ASSET
          PURCHASE AGREEMENT

      

    

     

    THIS
      ASSET PURCHASE AGREEMENT,
      dated
      as of July 16, 2007 (this “Agreement”),
      is by
      and among Microwave
      Satellite Technologies, Inc., a New Jersey corporation, with an address at
      259-263 Goffle Road, Hawthorne, NJ 07506
      (“Purchaser”),
      Newport
      Telecommunications Co., a New Jersey general partnership, with an address at
      100
      Town Square Place, Jersey City, New Jersey 07310
      (“Seller”)
      and,
      with respect to Section 6 of this Agreement, Telkonet, Inc., a Delaware
      corporation, with an address at 2034 Seneca Meadows Parkway, Germantown,
      Maryland 20876-7004 (“Telkonet”).

     

    W
      I T N E S S E T H:

    


    WHEREAS,
      Seller
      owns and operates facilities and holds certain rights over and pursuant to
      which
      it provides one or more of the following telecommunications services to its
      customers at certain residential and commercial properties in the Jersey City,
      New Jersey development known as Newport which are set forth on Schedule
      A
      annexed
      hereto (collectively, the “Newport
      Properties”):
      (i)
      certain broadband internet services through Cogent Communications and others;
      and (ii) certain telephone service through Verizon (collectively, the
“Broadband
      Business”);
      and

    


    WHEREAS,
      Seller
      desires to sell and transfer to Purchaser and Purchaser desires to purchase
      substantially all of the assets of Seller in connection with Seller’s operation
      of the Broadband Business, as more particularly described herein.

     

    NOW,
      THEREFORE,
      in
      consideration of the foregoing premises and of the mutual covenants and
      agreements hereinafter set forth, the parties hereto mutually covenant and
      agree
      as follows:

     

    1.    Purchase
      and Sale; Closing.

     

    (a)    Sale
      Assets.
      In
      consideration of the Purchase Price (as defined in Section 2(a)), Seller agrees
      to sell to Purchaser, and Purchaser agrees to purchase from Seller, all of
      the
      following, free and clear of all liens, claims and encumbrances (except as
      otherwise expressly set forth in this Agreement), on the terms and conditions
      set forth herein: all properties, privileges, rights, interests and claims,
      real
      and personal, tangible and intangible, of every type and description, including
      goodwill, owned by Seller in connection with, or relating to, the Broadband
      Business and those other personal property assets identified on Schedule
      4(c)
      attached
      hereto (collectively, the “Sale
      Assets”),
      including, without limitation, to the extent applicable: (i) all
      franchises, contracts and other instruments (including without limitation the
      Business Instruments (as defined in Section 4(e)) and set forth on Schedule 4(e)),
      all
      permits, licenses, governmental authorizations, and other intangibles and all
      goodwill in connection therewith; (ii) all electronic devices, trunk and
      distribution cable, amplifiers, power supplies, vaults and pedestals, grounding
      and pole hardware, “Subscriber” (as hereinafter defined) devices (including,
      without limitation, converters, traps, decoders, switches and fittings) and
      headend equipment (origination, signal processing and transmission);
      (iii) all equipment and any inventory (including without limitation the
      items set forth on Schedule
      4(c));
      (iv) all Seller’s Subscriber credit information and Subscriber lists for
      the Broadband Business; (v) all Seller’s rights to enter upon the Newport
      Properties, including the buildings situated thereon, in order to operate the
      Broadband Business thereat; (vii) all engineering specifications, maps,
      plans, diagrams and blue prints, including system engineering drawings and
      as-built maps for the Broadband Business; and (viii) all books, records and
      computer files relating to the Broadband Business; provided,
      however,
      that
      the Sale Assets shall not include, and Purchaser shall not acquire any interest
      in, any of the Excluded Assets (as defined in Section 1(b)). 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)    Excluded
      Assets.
      For
      purposes of this Agreement, the “Excluded
      Assets”
means
      (i) Seller’s cash and cash-equivalents as of the Closing Date (as defined in
      Section 1(c)) and any securities and similar
      investments, whether marketable or unmarketable; (ii) any and all insurance
      policies, bonds, letters of credit and other similar items and any rights and
      claims thereunder; (iii) any and all claims and rights of any nature
      whatsoever for any period prior to the Closing Date, including, without
      limitation, any and all claims against former employees or agents of Seller
      relating to any third-party reimbursements due to Seller for any period prior
      to
      the Closing Date, and any and all claims, rights and interests in and to any
      refunds for taxes or fees of any nature whatsoever for any period prior to
      the
      Closing Date; (iv) Seller’s business certificates and partnership records
      (except to the extent relating to the Broadband Business); (v) Seller’s
      employee records and records relating to pensions and benefit plans, (vi)
      Seller’s trademarks, trade names, service marks, service names, logos, websites
      and similar proprietary rights; (vii) all rights accruing to Seller under this
      Agreement; (viii) all programming agreements other than those set forth on
      Schedule
      1(b)(viii), provided,
      that
      Purchaser shall be entitled to designate as an Excluded Asset any of such
      agreements set forth on Schedule
      1(b),
      by
      giving Seller written notice thereof at least thirty (30) days prior to Closing;
      (ix) Seller’s accounts receivable for services relating to the Broadband
      Business, including, but not limited to, Seller’s pro-rata portion of its
      accounts receivable for the services relating to the Broadband Business which
      were provided during the calendar month in which the Closing occurs (which
      is
      acknowledged to be based on the numbers of days in such month prior to the
      Closing) (provided that any
      accounts receivable with respect to services provided in connection with the
      Broadband Business which remain uncollected sixty days after invoices are mailed
      or 60 days after the Closing, whichever shall occur later, shall become the
      property of Purchaser); (x) all telephone wire; (xi) all assets of Seller
      identified on Schedule
      1(b)(xi);
      and
      (xii) all other assets of Seller other than the Sale Assets.  

     

    (c)    Closing.  The
      closing of the transactions contemplated hereby (the “Closing”)
      shall
      take place simultaneously upon the execution of this Agreement (the
“Closing
      Date”).
      The
      Closing shall be deemed to be effective as of 12:01 a.m. on the Closing Date.
      

     

    2.    Purchase
      Price; Adjustment of Purchase Price.

     

    (a)    Purchase
      Price.
      The
      purchase price for the Sale Assets shall be Two Million Five Hundred Fifty
      Thousand Dollars ($2,550,000.00) consisting of: (a) One Million Five Hundred
      and
      Thirty Thousand Dollars ($1,530,000.00) (the “Stock
      Consideration”)
      paid
      in unregistered shares of $0.001 par value common stock of Telkonet (the
“Telkonet
      Common Stock”)
      based
      on the average of the closing price for one share of Telkonet Common Stock
      for
      the ten (10) trading days occurring immediately prior to the Closing Date;
      and
      (b) One Million Twenty Thousand Dollars ($1,020,000.00) (the “Cash
      Consideration”,
      together with the Stock Consideration, as adjusted pursuant to Section 2(b)
      hereof, the “Purchase
      Price”)
      payable by wire transfer. The Purchase Price will be paid by Purchaser as
      provided in Section 2(b), hereof.

