AGREEMENT FOR THE PURCHASE AND SALE OF MEMBERSHIP INTEREST

This AGREEMENT (the “Agreement”) dated and effective as of February 5, 2018, is made by and between Trevan Morrow (the “Seller”), and KonaTel, Inc., a Delaware corporation (the “Purchaser”). In consideration of the mutual covenants herein and intending to be legally bound hereby, the parties hereto do hereby agree as follows:

SECTION 1
DEFINITIONS

1.1

“License” or “Licenses” shall mean each of the franchises, authorizations, accreditations, licenses, designations as an eligible telecommunications carrier, permits, certificates, approvals, clearances, consents, registrations, certificates of authority, Orders or similar rights issued, granted or obtained by or from any governmental body or otherwise that are necessary for the Seller and/or IM Telecom, LLC, an Oklahoma limited liability company dba Infinity Mobile (“IM Telecom”), of which the Seller is the Manager and the owner of 100% of the membership interest (the “Membership Interest”), to provide to the existing customers of IM Telecom and others wireless telecommunications services in the states in which the Seller or IM Telecom are eligible for reimbursement under the Federal Communications Commission’s (the “FCC”) “Lifeline Program” in compliance with applicable law and any orders applicable to the Seller or IM Telecom or any of the IM Telecom assets, without qualification.

1.2

“Regulatory Approvals” shall mean all state or federal regulatory approvals set forth on the Schedule of Regulatory Approvals attached hereto as Exhibit 1.2 or otherwise (e.g., the FCC and state regulatory approvals as may be applicable, including but not limited to the serving of notices and expiration of requisite notice periods associated with the transfer of control of the Licenses to the Purchaser and/or the approval of the Purchaser as the owner of the Membership Interests, as defined below.

1.3

“Regulatory Approval Period” shall mean the period between execution of this Agreement and the receipt of all Regulatory Approvals, including the expiration of any notice periods set forth therein.

SECTION 2
PURCHASE AND SALE OF MEMBERSHIP INTERESTS

2.1

Purchase and Sale . The Seller represents that he owns (and will on the Closing own) 100% of all outstanding Membership Interests or otherwise of IM Telecom (the “Membership Interests”), free and clear of any and all liens, claims, charges, pledges, options, security interests or other encumbrances of any type or nature whatsoever (“Liens”); and that he is the sole Manager of the IM Telecom, with complete authority without qualification to sell the Membership Interests being sold hereunder, without qualification. The Seller agrees to sell, and the Purchaser agrees to purchase, the Membership Interests on the terms and conditions, and subject to the representations and warranties, set forth herein.

2.2

Purchase Price . The purchase price for the Membership Interests shall be $100 (the “Purchase Price”), which amount shall be paid in cash at the Closing, along with such other

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considerations as may be set forth herein.

SECTION 3
CLOSING; TRANSFER PROCEDURES

3.1

Closing in Escrow; Closing . The closing of the sale and purchase of the Membership Interests (herein called the “Closing”) shall take place within five (5) business days from the date that all Regulatory Approvals set forth on the Schedule of Regulatory Approvals attached hereto as Exhibit 1.2 have been received, and the expiration of any requisite notice periods related to notice served by the Purchaser, at such time and location as the parties may agree, or otherwise accomplished by and through an escrow established with Leonard W. Burningham, Esq. (the “Escrow Agent”) in accordance with escrow instructions provided by the Seller’s and the Purchaser’s respective attorneys (“Escrow Instructions).” On or before February 5, 2018, each of the Seller, IM Telecom (only to the full extent of Section 4 and Section 6.8 hereof) and the Purchaser shall execute and deliver to the Escrow Agent an original duly executed copy of this Agreement to be held in escrow subject to the Escrow Instructions pending the Closing.

3.2

IM Telecom Records . On or before February 5, 2018, the Seller shall deliver or cause IM Telecom to deliver to the Escrow Agent copies of all minute books, seals, Membership Certificates and other membership capitalization and transfer records of IM Telecom to be held in escrow subject to the Escrow Instructions pending the Closing.

3.3

Delivery of the Membership Certificates . At the Closing, the Seller shall deliver to the Purchaser all certificates representing the Membership Interests, duly endorsed in blank, in proper form for transfer of the 100% of the Membership Interests to the Purchaser upon delivery. If the Seller should refuse or fail to deliver the Membership Certificates at the Closing, the Purchaser shall at its sole discretion have the option to accept delivery of such Membership Certificates as are delivered at the Closing (without losing any rights the Purchaser may have hereunder or at law or in equity against the Seller refusing or failing to make such delivery) or to terminate the transactions contemplated by this Agreement without any further liability to the Purchaser.

3.4

Bank Account Signatures . At the Closing, the Seller shall deliver or cause IM Telecom to deliver to the Purchaser all necessary documents required by any banks or other depository institutions for IM Telecom to remove the authorized signatories and replace them with the Purchaser’s designees.

SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller and IM Telecom hereby represent and warrant to the Purchaser, as follows:

4.1

Organization and Good Standing . IM Telecom is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Oklahoma. IM Telecom is duly qualified and in good standing as a foreign company in all jurisdictions in which the nature of its activities requires such qualification or registration, a list of all such jurisdictions which is set forth in Disclosure Schedule 4.1 hereto. IM Telecom has all requisite corporate power and authority and all necessary licenses and permits to carry on its business as it has been

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and is now being conducted and to own, lease and operate the telecommunication assets used in connection therewith.

4.2

No Subsidiaries . IM Telecom has no interest in any other limited liability company, corporation, partnership, joint venture or other legal entity and all assets of IM Telecom are held or titled in the name of IM Telecom or its dba, “Infinity Mobile,” which “dba” is also 100% owned by IM Telecom.

4.3

Capitalization . The capital of IM Telecom consists of 1,000 Membership units with a par value $1.00 per unit (the “Units”). Each share of such unit issued and outstanding is validly issued, fully paid and non-assessable. There are no outstanding options, warrants, puts, calls, contracts, commitments, preemptive rights, cumulative voting rights, assignments, pledges, rights or demands of any character relating to any of the Membership Interest Units of IM Telecom. The Membership Interest Units were issued in compliance with all applicable Federal and state securities laws and regulations.

4.4

Membership Ownership . The Seller owns 100% of the Membership Interests of IM Telecom free and clear of all liens, encumbrances, claims and other charges of every kind. The Seller has the full right to transfer the Membership Interests to the Purchaser, free and clear of all liens, encumbrances, claims and other charges of every kind and without violating any agreement or understanding to which IM Telecom or the Seller is a party or by which any of them is bound.

4.5

Title to Property . Except as set forth on Disclosure Schedule 4.5 , IM Telecom owns outright, and has good and marketable title to, all of its Licenses and other property reflected on its balance sheet for the most recent Fiscal Month End (as herein defined), free and clear of all liens, pledges, mortgages, security interests, conditional sales contracts or other encumbrances of any nature whatsoever.  

4.6

Licenses . Disclosure Schedule 4.6 is a true, correct and complete list of each license owned by IM Telecom (the “Licenses”). The Licenses constitute all governmental approvals required or necessary for IM Telecom to provide to its existing customers wireless telecommunications services in the states in which IM Telecom is eligible for reimbursement under the Lifeline Program in compliance with applicable law and any orders applicable to IM Telecom or any of its assets.  Without limiting the generality of the foregoing, each of the Licenses is in full force and effect, and there is no proceeding or claim pending, or to the knowledge of the Seller, threatened, to revoke or terminate any of the Licenses.  Correct and complete copies of all Licenses have been made available by the Seller to the Purchaser, including all amendments, waivers, supplements or modifications thereto, and all correspondence related thereto.

4.7

Machinery and Equipment . Disclosure Schedule 4.7 is a true, correct and complete list of each material item of machinery and equipment owned by IM Telecom.

4.8

Existing Customers .    Disclosure Schedule 4.8 is a true and accurate list of monthly tabulations of IM Telecom’s customers’ enrollment in the Lifeline Program for the past twelve (12) months.

4.9

Contracts; Leases . Disclosure Schedule 4.9 contains a complete and accurate list of all

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current contracts, including all leases pertaining to personal or real property, with respect to which IM Telecom is a party, and which involve a total financial obligation on the part of IM Telecom of $10,000 or more.  

4.10

Copyrights and Trademarks . All registered trademarks, trade names, service marks, patents and copyrights which IM Telecom owns or utilizes in any respect of its business operations, including with respect to use of software, are listed on Disclosure Schedule 4.10 . As of the date of this Agreement, there are no pending, and to the best of the Seller’s knowledge after due inquiry of IM Telecom, no threatened interference or opposition actions or proceedings with respect to any such trademarks, trade names, service marks, patents or copyrights, and to the best of the Seller’s knowledge after due inquiry of IM Telecom, the use of any such trademarks, trade names, service marks, patents and copyrights does not infringe upon or conflict with, any trademark, trade name, patent, copyright or other proprietary right of any other person. As of the date of this Agreement, no notice has been received of any claim of any such infringement upon, or conflict with, any trademark, trade name, patent, copyright or other proprietary right of any person. The Seller has heretofore delivered to the Purchaser true, correct and complete copies of all documents described on Disclosure Schedule 4.10 .

4.11

Financial Statements; Financial Information and FCC Filings . The Seller has furnished to the Purchaser true and complete copies of the following financial statements (collectively, the “ Financial Statements ”) together with FCC Forms 497, 499 and 555 filings for each period: (i) accountant (CPA) prepared consolidated balance sheets and statements of income, changes in members’ equity and cash flow as of and for the fiscal years ended December 31, 2015, and December 31, 2016 of IM Telecom; and (ii) unaudited balance sheets and statement of income, changes in members’ equity and cash flow (the “Most Recent Financial Statements”) as of and for the period ended December 31, 2017 (the “Most Recent Fiscal Month End”) for IM Telecom. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and present fairly the financial condition of IM Telecom as of such dates and the results of operations of IM Telecom for such periods and do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, not misleading; provided, however, that the Most Recent Financial Statements are subject to normal year-end adjustments (which will not be material individually or in the aggregate) and lack footnotes and other presentation items.

4.12

Tax Matters . Except as disclosed on Disclosure Schedule 4.12 , there are no unpaid or delinquent taxes, tax liabilities and/or tax obligations of IM Telecom or no disputes, claims, actions, suits, proceedings, arbitrations, audits or investigations pending, or to the knowledge of the Seller threatened, against or related to IM Telecom with respect to any tax matters. IM Telecom has filed or caused to be filed all federal, state and local tax returns and reports through the taxable year ended December 31, 2016, which are due and required to be filed and has paid or caused to be paid all taxes due through December 31, 2016 and any assessment of taxes received, except taxes or assessments that are being contested in good faith and have been adequately reserved against. Since December 31, 2017, IM Telecom has made all required interim tax payments, including, without limitation, all payroll withholding taxes. The provision for income taxes payable reflected in the financial statements of IM Telecom as at the Most Recent Fiscal Month End is adequate for the payment of all taxes due for all periods ending on or before December 31, 2017, and includes provision for deferred taxes in accordance with generally accepted accounting principles, consistently applied.

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4.13

Litigation . Except as disclosed in Disclosure Schedule 4.13 :

i)

there are no other disputes, claims, actions, suits, proceedings, arbitrations, audits or investigations, either administrative or judicial, governmental or quasi-governmental (including, without limitation, any state regulator, the FCC and the Universal Service Administrative Company (“USAC”) or private or otherwise, pending, or to the knowledge of the Seller threatened, against or related to IM Telecom, or its properties or business, including, without limitation, any Licenses held by IM Telecom;

ii)

IM Telecom is not in default with respect to any orders, writs, injunctions, violations or decrees or otherwise of any court or governmental department, commission, board, bureau, agency or instrumentality, including, without limitation, any state regulator, the FCC and/or the USAC, which involves the possibility of any judgment or liability; and

iii)

the Seller knows of no facts which would provide a basis for any such action, suit, proceeding or default referred to in subsections 4.13(a) or (b) above.

