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EXHIBIT 10.1
   
STANDBY BUSINESS AGREEMENT
 
THIS STANDBY BUSINESS COOPERATION AGREEMENT (“Standby BCA”), is entered into as
of December 19, 2011 by and between the following parties and shall be effective
when signed by all of the Parties, the last of whom shall fill in the date such
Party signs (“Effective Date”):
 
1.   VelaTel Global Communications, Inc., a United States (“US”) corporation,
organized under the laws of the state of Nevada, with a principal place of
business at 12526 High Bluff Drive, Suite 155, San Diego, California duly and
legally represented by George Alvarez, its Chief Executive Officer (“Investor”
or “VelaTel”), which terms shall also refer to VelaTel’s wholly owned
subsidiary, Gulfstream Capital Partners, Ltd., a Seychelles corporation
(“Gulfstream”) to the extent VelaTel elects to acquire the Investor’s Shares
through Gulfstream, in which case all obligations, representations and
warranties of Investor set forth in this Agreement and the Schedules thereof
shall apply jointly and severally to both VelaTel and Gulfstream);
 
2.   7L Capital Partners Emerging Europe LP a limited partnership incorporated
in Guernsey, having its registered office in Guernsey, Carinthia House, 9-12 The
Grange, St. Peter Port, GY1 4BF, duly and legally represented by Mr. Salvator
Levis (“7LCPEELP”);
 
3.   Kerseyco Trading Limited, a company incorporated in Cyprus and having its
registered office in Cyprus (Agapinoros 2, Iris Tower, 7th Floor Flat/Office 702
Nicosia) duly and legally represented by Mr. Salvator Levis (“Company” or
“Kerseyco”);
 
4.   Verica Radovic (“Shareholder 1”);
 
5.   Angelina Jevtic (“Shareholder 2”);
 
6.   Nikola Zelic (“Shareholder 3”);
 
7.   Zivana Olbina (“Shareholder 4”); and
 
8.   CLEARCON D.O.O. (formerly: SECI D.O.O.). Beograd (“Shareholder 5”);
 
(all of the parties mentioned under number 2, 4, 5, 6, 7 and 8 hereinafter
referred to jointly as Shareholders).
 
(Each and all of the aforementioned referred to individually as a “Party” and
collectively as the “Parties”)
 
RECITALS
 
A.   The Company is the sole owner of Verat D.O.O. (“Verat”).
 
B.   Verat is a private company for telecommunication services limited by stake,
incorporated in Serbia, having its registered office at 37 Boulevard Vojvode
Mišića Str, Belgrade.  Verat’s operations include but are not limited to
providing wireless broadband access (“WBA”) services to subscribers in Serbia
using radio frequency spectrum licenses granted by appropriate Governmental
Authorities in Serbia.  Verat’s assets that are used exclusively or primarily to
deliver WBA services include eleven (11) fully installed base transceiver
stations (“BTS”) and related network core equipment.
  
 
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C.   Investor is in the business of designing, building, deploying, expanding
and operating WBA networks in key markets throughout the world.  Investor has
access to investment capital and relationship with vendors advantageous to the
business interests of Investor and the Company.
 
D.   7LCPEELP is an investment fund that also holds an equity interest in other
companies with telecommunications assets and operations in the Balkans region.
 
E.   Investor and 7LCPEELP, on behalf of the Shareholders, have been negotiating
the terms of a Business Cooperation Agreement (“BCA”) for Investor to acquire a
majority interest in the Company.  Such negotiations have proceeded in tandem
with negotiations for Investor to also acquire a majority interest in Herlong
Investments Limited (“Herlong”) a holding company with subsidiaries who have
telecommunications assets and operations in Croatia and Montenegro.
 
F.   Investor, 7LCPEELP, Herlong, and the other shareholders of Herlong have
recently signed a business cooperation agreement (“Herlong BCA”) for Investor to
acquire a 75% equity interest in Herlong.  The Herlong BCA is projected to close
in early January 2012.
 