     

    
      
        
        

      

      
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    (b)    Adjustment
      to Purchase Price.
      The
      Purchase Price shall be paid as follows: Upon the signing of this Agreement,
      Five Hundred Ten Thousand Dollars ($510,000.00) shall be delivered to Seller
      by
      wire transfer pursuant to wire instructions provided by Seller and the remainder
      of the Cash Consideration (which is acknowledged to be Five Hundred Ten Thousand
      Dollars ($510,000.00) (the “Deposited
      Cash Consideration”)
      and
      the Stock Consideration will be deposited by the Purchaser with U.S. Bank
      Corporate Trust Services (the “Escrow
      Agent”)
      and
      shall be subject to and disbursed pursuant to the terms of that certain Escrow
      Agreement to be entered into by and between Purchaser, Seller and Escrow Agent
      attached hereto as Exhibit
      A
      (the
“Escrow
      Agreement”).
      The
      Escrow Agent shall deposit the Deposited Cash Consideration into a high yield
      interest bearing account (the “Escrow
      Fund”)
      which
      shall be held therein until released from escrow pursuant to the terms of the
      Escrow Agreement (the “Escrow
      Period”).
      The
      Stock Consideration shall be deposited with the Escrow Agent by the Purchaser
      delivering to the Escrow Agent: (i) stock certificates representing an aggregate
      amount of shares of Telkonet Common Stock equal to the Stock Consideration
      (the
“Deposited
      Shares”);
      and
      (ii) stock powers for the Deposited Shares, duly endorsed in blank by Telkonet.
      Escrow Agent shall pay to Seller the Stock Consideration and Deposited Cash
      Consideration (and any earnings thereon) in accordance with, and pursuant to
      the
      terms of, the Escrow Agreement, less any credits to be provided to Purchaser
      in
      accordance with this Section 2(b). A credit shall be provided to Purchaser
      if
      the number of “Subscribers” in “Good Standing” (as such terms are defined
      below), delivered to Purchaser at Closing is less than 1841 (which is
      acknowledged to be 95% of the 1938 Subscribers that Seller believes to be in
      Good Standing). In the event that a credit shall be issued to Purchaser in
      accordance with this Section 2(b), the credit to Purchaser shall be an amount
      equal to the product of: (i) the difference between: (A) 1841; less (B) the
      actual number of Subscribers in Good Standing; multiplied by (ii) a fraction
      having a numerator of 2,550,000 and a denominator of 1938 (i.e. the number
      of
      Subscribers Seller believes will be in Good Standing (such fraction, the
“Credit
      Per Subscriber”).
      If
      the Subscribers in Good Standing are at least 1841, the Escrow Agent shall
      pay
      all of the Deposited Cash Consideration, Stock Consideration and earnings
      thereon to the Seller. At the end of the Escrow Period if the number of
      Subscribers in Good Standing delivered to Purchaser at Closing exceeds 2035
      (i.e. which is 105% of the 1938 Subscribers Seller believes will be in Good
      Standing), the Purchaser shall immediately pay additional consideration (in
      addition to the Stock Consideration and the Cash Consideration (including any
      earnings thereon) in the amount equal to the product of: (i) the difference
      between: (A) the actual number of Subscribers in Good Standing; less (B) 2035;
      multiplied by (ii) the Credit Per Subscriber. The amount of any credit to be
      provided to Purchaser or additional consideration to be paid to Seller pursuant
      to this Section 2(b) shall be paid: (i) all in cash so long as such amount
      does
      not exceed $100,000.00; or (ii) 40% in cash and 60% in Telkonet Common Stock
      (based on the average of the closing price for one share of Telkonet Common
      Stock for the ten (10) trading days occurring immediately prior to the Closing
      Date), if such amount exceeds $100,000.00. For purposes of this Agreement the
      term “Subscriber”
shall
      mean any customer of Seller who is existing as of the date of Closing. For
      purposes of clarity: (i) a customer shall include any person or entity from
      whom
      Seller, directly or indirectly, receives compensation with respect to or in
      exchange for providing telephone or internet services, including any person
      who
      becomes a customer prior to the Closing Date as a result of any marketing
      program or campaign conducted by or on behalf of Seller described in Schedule
      4(l) hereof; and (ii) a customer shall count as one Subscriber of Seller
      regardless of whether such customer subscribes to one or a combination of the
      internet or telephone services provided by Seller. A Subscriber shall be in
      “Good Standing” if his or her account is no more than sixty (60) days’ in
      arrears on the date of Closing, measured from the date that payment is due
      for
      the first unpaid month’s services. The procedure for finalizing the number of
      Subscribers in Good Standing, additional consideration to be paid to Seller,
      if
      any, and the credits to be provided to Purchaser, if any, shall be as set forth
      in the Escrow Agreement. The credits to be paid to Purchaser, if any, or the
      additional consideration to be paid to Seller, if any, shall be paid pursuant
      to
      the terms of this Section 2(b) and the Escrow Agreement. 

     

    
      
        
        

      

      
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    (c)    Allocation
      of Purchase Price.
      The
      Purchase Price shall be allocated among the Sale Assets in accordance with
      Schedule
      1(c).
      Seller
      and Purchaser shall be bound by such allocations, shall not take any position
      inconsistent with such allocations, and shall file all returns and reports
      with
      respect to the transactions contemplated by this Agreement on the basis of
      such
      allocations.

     

    3.    Liabilities
      Not Assumed.
      Seller
      agrees that Purchaser is not assuming any liabilities or obligations of Seller
      hereunder other than: (i) obligations and liabilities with respect to the period
      from and after the Closing arising under any of the Business Instruments and
      Licenses set forth on Schedule 4(e)
      and
Schedule
      4(f),
      respectively, (ii) obligations and liabilities arising out of Purchaser’s
      operation of the Broadband Business from and after the Closing including,
      without limitation, executory Subscriber contracts and (iii) obligations and
      liabilities for Subscriber prepayments, deposits and credits of the Broadband
      Business as of the Closing Date (all such liabilities and obligations described
      in Sections 3(i), (ii) and (iii) being hereinafter collectively referred to
      as
      the “Assumed
      Liabilities.”
For
      purposes of clarity, the parties agree that Purchaser is not assuming any
      obligations or liabilities arising under or related to the legal proceedings
      described in Schedule
      4(g)
      hereto
      and should Purchaser incur any loss or damage directly resulting from the
      obligations or liabilities arising under or related to the legal proceedings
      described in Schedule
      4(g)
      and seek
      indemnification for such losses or damages in accordance with the terms of
      this
      Agreement, the limitations set forth in Section 9(e) hereof shall not apply.
      At
      and after the Closing Date, Purchaser shall assume, discharge and otherwise
      satisfy the Assumed Liabilities. Other than any Assumed Liabilities, obligations
      and liabilities with respect to the pre-Closing period shall be the
      responsibility of Seller, and if any such item is paid by Purchaser following
      the Closing, Seller shall be obligated to reimburse Purchaser therefor in
      accordance with the terms of this Agreement.

