ITEM
1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On
April 18, 2019, we entered into a definitive agreement to acquire 50% of CLEC Networks, Inc (“CLEC”), a Delaware Corporation
currently 100%-owned by EDGE FiberNet, Inc., a Delaware Corporation, pursuant to the following terms (CLEC is the “Seller”
and we are the “Buyer” in the terms listed below):
a)
CLEC will engage EDGE FiberNet, Inc. to develop, license and interconnect CLEC’s contemplated Competitive Local Exchange
carrier facility.
b)
The SELLER shall contribute a Lucent LCS TDM/IP Switch (or equivalent switch in functionality and performance) with an appraised
value and/or replacement cost of no less than $100,000.00, which value or cost will be determined by the market comparables method
and listed as an Exhibit in the Closing Documents.
c)
In total, the SELLER will provide CLEC with $150,000.00 of equipment, person hours and management hours. At the end of each calendar
quarter, SELLER will provide BUYER with an itemized list or schedule(s) to document its contributions to CLEC.
d)
The BUYER will issue to EDGE, 100,000 Series B Preferred Shares of the BUYER, which shares will be convertible at SELLER’s
option into 100,000,000 common stock shares of the BUYER.
e)
If CLEC has achieved positive EBITDA (earnings before interest, taxes, depreciation, and amortization, otherwise defined as net
income before net interest expense, taxes, depreciation and amortization expense), no later than three (3) months ending December
31, 2020, SELLER shall have the right to demand that BUYER issue additional Series B preferred shares, common shares and/or stock
options/warrants to restore its diluted equity ownership in BUYER to 10% of the fully-diluted issued and outstanding shares of
BUYER, including common shares, convertible preferred shares and stock options/warrants, but excluding the dilutive impact of
any outstanding convertible debentures. Alternatively, at SELLER’s discretion, SELLER will have the right to demand an additional
10% of the equity in CLEC (i.e., should BUYER’s equity % drop to 40%, SELLER equity % increases to 60%), such shares shall
be held by an independent 3rd party and distributed or returned to CLEC as treasury shares accordingly. Alternatively, CLEC shall
issue additional common shares to SELLER to increase SELLER’s equity, based on an initial equity split of 50/50 and exclusive
of any additional outside financing consummated during the life of CLEC, to 60%.
f)
SELLER and BUYER agree that, if not already provided for by the rules of Delaware corporate law, CLEC’s Articles of Incorporation
shall be modified to state that any shareholder with a simple shareholdings majority will be deemed to have total control of the
CLEC board of directors and may excuse any seated director at any time.
g)
BUYER shall commit to funding CLEC with a total of $150,000.00 over a period of seven months based on a fixed schedule to fund
legal, licensing, capital expenditures, and other costs associated with the buildout of a facilities-based communications business
in the Verizon territories in the North East United States, which encompass NY, NJ, PA, VA, MD, MA, DC, DE and RI. Any shortfall
in funding by the end of Month 7 subsequent to closing shall result in a pro rata adjustment of BUYER’s equity in CLEC via
the return of CLEC shares to SELLER (EDGE) or the issuance of a number of CLEC shares to achieve the same proportional adjustment,
at the SELLER’s discretion. If there is a funding shortfall, after receiving notice by registered mail from SELLER, BUYER
shall have a cure period of 10 business days to fulfill its required funding commitment under this Agreement.
h)
The Partners will rename CLEC to “2050tel Corp.” or similar such corporate name as soon as practicable after closing.
i)
The BUYER shall grant the SELLER an option to spin-off as its own stand-alone public company, which option shall expire three
(3) years from the execution of this Agreement. BUYER’s retention of equity percentage in the spin-off shall be mutually
negotiated between BUYER, SELLER and outside Investors (and their Advisors) in the spin-off entity.
j)
Should such spin-off require a Form 10 or S-1 Registration Statement, the BUYER shall be responsible for preparing such document
unless, at SELLER’s discretion, SELLER releases BUYER from this responsibility and chooses to rely on other resources.
k)
Vikram Grover will be named a Director and Chief Financial Officer of CLEC and Ted Flomenhaft will continue as the President,
Secretary and Director of CLEC.
After
the closing, CLEC Networks intends to change its name to 2050Tel and deploy a facilities-based competitive telecommunications
carrier in the Northeast providing Origination Carrier Services, including DIDs, ports and hosting to VoIP providers and other
service providers. 2050Tel will also introduce services direct to consumers and businesses.