4.14

Absence of Undisclosed Liabilities; Additional Disclosure . IM Telecom has no liabilities or obligations accrued, absolute, contingent or otherwise, except as disclosed in this Agreement or the Disclosure Schedules hereto (and if any such liability or obligation does exist and is not disclosed in this Agreement or the Disclosure Schedules hereto, any and all such liabilities are set forth in Disclosure Schedule 4.14 ) or as incurred, consistent with past business practice, in the normal and ordinary course of its business since the date of the Most Recent Financial Statements.

4.15

Absence of Debt . Except as set forth on Disclosure Schedule 4.15 , IM Telecom is not a party to any debenture, note, conditional sale, loan, line of credit or other borrowing agreement, or any lease required to be capitalized in accordance with generally accepted accounting principles, nor accounts payable or other debt of any kind whatsoever (“IM Telecom Debt”).

4.16

Absence of Certain Changes and Events . Since the delivery of the Escrow Instructions to the Escrow Agent, except as set forth in Disclosure Schedule 4.16 , as of the Closing there has not been:

i)

any damage to, destruction or loss of any tangible asset of IM Telecom, whether covered by insurance or not, materially adversely affecting the operations, businesses or properties of IM Telecom;

ii)

any declaration, setting aside or payment of any dividend or any distribution with respect to the capital stock of IM Telecom or any direct or indirect redemption, purchase or other acquisition by IM Telecom of any such stock;

iii)

any labor trouble, claim of unfair labor practice or union organizing activity involving IM Telecom;

iv)

any sale, transfer, lease or other disposition, or agreement to do so, of any of the properties or assets, including, without limitation, any License(s), of IM Telecom other than in the ordinary course of its business consistent with past practice;

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v)

any mortgage, pledge or encumbrance of any of IM Telecom’s properties or assets, including, without limitation, any License(s); or

vi)

any sale by IM Telecom of capital stock of IM Telecom or any security or other instrument convertible into such capital stock or under which any person has any right to acquire any such capital stock.

 

4.17    Absence of Default . Except as set forth in Disclosure Schedule 4.17 , IM Telecom has complied with and performed all of its respective obligations required to be performed under all Licenses, material contracts, agreements and leases to which it is a party as of the date hereof, and is not in default in any material respect under any License contract, agreement, lease, undertaking, commitment or other obligation; and no event has occurred which, with or without the giving of notice, lapse of time or both, would constitute a default thereunder in any material respect. The Seller has no knowledge that any party has failed to comply with or perform any of its obligations required to be performed under any material contract, agreement or lease to which IM Telecom is a party as of the date hereof, that any event has occurred which, with or without the giving of notice, lapse of time or both, would constitute a default by such party thereunder.

 

4.18    Other Agreements and Contracts . Disclosure Schedule 4.18 contains a complete and accurate list of all agreements and Contracts to which IM Telecom is a party or by which it is bound which are not required to be listed in any other Disclosure Schedule hereto which require a payment of $500 or more in the aggregate or which may not be terminated upon thirty (30) days or less notice without penalty or additional liability. All of such agreements are in full force and effect and no uncured default by any party thereto exists, and no event, fact or condition exists which, with the giving of notice or the lapse of time, or both, would constitute a default by any party thereto.

 

4.19    Company Records . IM Telecom has maintained minute books which are up to date and in which are recorded accurately all actions taken by shareholders and the board of directors to the extent that such actions are required by law to be approved by shareholders or directors, as the case may be. IM Telecom has maintained stock certificate books or transfer records in which are recorded accurately all original issues, transfers, cancellations and losses (with appropriate indemnity) of stock certificates.

 

4.20    Restrictions . IM Telecom is not subject to any judgment, order, writ, injunction or decree of a court of competent jurisdiction which materially adversely affects or, so far as the Seller can now foresee, may in the future materially adversely affect, its business, operations, prospects, properties, assets (including any Licenses) or condition, financial or otherwise.

 

4.21   Compliance with Laws . Except as set forth in Disclosure Schedule 4.21 , neither IM Telecom nor the Seller has received a notice of violation of any law, ordinance, rule, regulation or order (including, without limitation, any environmental, safety, health, criminal or price or wage control law, ordinance, rule, regulation or order) with respect to IM Telecom and/or the Seller, and to their knowledge, none is pending or threatened, applicable to IM Telecom’s operations, business, assets (including any License), or other property (real or personal) as presently constituted or the acts or conduct of the Seller.

4.22

Employees . Disclosure Schedule 4.22 sets forth the name and current annual rate of

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compensation (including commissions and bonuses) paid by IM Telecom to each manager, officer or employee of IM Telecom that has an employment contract with IM Telecom and/or is not an employee at will who can be terminated at any time, without cause.

4.23

Employee Benefit Plans; Employee Relations .

i)

IM Telecom has never established, sponsored, participated in, maintained, or contributed to any pension, profit sharing, bonus, Membership Interest option, employment or severance agreements, deferred compensation plans, health, life, accident or disability plans, or any other agreement, arrangement, commitment or other employee benefit plan (including but not limited to, “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended and the regulations promulgated thereunder (“ERISA”)) or otherwise (the “Benefit Plans”), including, without limitation, (i) any “multiple employer plan,” as defined in Section 4001 of ERISA, or (ii) any “multiemployer plan,” as defined in Section 3(37) of ERISA, (iii) any single employer Benefit Plans which constitute “employee benefit plans” within the meaning of Section 3(3) of ERISA, (iv) any single employer Benefit Plan subject to Title IV of ERISA, (v) any single employer Benefit Plan subject to the minimum funding requirements of §   412 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (the “ Code ” ).

ii)

IM Telecom has not maintained or contributed to a “ multiple employer welfare arrangement ” within the meaning of Section 3(440) of ERISA.

iii)

The transfer of the Membership Interest pursuant to the Agreement will not by itself (i) entitle any current or former employee of IM Telecom to severance pay, unemployment compensation or any similar payment, or (ii) result in any liability to IM Telecom with respect to any Benefit Plan.

4.24

Managers, Members, Officers and Authorized Persons . Disclosure Schedule 4.24 sets forth a complete and accurate list of:

i)

      all members, managers and officers, if any, of IM Telecom;

ii)

the names of all persons holding powers of attorney from IM Telecom and a summary statement of the terms thereof;

iii)

the names of all persons authorized to borrow money or incur or guarantee indebtedness on behalf of IM Telecom; and

iv)

all bank accounts of IM Telecom and the names of all persons who are authorized signatories with respect to such accounts, the capacities in which they are authorized signatories and the terms of their authorizations.

4.25

Absence of Certain Practices .  IM Telecom has not, and none of its employees, contractors, officers, directors, equity holders, representatives or agents, have, directly or indirectly, made, given or incurred or agreed to make, give or incur any contribution, payment, gift or entertainment or other expense or similar benefit to any customer, client, vendor, supplier , governmental employee or other Person (a) that subjected or might subject IM Telecom or the Seller to any damage or penalty in any criminal or governmental Proceeding, (b) that subjected

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or might subject IM Telecom to any adverse consequences with any Governmental Body or regarding the ability of IM Telecom to continue doing business as it is currently conducted by IM Telecom, or (c) that in case of a payment made directly or indirectly to an official or employee of any Governmental Body, constitutes an illegal bribe or kickback (or if made to an official or employee of a foreign government, is unlawful under the Foreign Corrupt Practices Act of 1977, as amended) or, in the case of a payment made directly or indirectly to a Person other than an official or employee of a government or Governmental Body, constitutes an illegal bribe, illegal kickback or other illegal payment under any Law of the United States or under the Law of any state or locality that could subject the payor to a criminal penalty or the loss of a license or privilege to engage in a trade or business.

4.26

Good Faith Best Efforts .  From the execution and delivery of this Agreement and any related documents or schedules to the Escrow Agent as provided herein and to the Closing, the Seller will take all action required or necessary to cause the Licenses, including, without limitation, all Licenses applicable to the Lifeline Program, to be assigned and/or transferred to the Purchaser and to have the Purchaser receive all requisite approvals to own and use the Licenses as currently used by IM Telecom or as otherwise allowable by applicable law, and the Seller shall use his good faith best efforts in all of these respects, without qualification.

4.27

Disclosure . No representation or warranty by the Seller in this Agreement or in any other Disclosure Schedule, list, certificate or document delivered pursuant to this Agreement, contains or will contain any material omission or untrue statement of material fact required to be stated to make the statements made herein not misleading. Disclosure in any particular Disclosure Schedule attached hereto shall constitute disclosure for all purposes of this Agreement.

SECTION 5
CONDUCT PENDING THE CLOSING; COVENANTS OF SELLER

The Seller hereby covenants and agrees that, pending the Closing and except as otherwise approved in advance in writing by the Purchaser:

5.1

Conduct of Business . IM Telecom shall carry on its business diligently and substantially in the same manner as heretofore and refrain from any action that would result in the breach of any of the representations, warranties or covenants of the Seller or IM Telecom hereunder.

5.2

Access . The Purchaser and its authorized representatives shall have full access during normal business hours upon prior arrangement with the Seller to all properties (owned or leased), books, records, contracts and documents of IM Telecom, and the Seller shall furnish or cause to be furnished to the Purchaser, and its authorized representatives, all information with respect to IM Telecom as the Purchaser may reasonably request.

5.3

Contracts and Commitments . IM Telecom shall not enter into any contract, commitment or transaction not in the usual and ordinary course of its business and not consistent with past practices.

5.4

Sale of Capital Assets .  IM Telecom will not sell or dispose of any capital asset with an original cost in excess of One Hundred and 00/100 Dollars ($100.00).

5.5

Liabilities . IM Telecom will not, and will not agree to, create any indebtedness or any

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other fixed or contingent liability including, without limitation, liability as a guarantor or otherwise with respect to the obligations of others, other than that incurred in the usual and ordinary course of its business consistent with past practices, and that incurred pursuant to existing contracts disclosed in the Disclosure Schedules attached hereto.

5.6

Amendment . IM Telecom will not, and will not agree to, amend its Articles of Organization or Operating Agreement, nor will there be any change in its outstanding Membership Interests.

5.7

Insurance . All insurance maintained by IM Telecom insuring IM Telecom, its employees, if any, or its business or operations will be maintained by IM Telecom in all respects.

5.8

Preservation of Organization and Employees . IM Telecom will use its best efforts to preserve its business transactions intact, to keep available its respective key officers and employees, and to preserve the present relationships of IM Telecom with the FCC, USAC and any governmental or quasi-governmental agency, authority, commission or bureau, its suppliers, customers, banks and others having business relations with it. IM Telecom will not change its present relationship with its employees, if any, without the prior written consent of Purchaser, or the compensation payable or to become payable to any of them or declare or pay any bonus or make any other payment to any employee.

5.9

No Default . IM Telecom shall not do any act or omit to do any act, or permit any act or omission, which will (i) cause a material breach of any terms or conditions of any License, material contract, commitment or obligation to which it is a party or by which it is bound, or (ii) potentially cause or result in the loss or risk of loss, revocation or jeopardy of any License.

5.10

Tax Returns . IM Telecom will prepare and file all state, federal and other tax returns, and amendments thereto required to be filed between the date of this Agreement and the Closing. The Purchaser shall have a reasonable opportunity to review all such returns and amendments thereto, prior to their being filed.

5.11

Cash On-Hand . The Seller covenants and agrees that as of the Closing, there shall be a minimum of five hundred and 00/100 Dollars ($500.00) cash on hand on deposit in an account of IM Telecom.

5.12

Non-Solicitation .  The Seller shall not solicit or entertain any solicitation of the sale of the Membership Interest being sold hereunder or any of the assets of IM Telecom, including the Licenses, and in the event the Seller receives any unsolicited offer or inquiry respecting any of the matters covered by this Agreement, the Seller shall promptly and no later than one (1) day, provide the Purchaser with all information respecting any unsolicited offer or inquiry.

5.13

Notices and Filings .

The Seller shall cause to be delivered no later than the filing date copies of all filings made by the Seller or IM Telecom with the FCC or any state or other regulatory agency regarding the Licenses or otherwise related to the Licenses or the business of IM Telecom, and shall promptly, and within one (1) day, provide the Purchaser with copies of any notices received by from any of the foregoing or otherwise applicable to the business of IM Telecom.