     

    4.    Seller’s
      Representations and Warranties.
      Seller
      represents and warrants to Purchaser as follows:

     

    (a)    Organization;
      Authority.
      Seller
      is a New Jersey general partnership and has all requisite power and authority
      to
      conduct the Broadband Business as it is now being conducted and to own and
      operate the Sale Assets. Newport Telecommunications Company., Inc., the
      corporate general partner of Seller is authorized to execute and deliver this
      Agreement on behalf of Seller in accordance with Seller’s partnership agreement.
      This Agreement is the legal, valid and binding obligation of Seller, enforceable
      against Seller in accordance with its terms except insofar as enforceability
      may
      be limited by applicable bankruptcy, insolvency, reorganization, moratorium
      or
      similar laws now or hereafter in effect affecting creditors’ rights generally,
      or by principles governing the availability of equitable remedies.

     

    
      
        
        

      

      
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    (b)    Consents.
      Except
      as set forth on Schedule 4(b),
      neither
      the execution and delivery of this Agreement by Seller nor the consummation
      by
      Seller of the transactions contemplated hereby will (i) violate or conflict
      with
      Seller’s partnership agreement; (ii) violate, conflict with, constitute a
      default under, result in the termination of, accelerate the performance required
      by or result in the imposition of any encumbrance pursuant to any agreement
      or
      other instrument to which the Seller is a party or by which Seller is bound
      except where the violation, conflict, default, termination, acceleration or
      imposition would not have a Material Adverse Effect; or (iii) violate any
      statute, law, rule or regulation or any judgment, decree, order, regulation
      or
      rule of any court or federal, state or local governmental authority to which
      Seller is subject. Schedule
      4(b) sets
      forth a true and complete list of all consents, approvals, waivers, filings
      and
      notices necessary or required to consummate the transactions contemplated hereby
      (collectively, the “Required
      Consents”).
      As
      used in this Agreement the term “Material
      Adverse Effect”
means
      any effect or change that would be materially adverse to the Broadband Business
      or the Sale Assets, or on the ability of Seller to timely consummate the
      transactions contemplated hereby. 

     

    (c)    Title
      to Sale Assets. Except
      as
      set forth on Schedule
      4(c),
      Seller
      has sole, good and valid title to all of the Sale Assets consisting of tangible
      and intangible personal property, including without limitation Business
      Instruments (subject to the terms of such Business Instruments), Licenses
      (subject to the terms of such Licenses), Subscriber accounts, Subscriber lists,
      inventory, equipment and general intangibles, all free and clear of any liens,
      claims and other encumbrances. A true and complete list of Seller’s material
      tangible assets is set forth on Schedule
      4(c).
      

     

    (d)    Right
      of Access to Real Property. Attached
      as Exhibit
      B
      is that
      certain Grant of License and Right of Entry Agreement dated as of January 1,
      2007, between Hudson Conduit Associates LLC (“Hudson
      Conduit”)
      and
      Seller (the “License
      and ROE”),
      permitting Seller to have access to those Newport Properties set forth in the
      License and ROE in order to provide the Broadband Business thereat, through
      a
      certain conduit owned by Hudson Conduit. Seller has a good and valid license
      and
      right of access and entry to those Newport Properties described in the License
      and ROE in order to provide the Broadband Business thereat. The License and
      ROE
      is subject to Permitted Encumbrances (as
      hereinafter defined). As
      used
      herein, “Permitted
      Encumbrances”
means
      (a) liens for taxes, assessments and governmental charges not yet due and
      payable; (b) zoning laws and ordinances and similar legal requirements; (c)
      rights reserved to any governmental authority to regulate the affected real
      property; and (d) mortgages, deeds of trust or similar instruments, (e) ground
      or underlying leases, (f) security interests of the applicable property owners
      and (g) all easements, rights-of-way, servitudes, permits, restrictions and
      imperfections or irregularities in title which are reflected in the public
      records and that do
      not
      individually or in the aggregate materially or adversely interfere with any
      rights of Seller in and to the License and ROE, including but not limited to
      rights to conduct the Broadband Business or to consummate the transactions
      contemplated herein. The Parties agree that no access rights have been provided
      for telecommunications services provided by Seller to its customers at the
      Shore
      Condominium Residences at Newport located at 20 Newport Parkway, Jersey City,
      New Jersey (the “Shore
      Building”)
      since
      Purchaser has obtained or will obtain access rights separately from Shore at
      Newport Condominium Association, Inc. 

     

    
      
        
        

      

      
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    (e)    Business
      Instruments.
      Schedule
      4(e)
      sets
      forth a true and complete list of all contracts, franchises, leases (for real
      and personal property), licenses, pole attachment and other utility agreements,
      retransmission consent agreements, service and access agreements and all other
      agreements and instruments (other than Licenses) relating to the Broadband
      Business which are not Excluded Assets (the “Business
      Instruments”),
      including the parties thereto and the subject matter and expiration dates
      thereof. Seller has delivered to Purchaser true and complete copies of all
      Business Instruments, including all amendments, modifications and supplements
      thereto. Each Business Instrument is in full force and effect and constitutes
      the legal, valid and binding obligation of Seller
      and, to
      Seller’s Knowledge any other party(ies) thereto and is enforceable in accordance
      with its respective terms, except insofar as enforceability may be limited
      by
      applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
      now or hereafter in effect affecting creditors’ rights generally, or by
      principles governing the availability of equitable remedies. There are no
      defaults which have occurred and are continuing beyond any applicable notice
      and
      cure periods under any of the Business Instruments by Seller or, to Seller’s
      Knowledge, the other party(ies) thereto; nor has any event occurred that, with
      the giving notice or the passage of time or both, would constitute a default
      or
      event of default thereunder. The Business Instruments delivered to Purchaser
      contain all obligations and liabilities of Seller with respect to such
      instruments or the rights granted thereunder. Seller is not a party to, and
      neither Seller, the Sale Assets nor the Broadband Business is subject to or
      bound by, any agreement limiting Seller’s ability to compete in any services
      provided in connection with the Broadband Business in the United States. As
      used
      in this Agreement the term “Knowledge
      of Seller”
or
      “Seller’s
      Knowledge”
shall
      mean the actual knowledge of Rick Garrigan, Seller’s, General Manager and all
      direct reports to him and/or such knowledge that such individuals could be
      expected to discover or otherwise become aware in the course of conducting
      a
      reasonably comprehensive investigation concerning the existence of such fact
      or
      matter.

     

    (f)    Licenses.
      Schedule
      4(f)
      sets
      forth a true and complete list of all governmental or regulatory licenses,
      permits and other governmental authorizations and approvals held by Seller
      relating to the Broadband Business (“Licenses”),
      including the grant and the termination dates thereof. To the Knowledge of
      Seller, all Licenses are in full force and effect, and Seller has not been
      notified that it is subject to any fines or penalties in connection
      therewith.