G.   The Parties have reached agreement on all material terms of the BCA, in a
form substantially similar to the Herlong BCA, but for logistical reasons,
including Investor’s public disclosure obligation as a US public company, the
Parties require additional time to assemble all schedules that will be included
in the BCA.  The Parties expect to sign the BCA by January 15, 2012 and to Close
the BCA by February 15, 2012.
 
H.   The Parties enter into this Standby BCA so that Investor can proceed with
negotiations with its equipment vendor ZTE Corporation (“ZTE”), and with
preliminary engineering in preparation for the improvements to the Company’s WBA
infrastructure assets contemplated by the BCA.
 
I.   The Shareholders shall be entitled to sell all the Common Shares they hold
in the Company before or after Closing to a new holding company they shall
establish (“NewCo”), in which case NewCo shall enjoy the rights and bear the
obligations of the Shareholders as if NewCo were an original contracting party
hereto.
 
NOW, THEREFORE, in consideration of the foregoing premises and the respective
representations and warranties, covenants and agreements contained herein, the
sufficiency of which is hereby acknowledged, the Parties agree as follows:
 
AGREEMENT
 
Pursuant to the terms of the BCA, upon terms as similar as possible to the form
of the Herlong BCA, and subject to Closing of the BCA, which shall occur on or
before February 15, 2012:
 
1.   Investor shall acquire a 51% equity interest in the Company in exchange for
the following investment (“Investor’s 51% Investment”):
 
(a)   All CAPEX, OPEX, debt service, and other negative cash flow through the
date the overall operations of the Company and Verat become cash flow positive,
including the full cost and/or financing to design, purchase, install and deploy
the following described infrastructure equipment suitable for Verat’s existing
WBA operations using Verat’s current and any future WBA licenses, of at least
the following minimum components of equipment and service levels;
   
 
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(b)   Replacement of Verat’s existing 11 BTS with new BTS manufactured by ZTE,
including such new antennae, radios and back-up batteries as are necessary for
operation of the new BTS, lease payments on sites, and all civil works and
towers required to make the sites legally and structurally amendable to
installation of the new BTS equipment;
 
(c)   Replacement of such portion of Verat’s existing core network equipment,
switches and software as is necessary to make it compatible with the 11 new BTS
and to provide WBA service to at least 33,000 total subscribers based on no more
than a 300% over-subscription level (i.e. as many as 11,000 subscribers online
simultaneously);
 
(d)   Provision for national transport of internet connectivity between core
network equipment and remote cities, plus point-to-point backhaul via fiber or
microwave;
 
(e)   Administrative, sales, marketing and customer support staff, office space
and office equipment required to operate the WBA network(s);
 
(f)   Consumer premises equipment (CPE), dongles, tablets, handsets, Mi-Fi cards
and other devices compatible with the new BTS and core equipment and offered for
sale to subscribers to enable connection to the WBA network and carried as
inventory for sale;
 
(g)   Taxes, license fees and other amounts accruing to Governmental Authorities
in connection with operations of the WBA network; and
 
(h)   Debt service on any amounts borrowed from banks to finance any of the
foregoing items or other elements of CAPEX or OPEX, as well as debt service on
pre-existing debt, to be retired in the ordinary course and according to their
various terms.
 
2.   Subject to Section 10, Investor’s minimum cash commitment for Investor’s
51% Investment (“Investor’s 51% Cash Commitment”) is EUR 2,400,000, payable as
follows:
 
(a)   EUR 350,000 at or before Closing of the BCA;
 
(b)   The full value of the down payment for any of the equipment included in
Investor’s 51% Investment that Investor has paid to ZTE prior to Closing of the
BCA; and
 
(c)   Installments of at least EUR 250,000, each payable at least every 90 days
following Closing of the BCA, until Investor’s 51% Cash Commitment is paid in
full.
    