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SECTION 6

CONDITIONS PRECEDENT TO THE PURCHASER’S OBLIGATIONS

All obligations of the Purchaser under this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions:

6.1

Representations and Warranties . The Seller’s representations and warranties contained in this Agreement (including all Disclosure Schedules) or in any list, certificate or document delivered pursuant to the provisions hereof shall be true at and as of the time of Closing.  In addition, the Purchaser must have accepted and approved in writing the Seller’s exceptions to Seller’s representations and warranties, attached hereto as Disclosure Schedule paragraphs 4.5 - 4.7, 4.9, 4.10, 4.12 – 4.18, 4.21, 4.23 and 4.24 prior to or at the Closing.  Seller’s Disclosure Schedule as defined by Seller’s representations and warranties (i.e., Section 4, hereof) and all exceptions thereto shall be delivered to Purchaser in the form of a single compressed computer zip file prior to the Closing.

6.2

Performance of Agreements . The Seller shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by him prior to or at the Closing.

6.3

Regulatory Approvals . All Regulatory Approvals, as set forth in Disclosure Schedule 1.2, shall have been issued and received under terms and conditions of which are satisfactory to the Purchaser. If some, but not all, of the Regulatory Approvals are received, the Purchaser, at its sole discretion, may waive the condition that all Regulatory Approvals have been received.  

6.4

Closing Deliveries . The Seller shall have delivered the documents and other items described in Section 3 hereof.

6.5

No Litigation . Except as disclosed in Disclosure Schedule 4.13, there shall not be any other pending or, to the knowledge of IM Telecom or of the Seller, threatened action, proceeding or investigation by or before any court, arbitrator, governmental body or agency which shall seek to restrain, prohibit or invalidate the transactions contemplated hereby or which, if adversely determined, would result in a breach of a representation, warranty or covenant of any party hereto or a loss or revocation of any License.

6.6

Adverse Change . There shall not have occurred a material adverse change, event or casualty, financial or otherwise, in IM Telecom or to its business or operations whether covered by insurance or not.

6.7

Debt Limitation .  IM Telecom Debt as set forth in Exhibit 6.7 shall not exceed, in the aggregate, $446,830.35 at the Closing.

6.8

Consent of IM Telecom .  IM Telecom shall and does hereby, subject only to the terms and conditions hereof, consent to the transfer of the Membership Interest from the Seller and the Purchaser.

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SECTION 7
FEES AND EXPENSES

Each party hereby represents and warrants to the other that it has not engaged or dealt with any broker or other person who may be entitled to any brokerage fee or commission in respect of the execution of this Agreement or the consummation of the transactions contemplated hereby. Each of the parties hereto shall indemnify and hold the other harmless against any and all claims, losses, liabilities or expenses which may be asserted against a party as a result of such other party’s dealings, arrangements or agreements with any such broker or person.

SECTION 8
INDEMNIFICATION

8.1

Survival of Representations, Warranties and Agreements . All representations, warranties and agreements made by the Seller individually and collectively in this Agreement or in any certificate delivered pursuant hereto shall survive the Closing for a period of two (2) years.

8.2

Indemnification by the Seller . The Seller shall defend, indemnify and hold the Purchaser harmless from and against all actual or potential claims, demands, liabilities, damages, losses and out-of-pocket expenses including reasonable attorneys’ fees whether or not reduced to judgment, order or award, caused by or arising out of the breach of any agreement of or any material representation or warranty made by the Seller individually and collectively in this Agreement or in any Disclosure Schedule, list, certificate or document delivered by them pursuant hereto. Promptly after any service of process by any third person in any litigation in respect of which indemnity may be sought from the Purchaser pursuant to this Section 8, the Purchaser shall notify the Seller of the commencement of such litigation, and the Seller shall be entitled to assume the defense thereof at their expense with counsel of their own choosing.

8.3

The Seller shall be solely responsible for, and shall defend, indemnify, and hold IM Telecom and the Purchaser (and the individual shareholders officers, directors, owners, members and managers of both IM Telecom and the Purchaser, and the individual shareholders, officers, directors, owners, members and managers of any holding company or affiliate of both IM Telecom and the Purchaser) harmless from and against, all actual or potential claims, demands, liabilities, damages, losses and out-of-pocket expenses including reasonable attorneys’ fees, whether or not reduced to judgment, order or award,  arising from, related to or incidental to any facts, events, or circumstances occurring prior to the date of Closing including, but not limited to, (1) the facts, events and circumstances (as are  more fully set forth in Seller’s Disclosure Schedule 4.20 ) regarding the unauthorized use by a prospective buyer of IM Telecom of fraudulent/forged documents in order to obtain a loan, and (2) any liability that IM Telecom may have to any individual, entity and/or federal, state or local governmental agency, or otherwise, for the failure to comply with all applicable labor and employment requirements for the performance of services directly by any individual to IM Telecom (or indirectly through the employment of the individual by WWUSA, LLC, acting as an independent contractor, as is set forth more fully in of Seller’s Disclosure Schedule 4.22 ) including, but not limited to, all liability for state worker’s compensation insurance and the assessment of any claims or penalties with respect to payroll withholding taxes, labor or employment requirements.

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SECTION 9
TERMINATION

This Agreement may be terminated as follows:

9.1

Mutual Consent . By the Purchaser and by the Seller mutually agreeing in writing to terminate this Agreement; or

9.2

By the Purchaser . By the Purchaser if any of the conditions set forth in Section 6 have not been met or have not been waived by the Purchaser or April 30, 2018, except if such delay has resulted by reason of a breach by the Seller of any of its material obligations hereunder or is caused by the Purchaser; or

9.3

By the Seller . By the Seller if the Closing has not occurred by April 30, 2018, except if such delay has resulted by reason of a breach by the Seller of any of its material obligations hereunder or is otherwise caused by the Seller.

In the event of the termination by either party as provided above, written notice of termination shall forthwith be given by the party electing to terminate to the other party.

Any termination pursuant to this Section 9 shall be without liability on the part of any party to the other party hereto, except if such termination has resulted by reason of a breach by such party of any of its material obligations hereunder.

Either party may waive any condition precedent to its obligations. Nothing in this Agreement shall be deemed to require a party to terminate this Agreement in the event that a condition precedent to its obligations hereunder is not met.

SECTION 10
MISCELLANEOUS

10.1

Further Assurances . The Seller will, at the request of the Purchaser from time to time, execute and deliver such further instruments and will take such other action reasonably required to consummate the transactions contemplated by this Agreement.

10.2

Dispute Resolution.

i)

Mandatory Mediation . If the parties are unable to resolve any material dispute arising out of or relating to this Agreement, the parties shall submit the matter to non-binding Mediation, the costs of which shall be borne equally by the parties.

ii)

Binding Arbitration . In the event the parties are unable to resolve their dispute through mediation, the parties shall submit their dispute to binding arbitration, in the State of Nevada, County of Washoe , only, before a sole retired judge arbitrator in accordance with the laws of the State of Nevada.  The arbitration shall be administered by and heard before JAMS pursuant to its Streamlined Arbitration Rules and Procedures.  Judgment on the award may be entered in any court having jurisdiction.  The arbitrator shall allocate all the costs of the arbitration (excluding the mediation), including the fees of the arbitrator and the reasonable

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attorneys’ fees and costs of the prevailing party against the party who did not prevail.

10.3

Governing Law . This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Nevada.

10.4

Assignment . This Agreement shall not be assignable by either party without the prior written approval of the other party. To the extent assignable, this Agreement shall be binding upon, and inure to the benefit of, the Purchaser and the Seller and his respective heirs, executors, administrators and assigns.

10.5

Headings for Reference Only . The section and paragraph headings in this Agreement are for convenience of reference only and shall not be deemed to modify or limit the provisions of this Agreement.

10.6

Notices . Any notice, communication, demand or other writing (a “notice”) required or permitted to be given, made or accepted by any party to this Agreement shall be given by personal delivery or by depositing the same in the United States mail, properly addressed, postage prepaid and registered or certified with return receipt requested. A notice given by personal delivery shall be effective upon delivery and a notice given by registered or certified mail shall be deemed effective on the second day after such deposit. For purposes of notice, the addresses of the parties shall be, until changed by a notice given in accordance herewith, as follows:

If to the Purchaser : KonaTel, Inc. 13601 Preston Rd. Ste E816 Dallas, TX 75240 Attn: D. Sean McEwen, Chairman/CEO	If to Seller : Trevan Morrow, Esq. 1705 South Baltimore Ave Tulsa, OK 74119
With a required copy to : Burningham Law Group 2150 South 1300 East, Suite 500 Salt Lake City, Utah 84106 Attn: Leonard W. Burningham

10.7

Incorporation of Documents . All Disclosure Schedules and Schedules referred to in this Agreement shall be deemed to be incorporated herein and made a part of this Agreement.

10.8

Knowledge of Company . References to the “knowledge of IM Telecom” herein shall mean to the actual knowledge of the Seller, Manager, officers, directors or key employees of IM Telecom.

10.9

Entire Agreement and Amendment . This Agreement states the entire agreement reached between the parties hereto with respect to the transactions contemplated hereby and supersedes all prior or contemporaneous agreements, understandings, representations and warranties between the parties, and may not be amended except by written instrument executed by the parties hereto.

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10.10

Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and the Seller and the Purchaser may become a party hereto by executing a counterpart hereof. This Agreement and any counterpart so executed shall be deemed to be one and the same instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

10.11

Jurisdiction; Service of Process .  Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Nevada, County of Washoe , or, if it has or can acquire jurisdiction, in the United States District Court for the District of Nevada, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein.  Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world.

10.12

No Spousal Interest .  By her signature below, Jennifer Morrow, the spouse of the Seller, acknowledges and confirms that she has never had, and does not now have, any legal or equitable interest in or to the Membership Interests nor any claim or lien against IM Telecom and/or any of its assets.

10.13

Specific Performance .  In addition to all remedies at law available to the Purchaser, the Purchaser shall be entitled to specific performance of the obligations of the Seller.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day and year first above written.

PURCHASER: KonaTel, Inc. By: /s/ D. Sean McEwen       D. Sean McEwen, CEO	SELLER: /s/ Trevan Morrow Trevan Morrow, Seller /s/ Jennifer Morrow Jennifer Morrow, Spouse of the Seller, solely for purposes of Section 10.12 IM TELECOM, LLC (regarding the provisions of Section  4 and Section 6.8 only) By: /s/ Trevan Morrow      Trevan Morrow, Manager and Sole Owner

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FIRST AMENDMENT TO AGREEMENT FOR THE PURCHASE AND SALE OF MEMBERSHIP INTEREST

This First Amendment to Agreement for the Purchase and Sale of Membership Interest is entered into as of April 30, 2018, by and between Trevan Morrow (the “Seller”) and KonaTel, Inc., a Delaware corporation (the “Purchaser”), and is intended to amend that certain Agreement for the Purchase and Sale of Membership Interest (the “Agreement”) dated February 5, 2018 (the “Agreement”) between the same parties, as is set forth below.

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree to amend the Agreement as follows:

1.

Section 9.2 of the Agreement shall be deleted in its entirety and replaced with the following:

By the Purchaser. By the Purchaser if any of the conditions set forth in Section 6 have not been met or have not been waived by the Purchaser or December 31, 2018, except if such delay has resulted by reason of a breach by the Seller of any of its material obligations hereunder or is caused by the Purchaser; or

2.

Section 9.3 of the Agreement shall be deleted in its entirety and replaced with the following:

By the Seller.  By the Seller if the Closing has not occurred by December 31, 2018, except if such delay has resulted by reason of a breach by the Seller of any of its material obligations hereunder or is otherwise caused by the Seller.

3.

All matters set forth in the Agreement not specifically amended herein or inconsistent herewith shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment.

PURCHASER: KonaTel, Inc. By: /s/ D. Sean McEwen       D. Sean McEwen, CEO	SELLER: /s/ Trevan Morrow Trevan Morrow /s/ Jennifer Morrow Jennifer Morrow, Spouse of the Seller, solely for purposes of Section 10.12 IM TELECOM, LLC (regarding the provisions of Section 4 and Section 6.8 only of the Agreement) By: /s/ Trevan Morrow      Trevan Morrow, Manager and Sole Owner

SECOND AMENDMENT TO AGREEMENT FOR THE PURCHASE AND SALE OF MEMBERSHIP INTEREST

This Second Amendment to Agreement for the Purchase and Sale of Membership Interest (the “Agreement”) dated and effective as of December 31, 2018, is made by and between Trevan Morrow (the “Seller”), and KonaTel, Inc., a Delaware corporation (the “Purchaser”) (each a “Party” and collectively, the “Parties).