     

    (g)    Legal
      Proceedings.
      Except
      as set forth on Schedule
      4(g),
      there is
      (i) no suit, action or proceeding pending or, to Seller’s Knowledge, threatened,
      against Seller or the Broadband Business or any of the Sale Assets, and (ii)
      no
      judgment, decree, injunction, rule or order or any investigation or proceeding
      of any court, governmental department, agency or instrumentality involving
      Seller and/or the Sale Assets or the Broadband Business. 

     

    
      
        
        

      

      
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    (h)    Financial
      Statements.
      Seller
      has delivered to Purchaser true and correct copies of the financial statements
      identified on Schedule
      4(h)
      (collectively, the “Seller’s Financial
      Statements”).
      Seller’s
      Financial Statements: (i) are correct and complete in accordance with the books
      and records of Seller, (ii) fairly present the financial condition of Seller
      as
      of such dates and the results of its operations for the periods covered thereby,
      and (iii) were prepared in accordance with GAAP (subject to year-end adjustments
      and except for the omission of certain footnotes and other presentation items
      required by GAAP with respect to audited financial statements, which
      adjustments, footnotes and presentation items, if prepared as required for
      audited financial statements, would not reveal any fact or condition materially
      adverse to the financial condition or results of Seller presented in such
      unaudited Statements). 

     

    (i)    Conduct
      of Business.
      Except
      as set forth on Schedule
      4(i):
      (i),
      Seller has operated the Broadband Business in compliance in material respects
      with all applicable laws, regulations, ordinances and other legal requirements;
      and (ii) the Sale Assets constitute all of the assets, rights and properties
      necessary to conduct, operate and maintain the Broadband Business as conducted,
      operated and maintained by Seller immediately prior to the date
      hereof.

     

    (j)    Brokers.
      Seller
      has not employed any broker, finder or investment banker in connection with
      the
      Sale Assets transaction contemplated by this Agreement, nor is any broker,
      finder or investment banker entitled to any brokerage, finder or other fee
      or
      commission from Purchaser, in connection with this Agreement or the transactions
      contemplated hereby. 

     

    (k)    Sales
      Tax.
      There
      is no sales tax due from Seller with respect to the Broadband Business for
      periods prior to the Closing Date that are outstanding other than sales taxes
      for periods for which as of the Closing Date a sales tax return is not yet
      required to be filed. 

     

    (l)    Long
      Term Obligations.
      The
      form(s) of all written agreement(s), if any, which Seller may enter into with
      Subscribers, obligating Seller to provide specific services in connection with
      the Broadband Business, is/are attached to Schedule
      4(l)
      hereof.


     

    5.    Purchaser’s
      Representations and Warranties.
      Purchaser represents and warrants to Seller as follows:

     

    (a)    Organization;
      Authority.
      Purchaser is a corporation duly organized and in good standing under the laws
      of
      the State of New Jersey and has all requisite power and authority to carry
      on
      its business as it is now being conducted and to own and operate the properties
      and assets it now owns. Purchaser, has all requisite power and authority to
      execute and deliver this Agreement and to consummate the transactions
      contemplated hereby. This Agreement is the legal, valid and binding obligation
      of Purchaser, enforceable against Purchaser in accordance with its terms, except
      insofar as enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or similar laws now or hereafter in effect or by
      principles governing the availability of equitable remedies.

     

    (b)    No
      Violation.
      Neither
      the execution and delivery of this Agreement by Purchaser nor the consummation
      by Purchaser of the transactions contemplated hereby will (i) violate or
      conflict with Purchaser’s certificate of formation or operating agreement; (ii)
      violate, conflict with, constitute a default under, result in the termination
      of
      or accelerate the performance required by any agreement or arrangement to which
      Purchaser is a party or by which Purchaser is bound; or (iii) violate any
      statute, law, rule or regulation or any judgment, decree, order, regulation
      or
      rule of any court or federal, state or local governmental authority, which
      violation, conflict, default, termination or acceleration would have a material
      adverse effect on the ability of Purchaser to perform its obligations
      hereunder.

     

    
      
        
        

      

      
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    (c)    Legal
      Proceedings.
      There
      is no (i) suit, action, proceeding pending or to Purchaser’s Knowledge,
      threatened against Purchaser, and (ii) judgment, decree, injunction, rule or
      order or any investigation or proceeding of any court agreement department,
      agency or instrumentally involving Purchaser, which would cause Purchaser to
      be
      unable to consummate the transactions contemplated by this Agreement.
As
      used
      in this Agreement the term “Knowledge
      of Purchaser”
or
      “Purchaser’s
      Knowledge”
shall
      mean the actual knowledge of Frank Matarazzo Purchaser’s, Chief Executive
      Officer and/or such knowledge that such individual could be expected to discover
      or otherwise become aware in the course of conducting a reasonably comprehensive
      investigation concerning the existence of such fact or matter

     

    (d)    Brokers.
      Purchaser has not employed any broker finder or investment banker in connection
      with the Sale Assets Transaction contemplated by this agreement, nor is any
      broker, finder or investment banker entitled to any brokerage finder or other
      fee or commission from Purchaser or Telkonet in connection with this Agreement
      or the transactions contemplated hereby. 

     

    (e)    Financial
      Statements.
      The
      Purchaser’s financial statements are identified on Schedule 5(e) (the
“Purchaser’s Financial Statements”). Purchaser’s
      Financial Statements: (i) are correct and complete in accordance with the books
      and records of Purchaser, (ii) fairly present the financial condition of
      Purchaser as of such dates and the results of its operations for the periods
      covered thereby, and (iii) were prepared in accordance with GAAP (subject to
      year-end adjustments and except for the omission of certain footnotes and other
      presentation items required by GAAP with respect to audited financial
      statements, which adjustments, footnotes and presentation items, if prepared
      as
      required for audited financial statements, would not reveal any fact or
      condition materially adverse to the financial condition or results of Purchaser
      presented in such unaudited Statements). 

     

    6.    Telkonet’s
      Representations and Warranties; Breach of Representations or
      Warranties.
      

    


    (a)   Telkonet
      hereby represents and warrants to Seller, the following: 

    


    (i)    Organization.
      Telkonet is a corporation duly organized and validly existing under the laws
      of
      the State of Delaware and is in good standing under such laws. Telkonet has
      the
      requisite corporate power to own and operate its properties and assets and
      to
      carry on its business as presently conducted and as proposed to be conducted.
      Telkonet is qualified to do business as a foreign corporation in each
      jurisdiction in which the ownership of its property or the nature of its
      business requires such qualification. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (ii)    Authority;
      No Conflict.
      The
      execution, delivery and performance by Telkonet of its obligations under this
      Agreement and the consummation by Telkonet of all transactions contemplated
      to
      consummated by Telkonet pursuant to this Agreement have been duly authorized
      by
      all necessary corporate action. This Agreement has been duly executed and
      delivered by Telkonet and constitutes the valid and binding obligations of
      Telkonet enforceable in accordance with its respective terms, except
      as
      limited by applicable bankruptcy, insolvency, reorganization, moratorium or
      other laws of general application affecting enforcement of creditors’ rights and
      general principles of equity that restrict the availability of equitable
      remedies.
      The
      execution and delivery of this Agreement and the consummation of the
      transactions contemplated to be consummated by Telkonet hereunder, including,
      without limitation, the issuance, sale and delivery of the shares of Telkonet
      common stock comprising: (i) the Stock Consideration; and (ii) the additional
      consideration to be delivered to Seller in accordance with the terms of Section
      2(b) of this Agreement, if applicable, (collectively, the “Shares”),
      will
      not: (A) conflict with or violate any provision of the Certificate of
      Incorporation, Bylaws or other governing document of Telkonet; or (B) conflict
      with, result in a breach of, constitute a default under, result in the
      acceleration of or create in any party the right to accelerate, terminate,
      modify or cancel any contract, lease, sublease, license, agreement, mortgage
      for
      borrowed money, instrument of indebtedness or other arrangement to which
      Telkonet is a party or by which Telkonet is bound or to which its assets are
      subject. 