3.   Investor shall be issued Common Stock of the Company representing
Investor’s 51% Investment at Closing of the BCA.
 
4.   At such time as is advantageous, either before or after the signing or
Closing of the BCA, Investor may increase its equity interest in the Company to
65% in exchange for the following additional investment (“Investor’s 65%
Investment”):
 
(a)   Such additional CAPEX, OPEX, debt service, and other negative cash flow to
finance, design, purchase, install and deploy the following described additional
infrastructure equipment of at least the following minimum components of
equipment and service levels;
 
(b)   Fifteen additional new BTS manufactured by ZTE (bringing the total to 26
BTS) including such additional antennae, radios and back-up batteries as are
necessary for operation of the additional BTS, lease payments on sites, and all
civil works and towers required to make the sites legally and structurally
amendable to installation of the additional BTS equipment;
   
 
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(c)   Replacement or upgrade of such portion of Verat’s then existing core
network equipment (including components previously replaced or upgraded under
Investor’s 51% Investment), switches and software as is necessary for the total
26 BTS to provide WBA service to at least 78,000 total subscribers based on no
more than a 300% over-subscription level (i.e. as many as 26,000 subscribers
online simultaneously);
 
(d)   Such increased quantities of the items described in Section 1(d)-(h) as is
necessary based on the additional equipment, software and subscriber capacity
described in Section 4(a)-(c).
 
5.   Subject to Section 10, Investor’s minimum cash commitment for Investor’s
65% Investment (“Investor’s 65% Cash Commitment”) is EUO 3,000,000, which amount
is inclusive of Investor’s 51% Cash Commitment, payable as follows:
 
(a)   The same EUR 350,000 at or before Closing of the BCA, if Investor decides
to make Investor’s 65% Investment instead of Investor’s 51% Investment;
 
(b)   The full value of the down payment for any of the equipment included in
Investor’s 65% Investment and not previously paid to ZTE pursuant to Investor’s
51% Investment;
 
(c)   Additional installments of at least EUR 250,000, each payable every 90
days following either Closing of the BCA or the last payment Investor makes
under Section 2(c), until Investor’s 65% Cash Commitment is paid in full.
 
6.   Investor shall be issued Common Stock of the Company representing
Investor’s 65% Investment at Closing of the BCA, or if Closing of Investor’s 51%
Investment has already occurred, within 30 days of making the down payment
described in Section 5(b).  Such increase in Investor’s equity in the Company
may be accomplished by any combination of transfer of shares of Common Stock
from Shareholders or issuance of new additional Shares, in the discretion of the
Company’s Board of Directors.
 
7.   At such time as is advantageous after the Closing of the BCA, either as a
result of subscriber growth within Verat’s existing license territory, and/or if
Verat is awarded licenses covering additional geographic regions in Serbia,
Investor may increase its equity interest in the Company to 75% in exchange for
the following additional investment (“Investor’s 75% Investment”):
 
(a)   Such additional CAPEX, OPEX, debt service, and other negative cash flow to
finance, design, purchase, install and deploy the following described additional
infrastructure equipment of at least the following minimum components of
equipment and service levels;
 
(b)   Twenty-four additional new BTS manufactured by ZTE (bringing the total to
50 BTS) including such additional antennae, radios and back-up batteries as are
necessary for operation of the additional BTS, lease payments on sites, and all
civil works and towers required to make the sites legally and structurally
amendable to installation of the additional BTS equipment;
 
(c)   Replacement or upgrade of such portion of Verat’s then existing core
network equipment (including components previously replaced or upgraded under
Investor’s 51% and 65% Investments), switches and software as is necessary for
the 50 BTS to provide WBA service to at least 150,000 total subscribers based on
no more than a 300% over-subscription level (i.e. as many as 50,000 subscribers
online simultaneously);
   
 
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(d)   Such increased quantities of the items described in Section 1(d)-(h) and
as is necessary based on the additional equipment, software and subscriber
capacity described in Sections 7(a)-(c).
 