Recitals:

Whereas, on February 5, 2018, and effective February 7, 2018, the Parties entered into an Agreement for the Purchase and Sale of Membership Interest (the “PSMI”) for the sale and purchase of 100% of the membership interest in IM Telecom, LLC, an Oklahoma limited liability company (“IM Telecom”); and

Whereas, the Parties amended the PSMI, effective April 30, 2018, to delete the provisions of Section 9.2 thereof that would have allowed the Purchaser to terminate the PSMI if all of the conditions set forth in Section 6 of the PSMI were not satisfied by April 30, 2018, and to extend the time for satisfaction of such conditions to December 31, 2018, and to amend Section 9.3 thereof to allow the Seller to terminate the PSMI if there had not been a Closing of the PSMI by December 31, 2018; and

Whereas, one of the principal conditions of Section 6 was the receipt of certain regulatory approvals contemplated by the Parties, specifically the “Wireless Compliance Plan” of IM Telecom for its “Lifeline Program,” were approved by the Federal Communication Commission (the “FCC”) on or about October 23, 2018; and

Whereas the Parties desire to extend the Closing of the PSMI and related transactions to the closing of business on January 31, 2019, and to amend the PSMI as otherwise set forth herein, and with the agreement that all other terms and conditions of the PSMI not specifically modified herein shall remain in full force and effect and with all terms defined in the PSMI having the same meanings ascribed to them in the PSMI unless otherwise specifically modified herein;

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the sufficiency of which are hereby acknowledged, the Parties do hereby agree as follows:

Closing .  The Closing set forth in Section 3.1 of the PSMI shall be extended to not later than the close of business on January 31, 2019;

IM Telecom Records .  The IM Telecom Records referenced in Section 3.2 of the PSMI, to the extent required or necessary for the transition of the IM Telecom accounts payable, accounts receivable and payroll to Purchaser, shall be provided to the Purchaser, effective January 1, 2019 (the “Transition Period”);

Transition Period . The Transition Period shall be from January 1, 2018, to the Closing on January 31, 2018, during which time the Parties will cause the transfer and/or cancellation of all credit cards, business accounts and other applicable licenses or otherwise as may be required for

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the Closing and for the Purchaser to assume all operations of IM Telecom as contemplated by the PSMI.

Bank Account Signatures .  The bank account signatures and all related bank account authorizations referenced in Section 3.4 of the PSMI required or necessary for the Purchaser to carry on the business of IM Telecom during the Transition Period shall be provided to the Purchaser by the Seller on or before January 1, 2019, and any remaining balance in such bank accounts shall immediately be transferred to the Purchaser’s “IM Telecom Bank of Texas” account, following payment of all outstanding indebtedness of IM Telecom;

Debt Limitation .  The IM Telecom debt as set forth in Section 6.7, shall not exceed the amount of $416,932.58 at the Closing (the “Maximum Allowable IM Telecom Debt”), which has or will be paid by the Purchaser ($363,323.67 of which the Purchaser paid prior to December 31, 2018 ($60,000 of which is subject to the execution and delivery of Exhibit A attached hereto and incorporated herein by reference, along with the satisfaction of the condition of evidence of full payment to Wells Fargo Bank contained therein); $25,000 of which the Purchaser will pay on January 31, 2019; and $28,608.91 of which the Purchaser will pay on or before February 28, 2019;

Indemnification .  In accordance with Section 8 of the PSMI and without limiting the scope of such Section, the Seller shall indemnify, pay and hold harmless the Purchaser for any debt or claim that may be construed to be a debt or debt obligation or otherwise, for all damages and amounts in excess of the Maximum Allowable IM Telecom Debt;

Morrow Notes .  All Morrow promissory notes executed and delivered to the Purchaser under the PSMI or otherwise, shall be cancelled and compromised at and subject to the Closing.

Remainder of PSMI Terms and Conditions .  All other terms and conditions of the PSMI not specifically modified herein shall remain in full force and effect as originally contemplated.

  

( Signature Page Follows )

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Signature Page

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement on the day and year first above written.

PURCHASER: KonaTel, Inc. By: /s/ D. Sean McEwen       D. Sean McEwen, CEO	SELLER: /s/ Trevan Morrow Trevan Morrow, Seller /s/ Jennifer Morrow Jennifer Morrow, Spouse of the Seller, solely for purposes of Section 10.12 of the PSMI IM TELECOM, LLC (regarding the provisions of Section 4 and Section 6.8 of the PSMI only) By: /s/ Trevan Morrow       Trevan Morrow, Manager and Sole Owner

 

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INDEPENDENT CONTRACTOR AGREEMENT

This Independent Contractor Agreement (the “Agreement”), dated as of the 5 ^th day of February, 2018, is entered into by and between Trevan Morrow (“Contractor”) and KonaTel, Inc., a Delaware corporation (“Owner”).

RECITALS

A.

WHEREAS, Owner is a corporation organized in Delaware and doing business in the state of Texas and other jurisdictions operating in the telecommunications industry;

B.

WHEREAS, Owner has (or anticipates that it shortly will have) entered into an Agreement for the Purchase and Sale of Membership Interest dated simultaneously with the execution and delivery of this Agreement (the “PSMI” and the “PSMI Transaction”) whereby Owner will acquire from Contractor (as the “Seller”) all outstanding membership interest in and to IM Telecom, LLC, an Oklahoma limited liability company, d/b/a Infinity Mobile (“IM”), which shall constitute 100% of the membership interest and ownership of IM;

C.

WHEREAS, following the closing of the PSMI Transaction (the “Effective Date”), Contractor desires to provide telecommunications consulting for strategic planning and related services (the “Services”) to Owner on an independent contractor basis, and Owner desires to retain Contractor to provide those Services on the terms and conditions set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.

Services to be Provided by Contractor .  Contractor shall provide the Services for the benefit of Owner commencing on the Effective Date of the PSMI and continuing continuously thereafter for a 90-day period (the “Term”).  In the event that, for whatever reason, the PSMI fails to be executed by all parties on or before February 15, 2018, or there is no closing of the PSMI Transaction by April 30, 2018, at the sole option of the Owner, this Agreement may be extended to a future Effective Date or shall be cancelled in its entirety and rendered null and void.

2.

Compensation for Services.  In consideration of the Services, Owner shall pay to Contractor:

a)

The sum of $10.00 in cash upon the Effective Date of this Agreement;

b)

The sum of $28,000 upon the final closing of the PSMI Transaction; provided, however, that in the event the PSMI Transaction does not close (for whatever reason) on or before April 30, 2018, the obligation of Owner to pay the $28,000 to Contractor shall terminate, shall be deemed deleted from this Agreement and Owner shall have no obligation to pay Contractor all or any portion of said $28,000; and

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c)

Owner shall grant to Contractor, as of the Effective Date hereof pursuant to its Incentive Stock Option Plan, the option (the “Option”) to purchase up to 500,000 shares of the common stock of KonaTel, Inc., a Delaware corporation, at an exercise price of $0.20 per share.  The Option shall be in the form and subject to such additional terms and conditions as are set forth in the Incentive Stock Option Agreement, which is attached hereto as Exhibit A and incorporated herein by reference.  In the event that for any reason whatsoever and without qualification, Owner fails to close the PSMI Transaction with the PSMI having an Effective Date, and/or Contractor fails to perform the Services during the Term hereof, Contractor shall not be entitled to receive nor exercise (nor shall any rights to the Option vest in Contractor in respect thereof) all or any portion of the Option. In further consideration of being compensated by the Option, Contractor represents and warrants that he: (i) is an “accredited investor” as defined in United States Securities and Exchange Commission (the “ SEC”) Rule 506 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and understands the meaning of the term “accredited investor”; (ii) has had access to all filings of Owner in the Edgar Archives of the SEC; (iii) has had the opportunity to ask questions of the directors and executive officers of Owner regarding Owner, and to the extent Contractor utilized this opportunity, all questions asked by him have been answered to his total satisfaction; (iv) is acquiring the Owner Options for “investment purposes” and knows and understands the meaning of this term; (v) understands that Owner common stock he will receive on exercise of the Options comprise “restricted securities” as defined in SEC Rule 144, and that the resale of such shares of Owner common stock will be required to be registered with the SEC and sold by him under an “effective” registration statement filed with the SEC and a resale prospectus or in full compliance with SEC Rule 144 as currently in effect or as amended from time to time or another available exemption from registration under the Securities Act, and that as a result thereof, an investment in Owner common stock, including the Options, is illiquid, and Contractor may be required to hold these Options or any underlying shares of Owner common stock for a long period of time, to or including in excess of one (1) year from the exercise of the Options prior to any sale or disposition of these shares; and (vii) is fully capable of assuming the risk of loss of any investment in Owner resulting from the performance of his Services hereunder or otherwise.

3.

Termination.   By Contractor: This Agreement may be terminated prior to the expiration of the Term by Contractor upon 30 days written notice to Owner.  

By Owner: Except as is set forth in Sections 1 and 2, above, this Agreement may be terminated prior to expiration of the Term by Owner only for cause immediately upon written notice to Contractor.  A “for cause” termination includes, but is not limited to:

a.

Committing a breach of this Agreement, which is not corrected within ten (10) days following written notice thereof to Contractor;

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b.

Conviction of Contractor of a felony or a misdemeanor involving moral turpitude;

c.

Death of Contractor; or

d.

The occurrence of any event that triggers the indemnification obligations of the “Seller” as are set forth in Section 8 of the PSMI, if not cured within 60 days following written notification of Owner’s demand for indemnification to Contractor.  In such event, the Option shall immediately terminate and be of no further force and effect.

Any termination of this Agreement for any reason shall also result in the immediate termination of any unvested right Contractor shall have to exercise the Option.

4.

Confidential Information.  All information regarding the business operations, marketing, scheduling, procedures, services provided, financial information, clients and customers of Owner shall be deemed the sole property of Owner and shall be deemed to be “Confidential Information.” Contractor shall not during the term of this Agreement (and any extension thereof) and for two (2) years thereafter, directly or indirectly, disclose, divulge or communicate to any person or entity any such Confidential Information.  The parties agree that the Confidential Information is important and material information that affects the success and goodwill of Owner and that any breach of the provisions contained in this paragraph is a material breach of this Agreement.

5.

Relationship Status.  In performing the Services under this Agreement, Contractor will at all times be acting and performing as an independent contractor and not as an officer, agent, servant or employee of Owner or otherwise as a joint venture, partner or associate of Owner.  Owner shall have no right to control the manner, location of performance or method by which the work hereunder is done.  Contractor shall have no right to salary, employment benefits or employment rights that may or may not be available to Owner’s employees. Contractor shall be solely responsible for payment of worker’s compensation, income-tax, self-employment tax, withholding, social security or other assessment arising out of compensation due under this Agreement.  Contractor shall be solely responsible for payment of all costs of doing business, including but not limited to, office space, telephone service, supplies and equipment and staffing assistance.

6.

Compliance with Law.  Contractor shall fully comply with all federal, state and local laws and regulations including but not limited to maintaining any license required.

7.

Entire Agreement .  This writing (including its Exhibits) contains the entire agreement between the parties hereto concerning the subject matter hereof, and there are no promises, representations or conditions made a part of this Agreement that are not expressly set forth herein.

8.

Choice of Law.  This Agreement shall be construed and interpreted under Oklahoma law without regard to conflict of law principles for all matters including fundamental or procedural laws.

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9.

Attorneys’ fees .  The parties agree that in any suit at law or in equity to enforce or to interpret the terms of this Agreement, or arising out of it or its execution, the successful party shall be entitled to an award of reasonable attorneys’ fees, costs of suit and other expenses of litigation.

10.

Captions . Paragraph titles or captions contained herein are inserted only as a matter of convenience and for reference, and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof.