    


    (iii)    Legal
      Proceedings.
      There
      is no (i) suit, action, proceeding pending or to the knowledge of Telkonet,
      threatened against Telkonet, and (ii) judgment, decree, injunction, rule or
      order or any investigation or proceeding of any court agreement department,
      agency or instrumentally involving Telkonet, which would restrict of prohibit
      Telkonet from consummating the transactions contemplated by this Agreement,
      including, without limitation, issuing and delivering all of the Shares to
      Seller, as contemplated under this Agreement. 

    


    (iv)    Governmental
      Consents.
      No
      consent, approval, order or authorization of, or registration qualification,
      designation declaration or filing with any
      federal,
      state, local or provincial governmental authority or
      any
      other regulatory agency or authority is required in connection with the
      issuance, sale and delivery of the Shares as contemplated by this Agreement
      except for filings which have been made prior to Closing under applicable
      federal and state securities laws. 

    


    (v)    Issuance
      of Stock Consideration.
      The
      issuance, sale and delivery of the Shares has been duly authorized by all
      necessary corporate action on the part of Telkonet. The Shares, when so issued,
      sold and delivered in accordance with this Agreement, will be duly and validly
      issued, fully paid and non-assessable. 

    


    (vi)    Title
      to Shares.
      Telkonet is the sole owner of the Shares, has the unrestricted right to sell
      and
      transfer the Shares to Seller and Telkonet will transfer and deliver the Shares
      to Seller free and clear of all liens, encumbrances, options or other adverse
      claims (as defined in the Uniform Commercial Code) of any kind whatsoever.
      

    


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (b)    Indemnification
      by Telkonet.
      The
      representations and warranties contained in this Section 6 shall survive for
      the
      duration of the applicable statute of limitations with respect to the matters
      set forth therein. Telkonet shall indemnify and hold all “Seller Indemnitees”
(as defined in Section 9, below) harmless from and against any “Damages” (as
      defined in Section 9, below) asserted against, imposed upon or incurred by
      any
      such Seller Indemnitee to the extent resulting from a breach of any of
      Telkonet’s representations or warranties set forth in this Section
      6.

     

    7.    Purchaser’s
      Access to Seller’s Books and Records After Closing.
      Seller
      shall, for a period of three (3) years after Closing, give Purchaser’s officers,
      employees, accountants and other representatives, at Purchaser’s expense,
      reasonable access to Seller’s business and financial records and accounts during
      Seller’s business hours to the extent reasonably necessary (and at no expense to
      Seller), to enable Purchaser to obtain any information and data required in
      connection with the preparation of Purchaser’s and its affiliates’ financial
      statements and any regulatory filings relating to the Broadband
      Business.

     

    8.    Closing
      Conditions and Deliveries.
      

     

    (a)    Seller’s
      Deliveries.
      At or
      prior to the Closing, Seller shall deliver the following to
      Purchaser:

     

    (i)     
      Four
      (4)
      originals of the Escrow Agreement in the form of Exhibit
      A
      annexed
      hereto, duly executed by Seller;

     

    (ii)   
Four
      (4)
      original of the Assignment and Assumption Agreement in the form of Exhibit
      C
      annexed
      hereto, duly executed by Seller; 

     

    (iii)    such
      other instruments or documents as Purchaser shall request to evidence the
      transfer of all the Sale Assets to Purchaser in accordance with the terms hereof
      (including, without limitation, a Bill of Sale in the form of Exhibit
      D,
      attached hereto);

     

    (iv)    All
      Required Consents, other than any renewal of Seller’s ARIN membership, in a form
      reasonably satisfactory to Purchaser, the terms of which shall not contain
      any
      change in the underlying instrument that would constitute a Materially Adverse
      Effect;

     

    (v)    
a
      true
      and complete list of Subscribers as of a date reasonably close to (and not
      more
      than five (5) business days preceding) the Closing Date, an updated list of
      Subscriber deposits and prepayments;

     

    (vi)    a
      true
      and complete accounts receivable aging report as of a date not more than two
      (2)
      business days prior to the Closing Date;

     

    (vii)   evidence,
      reasonably satisfactory to Purchaser, of the release or termination of all
      security interests, liens and other encumbrances affecting the Sale Assets
      (other than the Permitted Encumbrances), if any; 

     

    (viii)  
Four
      (4)
      original executed copies of an Agreement of Lease between 25 River Drive South
      Urban Renewal Company, as Landlord and Microwave Satellite Technologies, Inc.,
      as tenant for the office premises located on the 6th floor of Newport Office
      Center VIII, 100 Town Square Place, Jersey City, New Jersey.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (ix)    A
      Certificate dated as of the Closing Date and signed by the duly authorized
      officer of the corporate general partner of Seller: (A) attesting to the
      incumbency of each person who shall execute this Agreement as an officer of
      the
      corporate general partner on behalf of Seller and any other agreement entered
      into in connection with this Agreement to which Seller is a party; and (B)
      certifying that attached thereto is a true and complete copy of the Partnership
      Agreement of the Seller as in effect as of the Closing Date; and 

     

    (x)    
Written
      resolutions of the corporate general partner of Seller authorizing the
      execution, delivery and performance of the corporate general partner on behalf
      of the Seller of this Agreement and any other agreement executed in connection
      with this Agreement to which Seller shall be a party.

     

    (b)    Purchaser’s
      Deliveries.
      At or
      prior to the Closing, Purchaser shall deposit the Stock Consideration and the
      Deposited Cash Consideration with the Escrow Agent as provided for in Section
      2(b) herein and shall deliver the following to Seller: 

     

    (i)     
      Five
      Hundred Ten Thousand Dollars ($510,000.00) shall be delivered to Seller by
      wire
      transfer pursuant to wire instructions provided by Seller; 

     

    (ii)   
Four
      (4)
      originals of the Escrow Agreement in the form of Exhibit
      A
      annexed
      hereto, duly executed by Purchaser;

     

    (iii)    Four
      (4)
      original of the Assignment and Assumption Agreement in the form of Exhibit
      C
      annexed
      hereto, duly executed by Purchaser; 

     

    (iv)    Four
      (4)
      originals of a fully executed License from Purchaser to Realty Information
      Systems Co. to use fiber constituting a portion of the Sale Assets in the form
      annexed hereto as Exhibit
      E.

