SALES NOVATION AGREEMENT

THIS SALES NOVATION AGREEMENT is entered into as of this 31st day of August, 2010 (the “Agreement”), by and between RevNet International, LLC, a Florida limited liability company (“RevNet” or the “Agent”), and Global Telecom & Technology Americas, Inc., a Virginia corporation (“GTT”).

 

A.           RevNet has entered into the respective contracts with the respective customers set forth on Exhibit A to provide services pursuant to service level agreements.  Each such service level agreement is hereinafter referred to as a “Customer Contract” with the customer of the Agent subject to the Customer Contract being a “Customer.”

 

B.           In order to provide the services for each Customer Contract, the Agent has entered into a master service agreement with each of the providers of telecommunications connectivity with respect to such services (each such entity being a “Supplier”).  The contractual obligation of the Agent is hereinafter referred to as a “Supplier Contract”, a list of which is set forth on Exhibit B.

 

C.           The Agent desires to assign and otherwise transfer to GTT, and GTT desires to receive from the Agent, each Customer Contract, subject to the corresponding Supplier Consent (as defined below), in each case on the terms and subject to the conditions set forth herein, with each such assignment being referred to hereafter as an “Assignment” and which Assignment will be conditioned upon: (a) receipt from the applicable Customer of its consent to the Assignment of its Customer Contract from the Agent to GTT, in a form reasonably acceptable to GTT (each, a “Customer Consent”), if required under the terms and conditions of such Customer Contr act (if no consent is required for the Assignment of a Customer Contract under the terms and conditions thereof, then the applicable Customer shall be provided with prior notice of the Assignment in accordance with the terms and conditions of such Customer Contract and applicable law, in a written notice in a form reasonably satisfactory to GTT, but Customer Consent shall not be required with respect to such Customer Contract); (b) receipt from the Supplier(s) of connectivity related to the applicable Customer Contract(s) of an agreement, to be effective as of the date of the Assignment of that Customer Contract and in a form reasonably satisfactory to GTT, providing that: (i) there are no outstanding costs, fees, taxes or other obligations under the Supplier Contract covering the services provided under such Customer Contract or if there are outstanding obligations, a statement of the amount thereof (which shall be applied as a credit against the Commission Payment for the assignment of the Customer Contrac t corresponding to such obligation pursuant to the terms of Section 2.1(a) below; and (ii) the applicable Supplier will provide the services covered by such Supplier Contract to GTT under GTT’s existing contract with such Supplier (or a new contract to be entered into between the Supplier and GTT if no Supplier Contract presently exists with GTT) for at least the remaining term thereof on terms no more costly per month than prior to the Assignment, unless GTT accepts other terms in its sole discretion (each, a “Supplier Consent”) (each Customer Consent and Supplier Consent with respect to a Customer Contract or Supplier Contract is referred to collectively as “Contractual Consents” for such Customer Contract or Supplier Contract).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, GTT and the Agent hereby agree as follows:

 

1.1   Assignment of Novated Assets.  Upon the terms and subject to the conditions set forth herein, at Closing (as defined herein), the Agent shall assign and deliver to GTT, and GTT shall assume, free and clear of all liens, mortgages, pledges, easements, conditional sale or other title retention agreements, defects in title, covenants or other restrictions of any kind (collectively, “Encumbrances”), only the following assets of the Agent (collectively, the “Purchased Assets”):

 

(b) each of the Customer Contracts and all rights thereunder related to services rendered following the Closing at which such Customer Contract is assigned to GTT hereunder, including all of the Agent’s rights, claims or causes of action against third parties relating to each such Customer Contract;

 

(b) copies of all books and records in the Agent’s possession relating to the Customer Contracts, including a tab-delimited Microsoft Excel spreadsheet, in form reasonably satisfactory to GTT for use in its CMD system, with the billing and other information concerning the Customers (collectively, the “Books and Records”); and

 

(b) any deposit(s) previously provided by the applicable Customer(s) to the Agent with respect to the Customer Contracts (the “Customer Deposits”).