11.

Invalidity of Provisions . In case any one or more of the provisions contained in this Agreement shall, for any reason under the laws of any jurisdiction, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability under the laws of such jurisdiction shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein; provided , however ,  that any such invalidity, illegality or unenforceability in any jurisdiction shall not invalidate such provision in any other jurisdiction.

12.

No Third-Party Beneficiaries . No person not a party hereto, including, without limitation, employees, clients, customers, creditors or suppliers shall derive any rights hereunder or be construed to be a third-party beneficiary hereof.

13.

No Assignment.  Neither party shall be entitled to assign all or any portion of this Agreement without the written consent of the other.

14.

Time of the Essence.  Time is of the essence of each provision of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above.

OWNER

 

KONATEL, INC.:

By:

/s/ David Sean McEwen

David Sean McEwen, CEO

INDEPENDENT CONTRACTOR:

/s/ Trevan Morrow

Trevan Morrow

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Exhibit A

KONATEL, INC.

INCENTIVE STOCK OPTION AGREEMENT

This is an Incentive Stock Option Agreement (the “Agreement”) between KonaTel, Inc. (the “Company”), and the optionee identified above (the “Optionee”), effective as of the Date of Grant specified above.

Recitals:

WHEREAS, the Company has entered into an Agreement for Purchase and Sale of Membership Interest (the “PSM Agreement”) with Trevan Morrow (the “Optionee”), as of the Date of Grant listed above; and

WHEREAS, in the event there is a closing of the PSM Agreement and the Independent Contractor Agreement (the “Optionee Agreement”) between the Company and the Optionee becomes effective; and

WHEREAS, Pursuant to the Optionee Agreement, the Board of Directors of the Company (the “Board”) and any Committee of the Board authorized by the Board with the responsibility of determining the grants of Options on the shares of common stock of the Company (the “Committee”) hereby grants the Option to the Optionee to purchase the number of shares of $0.001 par value common stock of the Company (the “Shares”) specified at the beginning of this Agreement under the following terms and conditions:

1.   Grant .  The Optionee is granted the Option to purchase the number of Shares specified at the beginning of this Agreement.

2.   Exercise Price .  The price to the Optionee of each Share subject to the Option will be the exercise price specified at the beginning of this Agreement (which price may not be less than the Fair Market Value as of the date of grant or, if the Optionee owns or is deemed to own stock possessing more than 10% of the combined voting power of all classes of stock of the Company, 110% of the Fair Market Value as of the Date of Grant).

3.   Incentive Stock Option .  The Option is intended to be an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), provided that to the extent the Option or part thereof fails to qualify as an incentive stock option, it will be treated as a non-statutory stock option.

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4.   Exercise Schedule .  The Option will vest and become exercisable as to the number of Shares and on the date specified in the Exercise Schedule at the beginning of this Agreement, to the extent the Option has not already been exercised and has not expired, terminated or been cancelled as provided herein, and the Optionee may at any time, and from time to time, purchase all or any portion of the Shares then purchasable hereunder subject to the terms and conditions hereof.

The Option may also be exercised in full under the circumstances described in Section 8 of this Agreement if it has not expired prior thereto.

5.   Expiration .

(a)   Timing . The Option will expire at 5:00 p.m. Eastern Time on the earliest of:

(1)  The Expiration Date specified at the beginning of this Agreement;

(2)  Eighteen (18) months following the date of FCC approval of the transfer of ownership and Lifeline Program and related licenses of IM Telecom, LLC, an Oklahoma limited liability company, to KonaTel, Inc.; or

(3)  Upon termination of the Optionee’s employment for cause, or if it is determined by the Company within ten (10) days after termination of the Optionee’s employment by the Optionee that cause existed for termination by the Company, the date of such determination.

 

(b)   Expiration Final .  In no event may anyone exercise the Option, in whole or in part, after it has expired, notwithstanding any other provision of this Agreement.

(c)   Rescission .  If the Option is exercised, and prior to the delivery of the certificate representing the Shares so purchased, it is determined that cause for termination existed, then the Company, in its sole discretion, may rescind the Option exercise by the Optionee and terminate the Option.

6.   Procedure to Exercise Option .

(a)   Notice of Exercise .  The Option may be exercised by delivering written notice of exercise to the Company at the principal executive office of the Company, to the attention of the Company’s Secretary, in the form attached to this Agreement. The notice shall state the number of Shares to be purchased, and shall be signed by the person exercising the Option. If the person exercising the Option is not the Optionee, he/she also must submit appropriate proof of his/her right to exercise the Option.

(b)   Tender of Payment .  Upon giving notice of any exercise hereunder, the Optionee shall provide for payment of the Exercise Price of the Shares being purchased through one or a combination of the following methods:

(1)  Cash (including check, bank draft or money order);

(2)  To the extent permitted by law, through a broker assisted cashless exercise in which the Optionee simultaneously exercises the Option and sells all or a portion of the Shares thereby acquired pursuant to a brokerage or similar relationship and uses the proceeds from such sale to pay the Exercise Price of such Shares; or

(3)  By delivery to the Company of unencumbered Shares having an aggregate Fair Market Value on the date of exercise equal to the Exercise Price of such Shares.

(c)   Limitation on Payment by Shares .  Notwithstanding Section 6(b) hereof, the Option may not be exercised through payment of any portion of the Exercise Price with Shares if, in the opinion of the Board, payment in such manner could have adverse financial accounting consequences for the Company that were not applicable at the time of the Date of Grant.

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(d)   Delivery of Certificates .  As soon as practicable after the Company receives the notice and payment of the Exercise Price provided for above, it shall deliver to the person exercising the Option, in the name of such person, a certificate or certificates representing the Shares being purchased. The Company shall pay any original issue or transfer taxes with respect to the issue or transfer of the Shares and all fees and expenses incurred by it in connection therewith. All Shares so issued shall be fully-paid and nonassessable. Notwithstanding anything to the contrary in this Agreement, no certificate for Shares distributable under this Agreement shall be issued and delivered unless the issuance of such certificate complies with all applicable legal requirements including, without limitation, compliance with the provisions of applicable state securities laws, the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the General Rules and Regulations of the United States Securities and Exchange Commission (the “SEC”) promulgated under the Securities Act and the Exchange Act, including published interpretations thereof by the SEC.

7.   Employment Requirement .  Except as otherwise provided in Section 5 hereof, the Option may be exercised only while the Optionee remains employed with the Company or a parent or subsidiary thereof, and only if the Optionee has been continuously so employed since the date the Option was granted; provided that:

(a)   Post-Employment .  The Option may be exercised for the later of (i) six (6) months after termination of the Optionee’s employment or (ii) the six (6) months from the vesting of the Option, if such cessation of employment is for a reason other than death or disability or retirement, provided, however, that if termination of the Optionee’s employment shall have been for cause, the Option shall expire, and all rights to purchase Shares hereunder shall terminate, immediately upon such termination.

(b)   Death or Disability .  The Option may be exercised to the extent that the Option was vested and exercisable as of the date of the death or disability of the Optionee, for three (3) months after termination of the Optionee’s employment if such termination of employment is because of death or disability of the Optionee.

8.   Acceleration of Vesting .

(a)   Change in Control .  If a change in control (as defined below) of the Company or buyout of the operations of the Company shall or is to occur, then the Option, if not already exercised in full or otherwise terminated, expired or cancelled, shall become immediately vested and exercisable in full and shall remain exercisable for a period of thirty (30) days following the completion of the change in control.

(b)   Discretionary Acceleration .  Notwithstanding any other provisions of this Agreement to the contrary, the Board or any Committee may, in its sole discretion, declare at any time that the Option shall be immediately exercisable.

9.   Limitation on Transfer .  During the lifetime of the Optionee, only the Optionee or his/her guardian or legal representative may exercise the Option.  The Option may not be assigned or transferred by the Optionee otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder.

10.   No Shareholder Rights Before Exercise .  No person shall have any of the rights of a shareholder of the Company with respect to any Share subject to the Option until the Share actually is issued to him/her upon exercise of the Option.

11.   Discretionary Adjustment .  In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, or extraordinary dividend or divestiture (including a spin off), or any other change in the corporate structure or Shares of the Company, the Board or the Committee (or if the Company does not survive any such transaction, a comparable committee of the Board of Directors of the surviving corporation) may,

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without the consent of the Optionee, make such adjustment as it determines in its discretion to be appropriate as to the number and kind of securities granted herein and, in order to prevent dilution or enlargement of rights of the Optionee, the number and kind of securities issuable upon exercise of the Option and the exercise price hereof.

12.   Tax Effect of Transfer of Shares .  The Optionee hereby acknowledges that if any Shares received pursuant to the exercise of any portion of the Option are sold within two (2) years from the Date of Grant or within one (1) year from the effective date of exercise of the Option, or if certain other requirements of the Code are not satisfied, such Shares will be deemed under the Code not to have been acquired by the Optionee pursuant to an “incentive stock option” as defined in the Code; and that the Company shall not be liable to the Optionee in the event the Option for any reason is deemed not to be an “incentive stock option” within the meaning of the Code. Furthermore, the Optionee will promptly notify the Company, in writing, of any sale of Shares received through the exercise of any portion of the Option within two (2) years from the Date of Grant or within one (1) year from the effective date of exercise of the Option.

13.   Interpretation of This Agreement .  All decisions and interpretations made by the Board or the Committee, if there is a Committee, with regard to any question arising hereunder shall be binding and conclusive upon the Company and the Optionee.

14.   Discontinuance of Employment .  This Agreement shall not give the Optionee a right to continued employment with the Company or any parent or subsidiary of the Company, and the Company or any such parent or subsidiary employing the Optionee may terminate his/her employment at any time and otherwise deal with the Optionee without regard to the effect it may have upon him/her under this Agreement.

15.   Option Subject to Articles of Incorporation and Bylaws .  The Optionee acknowledges that the Option and the exercise thereof is subject to the Articles of Incorporation, as amended from time to time, and the Bylaws, as amended from time to time, of the Company, and any applicable federal or state laws, rules or regulations.

16.   Obligation to Reserve Sufficient Shares .  The Company shall at all times during the term of the Option reserve and keep available a sufficient number of Shares to satisfy this Agreement.

17.   Binding Effect . This Agreement shall be binding in all respects on the heirs, representatives, successors and assigns of the Optionee.

18.   Choice of Law .  This Agreement is entered into under the laws of the State of Delaware and shall be construed and interpreted thereunder without regard to its conflict of law principles for all matters, including fundamental or procedural laws.

19.    Change in Control .  For all purposes of this Agreement, “Change in Control” shall mean: (i)  the completion of one or more transactions by which any person or entity (and his, her or its affiliates) becomes the beneficial owner 50.1% or more of the voting power of the Company’s securities; or (ii)  any merger, consolidation or liquidation of the Company in which the Company is not the continuing or surviving company or pursuant to which stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the shares stock immediately before the merger have the same proportionate ownership of the Common Stock of the surviving company immediately after the merger; or (iii)  substantially all of the assets of the Company are sold or otherwise to parties that are not within a “controlled group of corporations” (as defined in Section 1563 of the Internal Revenue Code of 1986, as amended) in which the Company is a member at the time of such sale or transfer.

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The Optionee and the Company have executed this Agreement as of the 5th day of February, 2018.

OPTIONEE:

/s/ Trevan Morrow

Trevan Morrow

KONATEL, INC.:

By D. Sean McEwen

     Its CEO

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NOTICE OF STOCK OPTION EXERCISE

KonaTel, Inc.

13601 Preston Rd. Ste E816

Dallas, TX 75240

Attention: Board of Directors

Dear Sir or Madam:

I am the holder of ____________ Stock Options, granted to me under the KonaTel, Inc. (the “Company”) 2017 Incentive Stock Option Agreement, granted on _____________________(date of grant) for the purchase of ___________shares of $0.001 par value Common Stock of the Company (“shares”) at a purchase price of $0.20 per share.