     

    (v)    A
      Secretary’s Certificate dated as of the Closing Date and signed by the Secretary
      of Purchaser: (A) attesting to the incumbency of each person who shall execute
      this Agreement and any other agreement entered into in connection with this
      Agreement to which Purchaser is a party; (B) certifying that attached thereto
      is
      a true and complete copy of the Certificate of Incorporation of the Purchaser
      as
      in effect as of the Closing Date; and (C) certifying that attached thereto
      is a
      true and complete copy of Purchaser’s Bylaws as in effect as of the Closing
      Date. 

     

    (vi)    Written
      resolutions or the requisite approvals of the board of directors of the
      Purchaser and the shareholders of the Purchaser, in form and substance
      reasonably satisfactory to Seller, authorizing the execution, delivery and
      performance by Purchaser of this Agreement and any other agreement executed
      in
      connection with this Agreement to which Purchaser is a party, which copy shall
      be certified by the appropriate officer of the Purchaser as being the true
      and
      correct copies of such approvals.

     

    (vii)   Written
      resolutions or the requisite approvals of the board of directors of Telkonet,
      in
      form and substance reasonably satisfactory to Seller, authorizing the issuance
      of the Shares and the execution, delivery and performance by Telkonet of its
      obligations under this Agreement, which copy shall be certified by the
      appropriate officer of Telkonet as being the true and correct copies of such
      approvals. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    9.    Survival
      and Indemnification.

     

    (c)    Survival
      of Representations and Warranties. 
      The
      representations and warranties contained in this Agreement shall survive the
      Closing for a period of one (1) year, except that the representations and
      warranties set forth in: (i) the second sentence of Section 4(a), (ii) Section
      4(c) (to the extent related to the title of the Sale Assets), (iii) Section
      4(j), (iv) the second sentence of Section 5(a) and (v) Section 5(d) shall
      survive for the duration of the applicable statute of limitations with respect
      to the matters set forth therein. 

     

    (d)    Indemnification
      by
      Seller.
      Subject
      to the limitations set forth in Section 9(e) below, Seller
      shall indemnify and hold Purchaser and its affiliates (including said parties’
officers, directors, partners, shareholders, managers, members, employees and
      agents) (“Purchaser
      Indemnitees”)
      harmless from and against any demand, claim, action, damage or liability
      (including without limitation reasonable attorney’s fees) (collectively,
“Damages”)
      asserted against, imposed upon or incurred by any such Purchaser Indemnitee
      to
      the extent resulting from: (i) a breach of any of Seller’s representations or
      warranties set forth herein; (ii) a breach of any of Seller’s covenants set
      forth herein; (iii) any litigation, legal proceeding or claim against Purchaser
      or Purchaser Indemnitees relating to Seller’s relationship with any Subscriber,
      the Broadband Business or the Sale Assets during the time period prior to the
      Closing Date; or (iv) any liability or obligation relating to the period prior
      to the Closing
      Date and not specifically assumed by Purchaser in accordance with the provisions
      hereof (any such claim, a “Purchaser Indemnification Claim”). 

     

    (e)    Indemnification
      by
      Purchaser.
      Purchaser shall indemnify and hold Seller and its affiliates (including said
      parties’ officers, directors, partners, shareholders, managers, members,
      employees and agents (“Seller
      Indemnitees”)
      harmless from and against any Damages asserted against, imposed upon or incurred
      by any such Seller Indemnitee to the extent resulting from: (i) a breach of
      any
      of Purchaser’s representations or warranties set forth herein; (ii) a breach of
      any of Purchaser’s covenants set forth herein; (iii) any litigation, legal
      proceeding or claim against Seller or Seller Indemnitees relating to Purchaser’s
      relationship with any of its customers (including, any Subscriber), the
      Broadband Business or the Sale Assets during the time period following the
      Closing Date; or
      (iv)
      any liability or obligation relating to the period prior to the Closing Date
      and
      which has been specifically assumed by Purchaser in accordance with the
      provisions hereof
      (any
      such
      claim, a “Seller
      Indemnification Claim”).

     

    (f)    Indemnification
      Procedures.
      Purchaser
      shall promptly notify Seller of any
      Purchaser Indemnification Claim and Seller shall promptly notify Purchaser
      of
      any Seller Indemnification Claim, provided,
      that the failure to give such notice shall not affect any of Purchaser’s or
      Seller’s right to indemnification unless the
      party
      from which indemnification is sought
      shall
      have been materially prejudiced thereby.
      If the
      claim is as a result of a third party matter, the
      indemnifying party
      shall be
      entitled to participate in the defense thereof, and, if it so chooses, to assume
      the defense thereof with counsel that it selects, and subject to the
      other
      party’s
      right
      to participate in such defense and to employ its own counsel, at its own
      expense. Neither
      Seller
      nor
      Purchaser shall consent to the entry of any judgment or enter into any
      settlement with respect to the
      other
      party without
      the prior written consent of such other party,
      which
      consent will not be unreasonably withheld,
      provided
      that Seller or Purchaser, shall have assumed the defense of a Purchaser
      Indemnification Claim
      or
      Seller Indemnification Claim, as applicable, and such party shall
      have
      acknowledged in writing its obligation
      to
provide
      indemnification in connection
      with
such
      claim.
      

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (e)    Limitations.
      Seller
      shall not be liable to the Purchaser Indemnitees under this Section 9 for any
      Damages unless and until the cumulative amount otherwise due to the Purchaser
      Indemnitees for all claims for Damages under this Section 9 exceeds Seventy-Five
      Thousand Dollars ($75,000.00). Thereafter, the amount due to the Purchaser
      Indemnitees for all claims for indemnification under this Section 9 in excess
      of
      Seventy-Five Thousand Dollars ($75,000.00) shall be indemnifiable, but in no
      event shall the Seller be required to indemnify the Purchaser Indemnitees under
      this Section 9 once the aggregate of: (i) the amount of Seller’s liability to
      the Purchaser Indemnitees under this Section 9 for any Damages; and (ii) the
      aggregate amount incurred by the “Newport Entities” (as defined in that certain
      Agreement dated as of the date hereof, by and among Seller, Purchaser and those
      other parties identified therein as “Building Owners” which provides for
      agreements among the parties relating to DirecTV programming services at certain
      Newport Properties (the “DirecTV Agreement”)) arising from or related to the
“Newport Entities Obligations” (as defined in the DirecTV Agreement) exceed One
      Million Dollars ($1,000,000.00).

    


     

    (f)    Sole
      Remedy.
      The
      remedies set forth in this Section 9 of the Agreement shall be the exclusive
      remedies of the: (i) parties to this Agreement, (ii) the Seller Indemnitees
      and
      (iii) the Purchaser Indemnitees with respect to the subject matter of this
      Agreement and shall control and determine the rights and obligations of the:
      (A)
      parties to this Agreement, (B) the Seller Indemnitees, and (C) the Purchaser
      Indemnitees, with respect to all claims, demands, losses and other causes of
      action arising in connection with this Agreement. 