 

1.2   Assumed Liabilities.  GTT hereby agrees to assume only the Liabilities of the Agent under each Customer Contract assigned to GTT hereunder, in each case solely to the extent relating to circumstances or events first occurring or existing after the Closing at which such Customer Contract is assigned to GTT hereunder (and specifically excluding: (a) any Liabilities for any breach of or default under any such Customer Contract by the Agent that occurred prior to such Closing; or (b) any violation of law by the Agent that occurred prior to the Closing) (collectively, the “Assumed Liabilities”).& #160; For purposes of this Agreement, “Liability” or “Liabilities” means any direct or indirect liability, indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation or responsibility, either accrued, absolute, contingent, mature, unmature or otherwise and whether known or unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured.

 

1.3   Excluded Liabilities.  Except for the Assumed Liabilities, GTT shall not assume or otherwise be obligated to pay, perform or otherwise discharge any Liability of the Agent (all such Liabilities being herein called the “Excluded Liabilities”).  Without limiting the generality of the foregoing, the Excluded Liabilities include: (a) any Liabilities of the Agent under any Customer Contract relating to circumstances or events occurring or existing on or prior to the Closing at which such Customer Contract is assigned to GTT hereunder; and (b) any outstanding costs, fees, taxes or other obligations under any Supplier Contract covering the services provided under any Customer Contract assigned to GTT hereunder as of the Closing at which such Customer Contract is assigned to GTT hereunder.

 

1.4   Revenue.  If the Agent receives any revenue (other than any revenue for which GTT has received a credit pursuant to Section 2.1(a)) that is attributable to any services provided by GTT under any of the Customer Contracts on or after the Closing with respect to such Customer Contract  (“GTT Revenue”), it shall hold such GTT Revenue in trust for GTT and, as soon as reasonably practicable after receipt thereof, pay all of such GTT Revenue over to GTT, by check or wire transfer of immediately available funds.  I f GTT receives any revenue that is attributable to any services provided by the Agent under any of the Customer Contracts prior to the Closing with respect to such Customer Contract (“Agent Revenue”), it shall hold the Agent Revenue in trust for the Agent and, as soon as reasonably practicable after receipt thereof, pay all of the Agent Revenue over to the Agent, by check or wire transfer of immediately available funds.  If either the Agent or GTT receives any revenue that is not designated by the applicable Customer as either GTT Revenue or Agent

 

 

Revenue and is not otherwise reasonably identifiable as either GTT Revenue or Agent Revenue, the receiving party shall provide written notice thereof to the other party, contact the applicable Customer and otherwise use commercially reasonable efforts to determine whether such payment is GTT Revenue or Agent Revenue, provide written notice to the other party of the determination and, if applicable, make payment to the other party as described above.

 

 

2.1   Payments.

 

(a) In consideration for assignment and delivery of the Purchased Assets, in addition to GTT’s assumption of the Assumed Liabilities, GTT shall pay to the Agent (i) the amount of Two Million One Hundred Thousand ($2,100,000) Dollars at Closing (“Upfront Payment”), and (ii) eighty percent (80%) of the gross margin received by GTT during each calendar month (or portion thereof) following the Closing for a period of seven (7) years.   “Gross Margin” means gross revenue net of bad debt less vendor cost for gross revenue (“Monthly Gross Margin Payments”), with each Monthly Gross Margin Payment due by the 15th day following the end of each month during such period, in each case subject to the following deductions:

 

(i) Deducted from the Upfront Payment, the amount of any prepayments received by the Agent on or prior to the Closing with respect to the Customer Contract(s) being assigned to GTT hereunder for services to be rendered under such Customer Contract(s) following the Closing with respect to such Customer Contract;

 

(ii) Deducted from the Upfront Payment, the amount of any outstanding Supplier obligations under the Supplier Contract(s) covering the services provided under the Customer Contract(s) being assigned to GTT hereunder as of the Closing with respect to each such Customer Contract (which deducted amount shall be paid by GTT to the applicable Supplier(s) at such Closing by wire transfer of funds as payment against the Supplier Contract(s) in question).