I hereby exercise my option to purchase ___________shares, for which I have enclosed: please either enter (“cash,” “personal check,” or “Stock Certificate No.(s)) ____________________________in the total aggregate amount of __________________.  Please register my stock certificate as follows:

Name(s):____________________________________

Street Address:_______________________________

City, State & Zip Code_________________________

Social Security No. : __________________________

In connection with your acceptance of this Notice of Stock Option Exercise, I hereby represent, warrant and covenant as follows:

I am purchasing the Shares for my own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act of 1933 (the “Securities Act”), or any rule or regulation under the Securities Act.

I have had such opportunity as I have deemed adequate to obtain from representatives of the Company such information as is necessary to permit me to evaluate the merits and risks of my investment in the Company.

I have sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.

I can afford a complete loss of the value of the Shares and am able to bear the economic risk of holding such Shares for an indefinite period.

I understand that (i) the Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least one year and even then will not be available unless a public market then exists for the Common Stock, adequate information concerning the Company is then available to the public, and other terms and conditions of Rule 144 are complied with; and

(iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.

Very truly yours,

 ___________________________________________

Signature)

10

FIRST AMENDMENT TO INDEPENDENT CONTRACTOR AGREEMENT

This First Amendment to Independent Contractor Agreement is entered into as of April 30, 2018, by and between Trevan Morrow (“Contractor”) and KonaTel, Inc., a Delaw are corporation (“Owner”), and that certain Independent Contractor Agreement dated February 5, 2018 (the “Agreement”) between the same parties, as is set forth below.

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree to amend the Agreement as follows:

1.

Section 1 of the Agreement shall be deleted in its entirety and replaced with the following:

Services to be Provided by Contractor.  Contractor shall provide the Services for the benefit of Owner commencing on the Effective Date of the PSMI and continuing continuously thereafter for a 90-day period (the “Term”).  In the event that, for whatever reason, the PSMI fails to be executed by all parties on or before February 15, 2018, or there is no closing of the PSMI Transaction by December 31, 2018, at the sole option of the Owner, this Agreement may be extended to a future Effective Date or shall be cancelled in its entirety and rendered null and void.

2.

Section 2(b) of the Agreement shall be deleted in its entirety and replaced with the following:

The sum of $28,000 upon the final closing of the PSMI Transaction; provided, however, that in the event the PSMI Transaction does not close (for whatever reason) on or before December 31, 2018, the obligation of Owner to pay the $28,000 to Contractor shall terminate, shall be deemed deleted from this Agreement and Owner shall have no obligation to pay Contractor all or any portion of said $28,000; and

3.

All matters set forth in the Agreement not specifically amended herein or inconsistent herewith shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment.

OWNER

 

KONATEL, INC.:

By:

D. Sean McEwen

David Sean McEwen, CEO

INDEPENDENT CONTRACTOR:

/s/ Trevan Morrow

Trevan Morrow

KONATEL, INC.

INCENTIVE STOCK OPTION AGREEMENT

Name of Optionee:  Trevan Morrow
No. of Common Shares Covered: 500,000	Date of Grant: January 31, 2019
Exercise Price Per Common Share:  $0.20	Expiration Date: January 31, 2022
Exercise Schedule: All or Part, subject to Vesting or Expiration hereunder
Date of Vesting	No. of Common Shares as to which the Option becomes Exercisable
May 1, 2019	500,000

This is an Incentive Stock Option Agreement (the “ Agreement ”) between KonaTel, Inc. (the “ Company ”), and the optionee identified above (the “ Optionee ”), effective as of the Date of Grant specified above.

Recitals:

WHEREAS, the Company has entered into an Agreement for Purchase and Sale of Membership Interest, as amended (the “ PSMI ”), with Trevan Morrow (the “ Optionee ”); and

WHEREAS, the closing of the PSMI and an Independent Contractor Agreement (the “ Optionee Agreement ”) between the Company and the Optionee became effective on January 31, 2019 (the “ Date of Grant ”); and

WHEREAS, Pursuant to the Optionee Agreement, the Board of Directors of the Company (the “ Board ”) and any Committee of the Board authorized by the Board with the responsibility of determining the grants of Options on the shares of common stock of the Company (the “ Committee ”) has approved a grant of an Option to the Optionee to purchase the number of shares of $0.001 par value common stock of the Company (the “ Shares ”) specified at the beginning of this Agreement under the following terms and conditions:

1.   Grant .  The Optionee is granted the Option to purchase the number of Shares specified at the beginning of this Agreement.

2.   Exercise Price .  The price to the Optionee of each Share subject to the Option will be the exercise price specified at the beginning of this Agreement, which price is the Fair Market Value of the Shares as of the Date of Grant.

3.   Incentive Stock Option .  The Option is intended to be an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “ Code ”), provided that to the extent the Option or part thereof fails to qualify as an incentive stock option, it will be treated as a non-statutory stock option.

4.   Exercise Schedule .  The Option will vest and become exercisable as to the number of Shares and on the date specified in the Exercise Schedule at the beginning of this Agreement, to the extent the Option has not already been exercised and has not expired, terminated or been cancelled as provided herein, and the Optionee may at any time, and from time to time, purchase all or any portion of the Shares then purchasable hereunder subject to the terms and conditions hereof.

The Option may also be exercised in full under the circumstances described in Section 8 of this Agreement if it has not expired prior thereto.

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5.   Expiration .

(a)   Timing . The Option will expire at 5:00 p.m. Eastern Time on January 31, 2022.

 

(b)   Expiration Final .  In no event may anyone exercise the Option, in whole or in part, after it has expired, notwithstanding any other provision of this Agreement.

6.   Procedure to Exercise Option .

(a)   Notice of Exercise .  The Option may be exercised by delivering written notice of exercise to the Company at the principal executive office of the Company, to the attention of the Company’s Secretary, in the form attached to this Agreement. The notice shall state the number of Shares to be purchased, and shall be signed by the person exercising the Option. If the person exercising the Option is not the Optionee, he also must submit appropriate proof of his right to exercise the Option.

(b)   Tender of Payment .  Upon giving notice of any exercise hereunder, the Optionee shall provide for payment of the Exercise Price of the Shares being purchased through one or a combination of the following methods:

(1)  Cash (including check, bank draft or money order); or

(2)  To the extent permitted by law, through a broker assisted cashless exercise in which the Optionee simultaneously exercises the Option and sells all or a portion of the Shares thereby acquired pursuant to a brokerage or similar relationship and uses the proceeds from such sale to pay the Exercise Price of such Shares; or

 (c)   Limitation on Payment by Shares .  Notwithstanding Section 6(b) hereof, the Option may not be exercised through payment of any portion of the Exercise Price with Shares if, in the opinion of the Board, payment in such manner could have adverse financial accounting consequences for the Company that were not applicable at the time of the Date of Grant.

(d)   Delivery of Certificates .  As soon as practicable after the Company receives the notice and payment of the Exercise Price provided for above, it shall deliver to the person exercising the Option, in the name of such person, a certificate or certificates representing the Shares being purchased. The Company shall pay any original issue or transfer taxes with respect to the issue or transfer of the Shares and all fees and expenses incurred by it in connection therewith. All Shares so issued shall be fully-paid and nonassessable. Notwithstanding anything to the contrary in this Agreement, no certificate for Shares distributable under this Agreement shall be issued and delivered unless the issuance of such certificate complies with all applicable legal requirements including, without limitation, compliance with the provisions of applicable state securities laws, the Securities Act of 1933, as amended (the “ Securities Act ”), the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and the General Rules and Regulations of the United States Securities and Exchange Commission (the “ SEC ”) promulgated under the Securities Act and the Exchange Act, including published interpretations thereof by the SEC.

7.   Employment Requirement .  Except as otherwise provided in Section 5 hereof, the Option may be exercised only while the Optionee remains employed with the Company or a parent or subsidiary thereof, and only if the Optionee has been continuously so employed since the date the Option was granted; provided that:

(a)   Post-Employment .  In accordance with Section 5 hereof.

(b)   Death or Disability .  In accordance with Section 5 hereof.

8.   Acceleration of Vesting .

(a)   Change in Control .  If a change in control (as defined below) of the Company or buyout of the operations of the Company shall or is to occur, then the Option, if not already exercised in full or otherwise terminated, expired or cancelled, shall become immediately vested and exercisable in full and shall remain exercisable for a period of thirty (30) days following the completion of the change in control.

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(b)   Discretionary Acceleration .  Notwithstanding any other provisions of this Agreement to the contrary, the Board or any Committee may, in its sole discretion, declare at any time that the Option shall be immediately vested and exercisable.

9.   Limitation on Transfer .  During the lifetime of the Optionee, only the Optionee or his guardian or legal representative may exercise the Option.  The Option may not be assigned or transferred by the Optionee otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder.

10.   No Shareholder Rights Before Exercise .  No person shall have any of the rights of a shareholder of the Company with respect to any Share subject to the Option until the Share actually is issued to him upon exercise of the Option.

11.   Discretionary Adjustment .  In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, or extraordinary dividend or divestiture (including a spin off), or any other change in the corporate structure or Shares of the Company, the Board or the Committee (or if the Company does not survive any such transaction, a comparable committee of the Board of Directors of the surviving corporation) may, without the consent of the Optionee, make such adjustment as it determines in its discretion to be appropriate as to the number and kind of securities granted herein and, in order to prevent dilution or enlargement of rights of the Optionee, the number and kind of securities issuable upon exercise of the Option and the exercise price hereof.

12.   Tax Effect of Transfer of Shares .  The Optionee hereby acknowledges that if any Shares received pursuant to the exercise of any portion of the Option are sold within two (2) years from the Date of Grant or within one (1) year from the effective date of exercise of the Option, or if certain other requirements of the Code are not satisfied, such Shares will be deemed under the Code not to have been acquired by the Optionee pursuant to an “incentive stock option” as defined in the Code; and that the Company shall not be liable to the Optionee in the event the Option for any reason is deemed not to be an “incentive stock option” within the meaning of the Code. Furthermore, the Optionee will promptly notify the Company, in writing, of any sale of Shares received through the exercise of any portion of the Option within two (2) years from the Date of Grant or within one (1) year from the effective date of exercise of the Option.

13.   Interpretation of This Agreement .  All decisions and interpretations made by the Board or the Committee, if there is a Committee, with regard to any question arising hereunder shall be binding and conclusive upon the Company and the Optionee.

14.   Discontinuance of Employment .  This Agreement shall not give the Optionee a right to continued employment with the Company or any parent or subsidiary of the Company, and the Company or any such parent or subsidiary employing the Optionee may terminate his employment at any time and otherwise deal with the Optionee without regard to the effect it may have upon him under this Agreement.

15.   Option Subject to Articles of Incorporation and Bylaws .  The Optionee acknowledges that the Option and the exercise thereof is subject to the Articles of Incorporation, as amended from time to time, and the Bylaws, as amended from time to time, of the Company, and any applicable federal or state laws, rules or regulations.

16.   Obligation to Reserve Sufficient Shares .  The Company shall at all times during the term of the Option reserve and keep available a sufficient number of Shares to satisfy this Agreement.

17.   Binding Effect . This Agreement shall be binding in all respects on the heirs, representatives, successors and assigns of the Optionee.

18.   Choice of Law .  This Agreement is entered into under the laws of the State of Delaware and shall be construed and interpreted thereunder without regard to its conflict of law principles for all matters, including fundamental or procedural laws.

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19.     Lock-Up/Leak-Out Agreement .  The resale of the Shares acquired under the Option is subject to the terms and conditions of the Lock-Up/Leak-Out Agreement that is attached hereto and incorporated herein by reference.

20.    Change in Control .  For all purposes of this Agreement, “Change in Control” shall mean: (i)  the completion of one or more transactions by which any person or entity (and his, her or its affiliates) becomes the beneficial owner 50.1% or more of the voting power of the Company’s securities; or (ii)  any merger, consolidation or liquidation of the Company in which the Company is not the continuing or surviving company or pursuant to which stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the shares stock immediately before the merger have the same proportionate ownership of the Common Stock of the surviving company immediately after the merger; or (iii)  substantially all of the assets of the Company are sold or otherwise to parties that are not within a “controlled group of corporations” (as defined in Section 1563 of the Internal Revenue Code of 1986, as amended) in which the Company is a member at the time of such sale or transfer.

The Optionee and the Company have executed this Agreement effective as of the 31st day of January, 2019.