     

    (g)    Insurance
      Proceeds.
      The
      amount of any Damages for indemnification to be provided under this Section
      9
      shall be net of any amount actually recovered by the Purchaser Indemnitees
      or
      Seller Indemnitees, as applicable, under any applicable insurance policies
      with
      respect to such Damages. 

     

    10.   Access
      to Books and Records.
      Seller
      shall have the right, from time to time, at Seller’s expense, through its duly
      authorized agents, to review and inspect, during reasonable business house
      and
      upon reasonable notice to the Purchaser, all corporate books and business
      records pertaining to the Broadband Business for periods prior to the Closing
      Date which were transferred from Seller to Buyer in accordance with the terms
      of
      this Agreement. 

     

    11.    
      Miscellaneous.

     

    (g)    Notices.
      Any
      notice or other correspondence to be given in connection with this Agreement
      shall be in writing and shall be delivered by hand, overnight courier,
      registered or certified mail (postage prepaid, with return receipt requested),
      or by facsimile (provided that the sender receives printed confirmation of
      receipt) to the addresses and/or facsimile numbers set forth below or to such
      other address or facsimile number as a party may designate by notice given
      to
      the other party in accordance with the terms hereof. Any notice to be given
      by a
      party may be given by such party’s counsel. Each notice shall be deemed
      effective upon its receipt or refusal.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    


    
      	
              Notices
                to Seller :

              James
                Lavin 

              Newport
                Telecommunications Co.

              111
                Town Square Place

              Jersey
                City, New Jersey 07310

            	
              with
                a copy to:

              James
                T. LeFrak 

              Lefrak
                Organization, Inc.

              40
                West 57th
                Street, 23rd
                Floor

              New
                York, New York 10019

            
	 	 
	 	
              with
                a copy to:

              Riker,
                Danzig, Scherer Hyland & Perretti, LLP

              One
                Speedwell Avenue

              PO
                Box 1981

              Morristown,
                New Jersey 07962

              Attention:
                Robert Daleo, Esq.

              Fax:
                (973) 538-1984

            
	 	 
	
              Notices
                to Purchaser:

               

              Frank
                T. Matarazzo

              258-263 Goffle
                Road

              Hawthorne,
                New Jersey 07506

              Fax:
                (973) 304-6081
                

               

            	
              with
                a copy to:

              Womble
                Carlyle Sandridge & Rice, PLLC

              1401
                Eye Street, N.W.

              Seventh
                Floor

              Washington,
                DC 20005

              Attention:
                Howard J. Barr

              Fax:
                (202) 261-0006

            


    

     

    (h)    Expenses;
      Taxes.
      Except
      as otherwise set forth herein, each party shall be responsible for its own
      fees
      and expenses (including legal fees) in connection with the transactions
      contemplated hereby. Purchaser shall be responsible for and shall pay all
      federal, state and local transfer, sales, use and other taxes with respect
      to
      the sale of the Sale Assets. 

     

    (i)    Further
      Assurances.
      Seller
      and Purchaser hereby agree, at their own cost and expense, to execute and
      deliver any agreement, document or instrument and to take or cause to be taken
      any further action that the other may request in order to more fully give effect
      to the transactions contemplated hereby.

     

    (j)    Governing
      Law. 
      This
      Agreement shall be governed by and construed in accordance with the laws of
      New
      Jersey without giving effect to the principles of conflicts of
      laws.

     

    (k)    Entire
      Agreement; Amendment; Waiver. 
      This
      Agreement (including all schedules, exhibits and other agreements executed
      in
      connection with this Agreement) constitutes the entire agreement and
      understanding of the parties and supersedes any and all prior and
      contemporaneous agreements, understandings, correspondence, representations
      and
      warranties, oral or written. This Agreement shall not be amended, nor shall
      any
      term or provision hereof be waived, except in a writing signed by the party(ies)
      affected thereby. No waiver shall operate as a waiver of, or estoppel with
      respect to, any subsequent breach.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (l)    
Successors
      and Assigns. 
      This
      Agreement shall be binding upon and inure to the benefit of the parties hereto
      and their respective successors and assigns, except that neither party shall
      assign its obligations or rights hereunder without the other party’s prior
      written consent. Any attempted or purposed assignment in violation of this
      Section shall be null and void and have no force or effect.

     

    (m)   Counterparts;
      Facsimile Signatures.  This
      Agreement may be executed in counterparts that together shall constitute a
      single instrument. A facsimile copy of any signature hereto and to any amendment
      or supplement hereto shall be valid.

     