 

(iii) Commencing on the thirteenth (13th) month following the Closing, deducted from the Monthly Gross Margin Payments, at GTT’s option, up to fifty percent (50%) of each such Monthly Gross Margin Payments until (A) the Upfront Payment less the deductions described in provisions (i) and (ii) above, minus (B) the aggregate amount of deductions under this provision (iii) and provision (v) below (the “Recovery Balance”) equals zero.

 

(iv) Agent and GTT may mutually agree in writing to additional offsets or deductions from future Monthly Gross Margin Payments.

 

(v) Reserved.

 

(vi) Reserved.

 

(b) GTT shall pay to the owners of Agent eighty percent (80%) of the monthly gross margin from all new orders that the owners of Agent submit to GTT and GTT accepts during the seven (7) year period following the Closing.

 

(c) This Section 2.1(a) shall survive the Closing.

 

2.2   Closing

 

(a) Closing of the contract novation by GTT and the Agent of Customer Contracts under this Agreement shall occur on August 31, 2010 referred to herein as its “Closing Date.”

 

2.3   Agent Closing Deliverables.  At the Closing, the Agent shall deliver to GTT:

 

(a) such bills of sale, assignments and other instruments of transfer or conveyance as GTT may reasonably request or as may be otherwise necessary to evidence and effect the sale, assignment, transfer, conveyance and delivery to GTT of the Customer Contract(s) being assigned to GTT at the Closing;

 

(b) the Books and Records; and

 

(c) any Customer Deposit(s) with respect to the Closing Customer Contract(s); provided, however, that: (i) the Agent shall be entitled, in lieu of delivering such Customer Deposits to GTT, to instead provide a credit for such amount against the Prepayment to be paid at such Closing, in which event GTT shall assume the liability to the applicable Customers for such Customer Deposits.

 

2.4   GTT Closing Deliverables.  At the Closing, GTT shall deliver to the Agent:

 

(a) the Prepayment by wire transfer of immediately available funds to the account of the Agent as set forth in Section  2.1 (a);

 

(b) Reserved.

 

2.5   Audit.  GTT shall maintain or cause to be maintained a true and correct set of records pertaining to the gross margin received by GTT from the Customers during the seven (7) year period following the Closing Date, During such period and for a period of two (2) years thereafter, GTT agrees to permit an one or more accountants or other agents selected by the Agent to have access during ordinary business hours to such records as are maintained by GTT as may be necessary, in the opinion of such accountant, to determine the correctness of any calculation and/or payment made under this Agreement. In the event that the audit reveals an underpayment to the Agent by more than five percent (5%), the cost of the audit shall be paid by GTT. If the underpayment is less than five percent (5%) but more than two percent (2%), GTT and the Agent shall each pay fifty percent (50%) of the cost of the independent audit.  In all other cases, the cost of the audit shall be paid by the Agent.  This Section 2.5 shall survive the Closing.

 

 

The Agent hereby jointly and severally represents and warrants to GTT as follows:

 

3.1   Existence; Good Standing, Authority; Enforceability.

 

(a) The Agent is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all required power and authority to own or lease its properties and assets and to conduct its business as presently conducted.  The Agent is duly qualified to do business and in good standing as a foreign entity in all jurisdictions in which the failure to be so qualified would be reasonably likely to have a material adverse effect on the Agent.

 

(b) The Agent has full authority and capacity to execute, deliver and perform this Agreement and all of the other documents contemplated hereby to be executed by the Agent.  The execution, delivery and performance by the Agent of this Agreement and all of the other documents contemplated hereby

 

 

to be executed by the Agent have been duly authorized by all required action on the part of the Agent (including approval by its board of directors, board of managers, stockholders or equity holders, as applicable).

 

 

GTT hereby represents and warrants to the Agent as follows:

 

4.1   Existence; Good Standing; Authority; Enforceability.  GTT is a corporation, duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia.  GTT has full corporate power and authority to execute, deliver and perform this Agreement.  The execution, delivery and performance of this Agreement by GTT has been duly authorized and approved by GTT and does not require any further authorization or consent of GTT.  This Agreement has been duly authorized, executed and delivered by GTT and is the legal, valid and binding obligation of GTT enforceable against GTT in accordance with its terms.