to modify our operations;

 

●

require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund future business opportunities, working capital, capital expenditures and other general corporate purposes;

 

●

limit our ability to borrow additional funds to expand our business or ease liquidity constraints;

 

●

limit our ability to refinance all or a portion of our indebtedness on or before maturity;

 

●

limit our ability to pursue future acquisitions;

 

●

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

 

●

place us at a competitive disadvantage relative to competitors that have less indebtedness.

 

 

Pursuant to the terms of our Loan Agreement with Silicon Valley Bank (the “Loan Agreement”) we have pledged substantially all of our assets to the lender as security for our payment

 

 

 

The Loan Agreement and our existing notes impose financial restrictions that limit our discretion on some business matters, which could make it more difficult for us to expand our business, finance our operations and engage in other business activities that may be in our interest.  These restrictions include compliance with, or maintenance of, certain financial tests and ratios and restrictions that limit our ability and that of our subsidiaries to, among other things:

 

●

incur additional indebtedness or place additional liens on our assets;

 

●

pay dividends or make other distributions on, redeem or repurchase our capital stock;

 

●

make investments or repay subordinated indebtedness;

 

●

enter into transactions with affiliates;

 

●

sell assets;

 

●

engage in a merger, consolidation or other business combination; or

 

●

change the nature of our businesses.

 

Any additional indebtedness we may incur in the future may subject us to similar or even more restrictive conditions.

 

Despite our substantial level of indebtedness, we may incur a significant amount of additional indebtedness in the future, including secured indebtedness, which could exacerbate any or all of the risks described above.

 

We may be able to incur substantial additional indebtedness in the future, some or all of which may be senior to the Notes.  Although the Notes, the Loan Agreement and our other senior debt limit our ability and the ability of our subsidiaries to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, the amount of additional indebtedness incurred in compliance with these restrictions could be substantial.  The Notes, the Loan Agreement and other senior debt do not prevent us from incurring obligations that do not constitute indebtedness.  To the extent that we incur additional indebtedness or such other obligations, the risks associated with our substantial indebtedness described above, including the possibility that we may be unable to service our existing debt obligations, would increase.

 

 

Our ability to make payments on or refinance our indebtedness, including, with respect to the Notes, our indebtedness that will mature before the Notes, will depend on our ability to generate sufficient cash flows from our operations and/or our ability to raise additional capital.  Our payment obligations could arise in the context of (1) scheduled interest and maturity payments, (2) an acceleration of such indebtedness due to an event of default or (3) a mandatory prepayment following a change of control, asset sale or, in the case of the Loan Agreement, certain other events.  We may not be able to generate sufficient cash flows from operations to satisfy our payment obligations as they arise under such

 

 

 

The Unit purchase price of $10,000 per Unit will be allocated between the Notes and the Common Stock included in each Unit based as follows: first, an amount equal to the 30 day trailing average closing stock price will be allocated to the Common Stock, and then the remainder will be allocated to the Notes.  If the amount allocated to the Notes is less than the face amount thereof, the difference between the face amount and the amount allocated to the Notes may be deemed to original issue discount, or OID, within the meaning of the Internal Revenue Code (the “Code”), resulting in Investors realizing ordinary income to the extent of such OID.  In the event the Notes are issued with OID, for U.S. federal income tax purposes a U.S. holder will b e required to accrue OID as interest on the Notes.  Such OID generally will be includable in the gross income of the U.S. holder as it accrues, without regard to the receipt of cash payments on the Notes to which the OID is attributable, and regardless of the U.S. holder’s regular method of accounting for U.S. federal income tax purposes.

 

In the event the Notes constitute “applicable high yield discount obligations” for U.S. federal income tax purposes, our interest deductions with respect to OID relating to the Notes will be deferred until paid in cash, and a portion of the OID will be disallowed (and not merely deferred) if the yield to maturity on the Notes exceeds six percentage points over the “applicable federal rate” (as determined under Section 1274(d) of the Code in effect for the calendar month in which the Notes are issued).  The potential deferral and disallowance of deductions for OID on the Notes may reduce the amount of cash available to us to meet our obligations under the Notes.

 

 

The Notes will rank junior in right of payment to: (1) all indebtedness under the Loan Agreement, including both the term loans and the amount of the revolving line of credit thereunder outstanding from time to time, (2) our existing capitalized leases and (3) any future indebtedness we may incur, except and to the extent we designate any of such future indebtedness as ranking parri passu or subordinate to the Notes.  The Notes will rank parri passu in right of payment with: (A) our promissory notes due February 2012 (provided, however, such notes will mature prior to the Notes and the payment of the principal amount of such notes at maturity may be made witho ut any concurrent payment on the Notes), (B) our promissory notes due December 31, 2013 currently outstanding, (C) our trade payables outstanding from time to time and (D) and any future indebtedness we incur that is not designated as ranking parri passu with or junior to the Notes in right of payment.  The Notes will be structurally junior to all existing and future indebtedness and liabilities incurred by our subsidiaries.  In the event of our bankruptcy, liquidation, reorganization or other winding up, our assets that secure debt ranking senior or equal in right of payment to the Notes will be available to pay obligations on the Notes only after the secured debt has been repaid in full from these assets.  There may not be sufficient assets remaining to pay amounts due on any or all of the Notes then outstanding. The terms of the Notes do not prohibit us from incurring additional senior debt or secured debt, nor do they prohibit any of our subsidiaries from incurring additional liabilities.

 

 

The Notes are obligations exclusively of Global Telephone & Technology, Inc. and are not guaranteed by any of our operating subsidiaries.  A substantial portion of our consolidated assets are held by our subsidiaries.  Accordingly, our ability to service our debt, including the Notes, depends on the results of operations of our subsidiaries and upon the ability of such subsidiaries to provide us with cash, whether in the form of dividends, loans or otherwise, to pay amounts due on our obligations, including the Notes.  Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to make payments on the Notes or to make any funds available for that purpose.  In addition, dividends, loans or other distributions to us from such subsidiaries may be subj ect to contractual and other restrictions and are subject to other business considerations.

 

 

The Notes do not contain any financial covenants, and the Notes contain only limited operating covenants related to restrictions on the payment of dividends, the incurrence of indebtedness, the issuance or repurchase of securities by us or any of our subsidiaries or a fundamental change involving Global Telecom & Technology, Inc.

 

 

Prior to this offering, there has been no trading market for the Notes.  We do not intend to apply for listing of the Notes on any securities exchange or to arrange for quotation on any interdealer quotation system, and we do not expect a trading market for the Notes to develop.

 

 

The Notes and the Common Stock offered in this offering are being offered and sold pursuant to an exemption from registration under applicable federal and state securities laws.  Therefore, purchasers Notes and Common Stock in this offering may transfer or resell their Notes and Common Stock in the United States only in a transaction exempt from the registration requirements of applicable federal and state securities laws or pursuant to an effective registration statement.  Accordingly, purchasers in this offering will be required to bear the risk of their investment for an indefinite period of time.

 

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