OPTIONEE:

/s/ Trevan Morrow

Trevan Morrow

KONATEL, INC.:

By /s/ D. Sean McEwen

     D. Sean McEwen, President and CEO

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NOTICE OF STOCK OPTION EXERCISE

KonaTel, Inc.

13601 Preston Rd. Ste E816

Dallas, TX 75240

Attention: Board of Directors

Dear Sir or Madam:

I am the holder of ____________ Stock Options, granted to me under the KonaTel, Inc. (the “Company”) 2017 Incentive Stock Option Agreement, granted on _____________________(date of grant) for the purchase of ___________shares of $0.001 par value Common Stock of the Company (“shares”) at a purchase price of $0.20 per share.

I hereby exercise my option to purchase ___________shares, for which I have enclosed: please either enter (“cash,” “personal check,” or “Stock Certificate No.(s)) ____________________________in the total aggregate amount of __________________.  Please register my stock certificate as follows:

Name(s):____________________________________

Street Address:_______________________________

City, State & Zip Code_________________________

Social Security No. : __________________________

In connection with your acceptance of this Notice of Stock Option Exercise, I hereby represent, warrant and covenant as follows:

I am purchasing the Shares for my own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act of 1933 (the “Securities Act”), or any rule or regulation under the Securities Act.

I have had such opportunity as I have deemed adequate to obtain from representatives of the Company such information as is necessary to permit me to evaluate the merits and risks of my investment in the Company.

I have sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.

I can afford a complete loss of the value of the Shares and am able to bear the economic risk of holding such Shares for an indefinite period.

I understand that (i) the Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least one year and even then will not be available unless a public market then exists for the Common Stock, adequate information concerning the Company is then available to the public, and other terms and conditions of Rule 144 are complied with; and

(iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.

Very truly yours,

 ___________________________________________

Signature)

5

LOCK-LEAK-OUT AGREEMENT

THIS LOCK-UP/LEAK-OUT AGREEMENT (the “Agreement” ) is made and entered into between KonaTel, Inc., a Delaware corporation (the “Company” ), and the undersigned person or entity listed on the Counterpart Signature Page hereof (the “Shareholder” ), effective as of January 31, 2019 (the “Effective Date” ).  For all purposes of this Agreement, “ Shareholder ” includes any “ affiliate ,” controlling person of Shareholder, agent, representative or other person with whom Shareholder is or may be deemed to be acting in concert in connection with any sales of Common Stock (as defined below) of the Company.

RECITALS:

WHEREAS, the Company the Company granted the Shareholder an option to acquire 500,000 shares of its $0.001 par value common stock (respectively, the “ Option ” and the “ Common Stock ”) (designated “Shareholder” for convenience hereunder and shall not become a “Shareholder” until the Option has been exercised); and

WHEREAS, this Agreement is intended to promote an orderly trading market for the shares of Common Stock of the Company; and

WHEREAS, the execution and delivery of this Agreement is a condition to the Option grant; and

WHEREAS, the Company and the Shareholder understand that the Shareholder’s failure to comply with the terms and conditions of this Agreement could have substantial adverse consequences to the Company, its shareholders and any public trading market for the Company’s Common Stock that cannot be reasonably measured or determined at this time.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

1.

Subject to compliance with all of the applicable provisions of the Securities and Exchange Commission (the “SEC” ) Rule 144 as now in effect or hereafter amended, including SEC interpretations thereof, or an effective S-1 Registration Statement filed with the SEC under the Securities Act of 1933, as amended (the “Securities Act” ), which is accompanied by a “current” Resale Prospectus that includes shares of Common Stock covered hereby that are sought to be publicly sold by a Shareholder through a registered broker-dealer (respectively, a “Registration Statement” and the Shareholder Broker” ), and except as otherwise expressly provided herein, the Shareholder may only sell the Common Stock subject to the following conditions, commencing on the later of six (6) months from the Option exercise  (the “Lock-Up Period” ); provided, however, the Lock-Out Period shall not cover any Common Stock owned by the Shareholder that is included in a Registration Statement, though the provisions of the Leak-Out Period (as defined below) shall continue to be

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applicable to the Shareholder and the Common Stock.  Following the Lock-Up Period, the Shareholder may sell the Common Stock as follows (the “Leak-Out Period” ):

1.1

The Shareholder shall be allowed to sell in one (1) week, no more than the greater of (i) (5%) of the total shares of the Company publicly traded on any nationally recognized medium of a stature no less than the Pink OTC Markets, Inc. (the “OTC Pink” ) over the previous ten (10) trading days, or (ii) one percent (1%) of the total outstanding shares of the Company as reported in the Company’s most recently filed SEC report or registration statement in the Edgar Archives of the SEC, divided by thirteen (13) weeks, which number may be updated from time to time, based upon the number of shares reflected as being outstanding in the Company’s SEC filings, on a non-cumulative basis, meaning that if the amount of shares allowed to be sold under this subparagraph are not sold in any specific week, that the unsold amount cannot be cumulated and sold in any subsequent week or weeks with the sale of other shares that are allowed to be sold in a specific week. Any sales made by “affiliates” of the Company during the Leak-Out Period are also subject to the standard volume limitations applicable to any “affiliate” of the Company under SEC Rule 144. Notwithstanding, the Company may allow any Shareholder the right to sell or transfer Common Stock in a bona fide private transaction or by gift or for estate planning purposes, subject to receipt of an opinion of legal counsel for the Company that there is an available exemption from registration for any such transaction under the Securities Act, and subject to any transferee’s execution and delivery of a copy of this Agreement; provided, however , in such event, the Shareholder and any transferee in any such conveyance of Common Stock shall be required to aggregate their respective sales of Common Stock during the term of this Agreement so that the combined sale of shares of Common Stock sold by the Shareholder and any transferee does not exceed the number of shares of Common Stock that could have been sold by the Shareholder during the Leak-Out Period as if any such transaction had not occurred.

1.2

Except as otherwise provided herein (or by operation of law), all Common Stock shall be sold by the Shareholder in “broker’s transactions” and in compliance with the “manner of sale” requirements as those terms are defined in Rule 144 of the SEC during the Leak-Out Period.

1.3

An appropriate legend describing this Agreement shall be imprinted on each stock certificate representing Common Stock covered hereby, and the transfer records of the Company’s transfer agent shall reflect such resale restrictions.

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2.

The delivery of a duly executed copy of this Agreement, with the Shareholder’s Broker’s Acknowledgement duly signed by the Shareholder’s Broker, which Broker’s Acknowledgement is contained on the Counterpart Signature Page hereof, shall be satisfactory evidence for all purposes of this Agreement that the Shareholder and the Broker shall comply with the “brokers’ transactions,” “manner of sale” and limitations on the number of shares of Common Stock that can be sold in any applicable period outlined in Section 1.1 hereof and in compliance with all of the terms and conditions of this Agreement, and no further evidence thereof will be required of the Shareholder; provided, however, the Company shall have the right to confirm such compliance with any Shareholder and the Shareholder’s Broker, to the extent that it deems reasonably required or necessary to assure compliance with this Agreement; and provided, however , that the Shareholder can otherwise provide satisfactory evidence to the Company of such compliance, subject to the Company’s acceptance of any such alternative compliance evidence.  Failure by the Shareholder or the Shareholder’s Broker to provide the Company with reasonable evidence of compliance with the terms and provisions of this Agreement on written request by the Company and within ten (10) business days of such written request shall result in the withdrawal of any legal opinion rendered by legal counsel respecting the lawful sale of the Shareholder’s Common Stock, with advice thereof to the Shareholder and the Shareholder’s Broker, and if any of the shares of Common Stock then being sold by the Shareholder are being sold in reliance on a Registration Statement, at the option of the Company, such shares of Common Stock may be withdrawn from the Registration Statement,  In any such event, “stop transfer” instructions shall be provided to the Company’s transfer and registrar agent regarding the Shareholder’s Common Stock,

3.

Notwithstanding anything to the contrary set forth herein, the Company may, in its sole discretion and in good faith, at any time and from time to time, waive any of the conditions or restrictions contained herein to increase the liquidity of the Common Stock or if such waiver would otherwise be in the best interests of the development of the public trading market for the Company’s Common Stock.  Unless otherwise agreed, all such waivers shall be pro rata, as to all Shareholders who have executed a Lock-Up/Leak-Out Agreement with the Company, and all such shares of Common Stock shall be subject to sale in accordance will all applicable securities laws, rules and regulations.  

4.

In the event of: (a) a completed tender offer to purchase all or substantially all of the Company’s issued and outstanding securities (at least 50.1% or more of the Company’s voting securities); or (b) a merger, consolidation or other reorganization of the Company with or into an unaffiliated entity that results in a change in control of the Company (excluding the Merger Agreement and resulting in a change in control of 50.1% or more of the Company), then this Agreement shall terminate as of the closing of such event, and the Common Stock restrictions on the resale of the Common Stock pursuant hereto shall terminate, though the requirement that all shares of Common Stock shall be subject to sale in accordance will all applicable securities laws, rules and regulations shall continue.

5.

Except as otherwise provided in this Agreement or any other agreements between the parties or otherwise, the Shareholder shall be entitled to the

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beneficial rights of ownership of the Common Stock, including the right to vote the Common Stock for any and all purposes, only on the Option exercise, and then, only with respect to the shares acquired in the Option exercise.

6.

The number of shares of Common Stock included in any allotment that can be sold by the Shareholder hereunder shall be appropriately adjusted should the Company declare and effect a dividend or distribution, undergo a forward split or a reverse split or otherwise reclassify its shares of Common Stock.

7.

This Agreement may be executed in any number of counterparts with the same force and effect as if all parties had executed the same document.

8.

All notices, instructions or other communications required or permitted to be given pursuant to this Agreement shall be given in writing and delivered by certified mail, return receipt requested, overnight delivery or hand-delivered to all parties to this Agreement, to the Company, at 13601 Preston Road, # E816, Dallas, Texas 75240 (or the current address of the Company in the SEC Archives as listed in its most recently filed report or registration statement respectively filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act” ) or the Securities Act, and to the Shareholder or the Shareholder’s Broker, at the addresses in the Counterpart Signature Page.  All notices shall be deemed to be given on the same day if delivered by hand or on the following business day if sent by overnight delivery or the second business day following the date of mailing.

9.

The resale restrictions on the Common Stock set forth in this Agreement shall be in addition to all other restrictions on transfer imposed by applicable United States and state securities laws, rules and regulations.

10.

The Company or the Shareholder who fails to fully adhere to the terms and conditions of this Agreement shall be liable to every other party to this Agreement for any damages suffered by any party by reason of any such breach of the terms and conditions hereof.  The Shareholder agrees that in the event of a breach of any of the terms and conditions of this Agreement by the Shareholder, that in addition to all other remedies that may be available in law or in equity to the non-defaulting parties, a preliminary and permanent injunction, without bond or surety, and an order of a court requiring such Shareholder to cease and desist from violating the terms and conditions of this Agreement and specifically requiring the Shareholder to perform his/her/its obligations hereunder is fair and reasonable by reason of the inability of the parties to this Agreement to presently determine the type, extent or amount of damages that the Company or any non-defaulting Shareholder may suffer as a result of any breach of the terms and provisions of this Agreement or the continuation thereof.

11.

This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof, and may not be amended except by a written instrument executed by the parties hereto and approved by a majority of the members of the Board of Directors of the Company.

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12.

This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts entered into and to be performed wholly within said State; and the Company and the Shareholder agree that any action based upon this Agreement may be brought in the United States federal and state courts situated in Delaware only, and that each shall submit to the jurisdiction of such courts for all purposes hereunder.

13.

In the event of default hereunder, the non-defaulting parties shall be entitled to recover reasonable attorney’s fees incurred in the enforcement of this Agreement.

14.

This Agreement shall be binding upon any successors or assigns of the Common Stock, without qualification.

15.

This Agreement shall terminate on the earlier of: (i) eighteen (18) months from the exercise of any tranche of any option regarding the shares acquired under any such exercise; (ii) the listing on a nationally recognized exchange of no less significance than the New York Stock Exchange or NASDAQ; or (iii) on the completion of any event specified in Section 4 hereof.

IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the respective dates indicated below.