8.   Subject to Section 10, Investor’s minimum cash commitment for Investor’s
75% Investment (“Investor’s 75% Cash Commitment”) is EUR 4,200,000, which amount
is inclusive of Investor’s 51% and 65% Commitments, payable as follows:
 
(a)   EUR 400,000 upon Investor’s decision to increase to Investor’s 75%
Investment;
 
(b)   The full value of the down payment for the equipment included in
Investor’s 75% Investment and not previously paid to either ZTE or the Company
pursuant to Investor’s 51% and 65% Cash Commitments combined; and
 
(c)   Additional installments of at least EUR 250,000, each payable every 90
days following the last payment Investor makes under Section 2(c) or 5(c), until
Investor’s 75% Cash Commitment is paid in full.
 
9.   Investor shall be issued Common Stock of the Company representing
Investor’s 75% Investment within 30 days after making both of the payments
described in Section 8(a) and (b).  Such increase in Investor’s equity in the
Company may be accomplished by any combination of transfer of shares of Common
Stock from Shareholders or issuance of new additional Shares, in the discretion
of the Company’s Board of Directors.
 
10.   Investor’s Cash Commitment with respect to installments under Sections
2(c), 5(c) and 8(c) are each subject to a limitation that at such time as the
Independent Accountant confirms, based on audited financial statements, that the
operations of the Company and Verat have achieved cash flow positive (after due
allowance for reserves for taxes, working capital and other contingent
liabilities), any future payment called for under such Sections (i.e. 2(c),
5(c), or 8(c)) shall be deferred.
 
11.   Investor and 7LCPEELP shall each be entitled to Redeemable Preference
Shares, as that term is understood and at the same issuance price and redemption
rate described in the Herlong BCA.  At Closing of the BCA, 7LCPEELP shall be
entitled to 7,000,000 Redeemable Preference Shares.  At Closing of the BCA,
Investor shall be entitled to that number of Redeemable Preferred Shares
representing the value of the amount Investor pays at Closing, plus such amount
as Investor pays to ZTE prior to Closing of the BCA and which is credited
against either Investor’s 51% or 65% Investment, as the case may be.  Investor
and 7LCPEELP shall each be entitled to additional Redeemable Preference Shares
based on amounts either invests from time to time either after Closing of the
BCA or prior to Closing of the BCA and not paid or incurred as of the Effective
Date of this Standby BCA.
 
12.   This Standby BCA is a full binding and enforceable contract as of the
Effective Date.  For the avoidance of doubt, all terms of the Herlong BCA not
unique to or inconsistent with this Standby BCA are incorporated by this
reference, and the term “Shareholders” shall have the same meaning as the
Herlong BCA with the substitution of the shareholders of the Company for the
shareholders of Herlong.
   
 
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IN WITNESS WHEREOF, the Parties hereto have caused this Standby BCA to be duly
executed by their respective authorized officers as of the date first above
written.
 
7LCPEELP
 
7L CAPITAL PARTNERS EMERGING EUROPE LIMITED
 
 
 
By /s/ Salvator I. Levis
Salvator I. Levis, Authorized Signatory for 7L Capital Partners Emerging Europe
L.P.
INVESTOR
 
VELATEL GLOBAL COMMUNICATIONS, INC.
 
 
 
By: /s/ George Alvarez
George Alvarez, its Chief Executive Officer
       
Company
 
KERSEYCO TRADING LIMITED
 
 
 
By /s/ Aristides C. Fronistas
Aristides C. Fronistas
Authorized Signatory for Kerseyco Trading Limited
 
 
VERICA RADOVIC
 
 
 
/s/ Salvator I. Levis
Salvator I. Levis, as attorney in fact per POA
ANGELINA JEVTIC
 
 
 
/s/ Salvator I. Levis
Salvator I. Levis, as attorney in fact per POA
       
NIKOLA ZELIC
 
 
 
/s/ Salvator I. Levis
Salvator I. Levis, as attorney in fact per POA
ZIVANA OLBINA
 
 
 
/s/ Salvator I. Levis
Salvator I. Levis, as attorney in fact per POA
       
CLEARCON D.O.O. (formerly: SECI D.O.O) BEOGRAD
 
 
 
By /s/ Salvator I. Levis
Salvator I. Levis, as attorney in fact per POA
 

 
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