    (n)    Confidentiality.  The
      parties covenant and agree not to communicate the terms or any aspect of this
      Agreement and the transactions contemplated hereby to any person or entity
      and
      to hold, in the strictest confidence, the content of any and all information
      in
      respect of the Sale Assets, Broadband Business, Seller or Purchaser, which
      is
      disclosed by Seller to Purchaser or by Purchaser to Seller, as applicable,
      without the express written consent of the party disclosing such information;
      provided, however, that either party may, without consent, disclose the terms
      hereof and the transactions contemplated hereby (a) to its respective advisors,
      consultants, attorneys, accountants, partners, investors, and lenders (the
      “Transaction
      Parties”)
      without the express written consent of the other party, so long as any such
      Transaction Parties to whom disclosure is made shall also agree to keep all
      such
      information confidential in accordance with the terms hereof; and (b) if
      disclosure is required by law or by regulatory or judicial process or pursuant
      to any regulations promulgated by the New York Stock Exchange or other public
      exchange for the sale and purchase of securities, provided that in such event
      Seller or Purchaser, as applicable, shall notify the other party in writing
      of
      such required disclosure, shall exercise all commercially reasonable efforts
      to
      preserve the confidentiality of the confidential documents or information,
      as
      the case may be, including, without limitation, reasonably cooperating with
      the
      other party to obtain an appropriate order or other reliable assurance that
      confidential treatment will be accorded such confidential documents or
      information, as the case may be, by such tribunal and shall disclose only that
      portion of the confidential documents or information which it is legally
      required to disclose. The foregoing confidentiality obligations shall not apply
      to the extent that: (A) any such information is: (i) a matter of public record;
      (ii) is provided in other sources readily available or (iii) is otherwise
      properly, legally and generally known, in the telecommunications industry other
      than as a result of disclosure by Seller or Purchaser or the Transaction
      Parties, as applicable; or (B) such information was
      in
      the party’s possession prior to entering into this Agreement or prior to the
      disclosure by the other party.
      The
      provisions of this Section shall survive the Closing.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (i)    
Non-competition.
      In
      consideration of the payment of the Purchase Price and the other provisions
      of
      this Agreement, Seller shall not, for a period of three (3) years from the
      date
      of this Agreement: (a) own, operate, manage, maintain or participate in any
      business which is primarily engaged in the business of offering or providing
      telephone, video or internet services at the Newport Properties, whether on
      a
      resale basis or otherwise (b) market or assist in the marketing at the Newport
      Properties of any telephone, video or internet services which are provided
      at
      the Newport Properties by any third party other than Purchaser or its
      affiliates; (c) either alone or in conjunction with any other third party,
      directly or indirectly, solicit or divert or attempt to solicit or divert any
      employee of the Purchaser or in any way interfere with the relationship between
      Purchaser and any of its employees, or (d) either alone or in conjunction with
      any other third party, directly or indirectly, solicit or attempt to solicit
      any
      resident of the Newport Properties for the purpose of selling any telephone,
      internet or video services at the Newport Properties which are then provided
      by
      Seller. Notwithstanding the foregoing, it is expressly understood and agreed
      to
      by Purchaser that Seller, its affiliates and/or any Owner (as defined in that
      certain Master Communications Access and Service Agreement dated as of the
      date
      hereof (the “Master Access Agreement”)), whether or not an affiliate of Seller,
      may assist (so long as such assistance is not in violation of that certain
      Marketing Program and Support Agreement attached as Exhibit B to the Master
      Access Agreement) other providers or resellers of telephone, video or internet
      services in providing telephone, video or internet services at the Newport
      Properties (even if such services are competitive with the Broadband Business),
      which assistance shall include, but not be limited to, providing such providers
      or resellers access to the Newport Properties to install or maintain facilities
      or equipment at the Newport Properties; provided, however, that, except for
      providing such entities with access to the Newport Properties through the Hudson
      Conduit, for which Seller, its affiliates or Owners, whether or not an affiliate
      of Seller, may receive compensation and any charges which Realty Information
      Systems Co.  may
      impose for permitted uses of certain fiber as provided for in that certain
      License Agreement by and between Purchaser and Realty Information Systems Co.,
      dated as of the date hereof, Seller shall not be permitted to receive
      compensation in exchange for assisting such entities. Provided, further, that
      nothing contained in this Agreement shall prohibit or impair Seller or its
      affiliates or Owners from: (i) transacting business with or providing services
      on behalf of Purchaser; or (ii) from satisfying any obligations or
      responsibilities under any applicable federal, state or local law, rule,
      regulation or ordinance or under that certain MDU System Operator Agreement
      dated as of June 14, 2003 by and between Seller and Minnesota Digital Universe.
      Provided, further that, subject to the forty (40) month and five percent (5%)
      limitation on the new installation of wiring within certain buildings located
      at
      the Newport Properties as provided for in Section 1.01 of the Master
      communications and Access Agreement, nothing contained herein shall prohibit
      or
      restrict Seller or its affiliates or Owners from assisting any tenant or
      resident of the Newport Property in installing or maintaining any equipment
      for
      any video, internet or telephone services (even if such services are competitive
      with the Broadband Business), including, without limitation, by providing or
      facilitating such tenants or residents with access to certain areas located
      at
      the Newport Properties. Provided, further that nothing contained within this
      Agreement shall prohibit Seller or its affiliates or owners from purchasing
      or
otherwise
      acquiring up to (but not more than) twenty-five percent (25%) of any class
      of
      the securities of any third party (but may not otherwise participate in the
      activities of such third party) if such securities are listed on any national
      or
      regional securities exchange or have been registered under Section 12(g) of
      the
      Securities Exchange Act of 1934. Purchaser and Seller acknowledge and agree
      that
      providing tenants or residents of the Newport Properties with the phone numbers
      and other contact information of any provider or reseller of telephone, video
      or
      internet services which is providing or re-selling such services at the Newport
      Properties shall be permitted under this Agreement and shall not be deemed
      to be
      in violation of the Marketing Program and Support Agreement referenced above.
      

     

    (j)    
True
      Up for Purchase of Centrex Lines.
      Pursuant to the terms of this Agreement, all of Seller’s right, title and
      interest in and to that certain
      Services
      Agreement dated as of December 30, 2004, by and between Newport
      Telecommunication and Verizon New Jersey Inc. pertaining to Newport
      Telecommunication’s purchase of Centrex lines from Verizon New Jersey, Inc. (the
“Centrex
      Agreement”)
      shall
      be assigned and transferred to Purchaser.
      In
      connection therewith, Seller
      and
      Purchaser acknowledge and agree that in the event that Purchaser shall be
      charged with any fee relating to Purchaser’s failure to purchase the requisite
      minimum number of Centrex lines pursuant to the Minimum Line Obligation under
      the Centrex Agreement, Seller hereby agrees to reimburse Purchaser the amount
      of
      any such fee to the extent that such amount exceeds the amount charged for
      Purchaser’s actual purchase and usage of the Centrex lines. 

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (k)    Satellite
      Services.
      From
      the date hereof and until July 14, 2008, Purchaser shall not, directly or
      indirectly, offer, sell or solicit sales of, take orders for, or provide or
      install equipment for, any direct-to-home satellite broadcast services to be
      provided at the Newport Properties. 

     

    (l)    Packeteer
      Lease.
      Purchaser and Seller hereby acknowledge and agree that after the Closing :
      (i)
      Seller will assign and transfer to Purchaser all of its right, title and
      interest in and to that certain Lease Agreement dated as of August 22, 2006
      by
      and between Newport Telecommunications Company, Inc. and CIT Technology
      Financing Services, Inc. (“CIT”)
      (the
“Packeteer
      Lease”);
      or
      (ii) if Seller cannot transfer and assign all of its, right, title and interest
      in the Packeteer Lease to Purchaser, Purchaser shall enter into a new lease
      agreement with CIT for the same equipment that is the subject of the Packeteer
      Lease (the “New
      Packeteer Lease Agreement”).
      In
      the event that subsection (ii) of this Section 11(l) shall apply and Purchaser
      shall enter into the New Packeteer Lease Agreement with CIT, Seller shall pay
      Purchaser the excess amount, if any, that Purchaser shall be obligated to pay
      under the New Packeteer Lease Agreement as compared with the amount that
      Purchaser would have been obligated to pay to CIT under the Packeteer Lease.
      

     

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    IN
      WITNESS WHEREOF,
      this
      Asset Purchase Agreement has been executed and delivered as of the date first
      above written.

     

    
      	 	 	 
	 	Microwave
              Satellite Technologies, Inc.
	 
 	 
 	 
 
	 	By:  	 /s/
              Frank T.
              Matarazzo
	 	
              
Name:
              Frank T. Matarazzo
	 	Title:
              Chief Executive Officer 


    

    
      	 	 	 
	 	NEWPORT
              TELECOMMUNICATIONS CO.
	 	 
	 	
              By:
                Newport Telecommunications Company, 

              Inc.,
                its partner 

            
	 
 	 
 	 
 
	 	By:  	 /s/
              James T. LeFrak
	 	
              

              Name:
                James T. LeFrak

            
	 	
              Title:
                Vice President

            


    

    
      	 	 	 
	 	
              TELKONET,
                INC. (solely with respect to Section 

              6
                of this
                Agreement)

            
	 
 	 
 	 
 
	 	By:  	/s/
              Ron
              Pickett
	 	
              
                

                Name:
                  Ron Pickett

              

            
	 	Title: President