KONATEL, INC.

Date: January 31, 2019.

By:  D. Sean McEwen

        

       D. Sean McEwen, CEO

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LOCK-UP/LEAK-OUT AGREEMENT

COUNTERPART SIGNATURE PAGE

This Counterpart Signature Page for that certain Lock-Up/Leak-Out Agreement (the “Agreement” ) effective as of January 31, 2019 (the Effective Date” ), among KonaTel, Inc., a Delaware corporation (the “Company” ); and the undersigned, by which the undersigned, through execution and delivery of this Counterpart Signature Page, intends to be legally bound by the terms of the Agreement, as a Shareholder, of the number of shares of the Company set forth below and represented by the stock certificate(s) (as may be applicable) described below (or otherwise) or any Common Stock acquired after the Effective Date.

SHAREHOLDER:

Trevan Morrow

(Print Name)

 

1705 S. Baltimore Ave.

(Street Address)

Tulsa, OK 74119

(City and State)

 

______________________________________________

(Stock Cert. No. and No. of Shares [if applicable])

Date:  1-31-19.

/s/ Trevan Morrow

(Signature)

 (Representative Capacity, if Applicable)

                  BROKER ACKNOWLEDGEMENT:

______________________________________________

(Print Name)

______________________________________________

(Street Address)

______________________________________________

(City and State)

______________________________________________

(Stock Certificate No. and Number of Shares)

Date: _____________.

______________________________________________

(Signature)

  (Representative Capacity, if Applicable)

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CLOSING MEMORANDUM

This Closing Memorandum (the “ Closing Memorandum ”) is executed as of January 31, 2019, in connection with the closing (the “ Closing ”) of that certain Agreement for the Purchase and Sale of Membership Interest dated as of February 5, 2018, as amended (the “ PSMI ”), by and among KonaTel, Inc., a Delaware corporation (“ KonaTel ”), the “ Purchaser ” therein; and Trevan Morrow (“ Morrow ”) the “ Seller ” therein, along with Jennifer Morrow (“ Ms. Morrow ”), Morrow’s spouse (solely regarding the provisions of Section 10.12 thereof), and IM Telecom, LLC, an Oklahoma limited liability company (“ IM Telecom ”), the sale of 100% of the membership interest of which is the subject of the PSMI (solely regarding the provisions of Sections 4 and 6.8 thereof).  The foregoing are sometimes referred to herein as a “ Party ,” and collectively, as the “ Parties .”  All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the PSMI Transaction Documents (as defined below); and all “ Exhibits ” referred to herein shall be incorporated herein by reference.

RECITALS :

Whereas, on February 5, 2018, and effective February 7, 2018, the Parties entered into the PSMI for the sale and purchase of 100% of the membership interest in IM Telecom; and

Whereas, the Parties amended the PSMI, effective April 30, 2018, (i) to delete the provisions of Section 9.2 thereof that would have allowed the Purchaser to terminate the PSMI if all of the conditions set forth in Section 6 of the PSMI were not satisfied by April 30, 2018, (ii) to extend the time for the satisfaction of such conditions to December 31, 2018, and (iii) to amend Section 9.3 thereof to allow the Seller to terminate the PSMI if there had not been a Closing of the PSMI by December 31, 2018; and

Whereas, the Parties again amended the PSMI, effective December 31, 2018, (i) to set the Closing of the PSMI at January 31, 2019, (ii) to provide for transfer of certain books and records of IM Telecom to KonaTel effective January 1, 2019, (iii) to provide for a “Transition Period” to KonaTel for certain matters regarding IM Telecom, including the transfer of funds in IM Telecom bank accounts to KonaTel’s “ IM Telecom Bank of Texas ” account and as otherwise may be required for KonaTel to assume the business operations of IM Telecom at the Closing, (iv) to amend and reduce the “ Debt Limitation ” in the PSMI to $432,472.68 as the “ Maximum Allowable IM Telecom Debt ” of IM Telecom, with the condition that Morrow’s indemnification under the PSMI would cover, among other matters, all debt of IM Telecom in excess of such the Debt Limitation amount, and to provide a list of the balance of any additional payments of KonaTel due or payable under the PSMI, (v) to provide that all Morrow promissory notes executed and delivered to KonaTel for advances or payments made by KonaTel under the PSMI shall be cancelled and compromised at and subject to the Closing, and (vi) to provide that all other terms and conditions of the PSMI not otherwise amended shall remain in full force and effect; and

WHEREAS, all Parties to the Agreement desire to complete and close the PSMI and execute and deliver all of the PSMI Transaction Documents, and in order to do so, and for

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good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties do hereby agree as follows:

1. Representations and Warranties of Morrow, Ms. Morrow and IM Telecom under the PSMI .  Morrow, Ms. Morrow and IM Telecom, jointly and severally, and to the extent of their respective representations and warranties contained in the PSMI, hereby certify that such representations and warranties are true and correct at and as of the Closing and as if such representations and warranties were made at and as of the Closing, subject only to actual limitations applicable to Ms. Morrow and IM Telecom in the PSMI and to the exceptions set forth in the “ Disclosure Schedules ” of Morrow.

2.

Execution Documents .  All documents or instruments of any kind related to or required to be executed, delivered or completed by the respective Parties at and as of the Closing of the PSMI and as outlined herein or in the PSMI (the “ PSMI Transaction Documents ”) have been executed and delivered by the respective Parties, as may be applicable, including the (i) PSMI ( Exhibit A hereto); (ii) the “ Morrow Independent Contractor Agreement ” ( Exhibit B hereto); (iii) the “ Morrow Incentive Stock Option Agreement ” and associated “ Lock-Up Leak-Out Agreement ” regarding the resale limitations on the underlying shares of common stock of KonaTel that can be acquired thereunder ( Exhibit C hereto) (Exhibits A, B and C were deposited into escrow with Leonard W. Burningham, Esq. (the “ Escrow Agent ”) under an Escrow Agreement dated as of February 5, 2018, and as amended on April 30, 2018 (the “ Escrow Agreement ”); (iv) the “ Morrow Assignment of Membership Interest ”  ( Exhibit D hereto) whereby Morrow has assigned to KonaTel 100% of the membership interest in IM Telecom; (v) the “ IM Telecom Resolutions ” approving the PSMI Transaction Documents, as applicable ( Exhibit E hereto); (vi) the “ Morrow Resignation ” resigning as a member of IM Telecom ( Exhibit F hereto); and the “ Iser-AGVZ (as defined below) Debt Cancellation Agreement Pay-Off Letter ” ( Exhibit G hereto).  

3.

Termination of Escrow Agreement .  All obligations of the Escrow Agent under the Escrow Agreement have been satisfied in full, without exception or otherwise, and the Escrow Agent is hereby released from any other obligation thereunder, without qualification.

4.

Acceptance of Morrow Resignation and Change of Ownership of IM Telecom .  The Morrow Resignation is hereby accepted, and KonaTel is hereby authorized and shall, as may be required or necessary and without qualification, amend all documents in federal, state or other regulatory agencies or otherwise to reflect that KonaTel is the 100% owner of the membership interest in IM Telecom.

5.

KonaTel Payments .  Unless otherwise provided herein, at the Closing, KonaTel shall: (i) issue a check in the amount of $100 to Morrow for the assignment of 100% of the membership interest of IM Telecom to KonaTel ( Exhibit H hereto); (ii) issue a check in the amount of $10 to Morrow as initial consideration under the Morrow Independent Contractor Agreement ( Exhibit I hereto); (iii) wire $10,000 to Wells Fargo Financial Leasing, Inc. (“ Wells Fargo Leasing ”) for full payment and settlement of the principal, accrued interest or otherwise due and payable on Account No. 301-0240432-001 under a “ Settlement Agreement and Release of Claims ” ( Exhibit J hereto) and wire an aggregate total of $50,000 to Gregg Iser and

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AGVZ Management, LLC, an Oklahoma limited liability company also know as “ AGVZ ” or “ AGVZ, LLC ” ($60,000 under Exhibit G , less the $10,000 wired to Wells Fargo Leasing) ( Exhibit K hereto); (iv) pay $27,500.00 to Morrow ($25,000 as set forth in Promissory Note dated January 10, 2018, and $2,500.00 for accounting and convenience fee to extend Closing date from December 31, 2108, to January 31, 2019) by wire or as otherwise reasonably directed by Morrow ( Exhibit L hereto; and (v) pay $28,000.00 to Morrow (as set forth in Section 2(b) of the Morrow Independent Contractor Agreement) by wire or as otherwise reasonably directed by Morrow (copies of such wire or other payment instructions shall be promptly provided to all Parties as may be applicable).

6.

Debt Limitation and Indemnification .  The Debt Limitation in the PSMI shall be $432,472.68, $379,472.68 of which has been and is herby acknowledged to have been paid by KonaTel prior to January 26, 2019, and the balance of which is provided to be paid by KonaTel in accordance with paragraph 5 hereof, and with Morrow indemnifying and holding KonaTel harmless from and against any debts or obligations of IM Telecom in excess of the Debt Limitation, all in accordance with the applicable terms and provisions of the PSMI.

7.

Morrow Promissory Notes to KonaTel .  All promissory notes executed and delivered by Morrow to KonaTel in connection with the PSMI or otherwise for any advances paid to or for the benefit of IM Telecom to the date of the Closing are hereby cancelled and compromised at and as of the Closing.

8.

Morrow Cooperation .  Morrow agrees, that as a condition of and in further consideration of the Closing and without any additional compensation other than as referenced herein, that he shall fully cooperate with KonaTel in a reasonable commercial manner, to assist KonaTel in the preparation of or the audit of the financial statements of IM Telecom for the years ended December 31, 2017, and 2018, or as may be otherwise reasonably required or necessary for the Securities and Exchange Commission (“ SEC ”) filing requirements of KonaTel, provided, however , all costs of any accounting professionals or others engaged to prepare or audit such financial statements shall be borne and paid in their entirety by KonaTel.

9.

Disclosure Schedules .  The Parties’ Disclosure Schedules, as may be applicable ( Exhibit M hereto), have been delivered to the respective Party entitled thereto as amended and as of January 31, 2019, and are acceptable to such respective Parties, without qualification.

10.

IM Telecom Books and Records .  At the Closing, Morrow shall forthwith deliver all books and records of IM Telecom not delivered to KonaTel prior to the Closing and as referenced in the Recitals above or as otherwise agreed in writing by KonaTel.

11.

KonaTel Conditions to Closing .  Based upon the terms and condition of this Closing Memorandum, and subject to the satisfaction and fulfillment of all such provision of this Closing Memorandum, KonaTel acknowledges that all of the conditions precedent to its obligations to complete the PSMI as outlined in Section 6 of the PSMI have been fully satisfied.

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12.   Continuing Cooperation .  The Parties shall in good faith take all other reasonable actions required or necessary under the PSMI Transaction Documents as contemplated to affect all matters not otherwise covered hereby but contemplated in the Closing of the PSMI Transaction Documents.

13.

All terms, conditions and covenants of the Parties contained in any of the PSMI Transaction Documents shall continue to be effective and binding on the Parties as may be applicable until their full satisfaction, expiration or waiver in writing by the Party to whom any such terms, conditions and covenant are owed thereby.

14.

SEC Filings .  KonaTel, in its sole discretion, is authorized to file all PSMI Transaction Documents as Exhibits to reports that it is required to file with the SEC, and the Parties shall maintain the Closing of the PSMI and the PSMI Transaction Documents in strict confidence until KonaTel has filed an 8-K Current Report with the SEC announcing the Closing of the PSMI, which is anticipated to be filed with the SEC on or before four business days following the Closing.

( Signature Page Follows )

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Signature Page

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day and year first above written.

PURCHASER: KonaTel, Inc. By: /s/ D. Sean McEwen       D. Sean McEwen, CEO	SELLER: /s/ Trevan Morrow Trevan Morrow, Seller /s/ Jennifer Morrow Jennifer Morrow, Spouse of the Seller (solely for purposes of Section 10.12 of the PSMI) IM TELECOM, LLC (solely for the provisions of Section 4 and Section 6.8 only of the PSMI) By: /s/ Trevan Morrow Trevan Morrow, Manager and Sole Owner

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