**Exhibit 10.1**

 

**Asset Sale Agreement**

** **

**Between**

** **

**ETS Payphones, Inc.,**

** **

**as the Seller**

** **

**and**

** **

**Empire Payphones, Inc.**

** **

**as the Buyer**

** **

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** **

**Entered into and effective June 30, 2005**

** **

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** **

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TABLE OF CONTENTS

 
| Section 1  Index of Definitions                         |                                                       |
|---------------------------------------------------------|------------------------------------------------------------|
|                                                    |                                                       |   |
| Section 2 Purchase and Sale of Assets                   |                                                       |
|                                                    |                                                       |   |
| 2.1                                                     | Purchase and Sale                                          |   |
| 2.2                                                     | Delivery of Assets                                         |   |
| 2.3                                                     | Excluded Assets                                            |   |
| 2.4                                                     | Assumed and Excluded Liabilities                           |   |
| 2.5                                                     | Authorizations                                             |   |
| 2.6                                                     | Further Assurances                                         |   |
|                                                    |                                                       |
| Section 3  Purchase Price                               |                                                       |
|                                                    |                                                       |
| 3.1                                                     | Purchase Price                                             |   |
| 3.2                                                     | Payment Procedure                                          |   |
| 3.3                                                     | Prorations                                                 |   |
| 3.4                                                     | Pay-over Obligation and Resolution                         |   |
| 3.5                                                     | Right of Setoff                                            |   |
|                                                    |                                                       |
| Section 4  Representations and Warranties of the Buyer  |                                                       |
|                                                    |                                                       |
| 4.1                                                     | Authorization and Enforceability                           |   |
| 4.2                                                     | Compliance                                                 |   |
| 4.3                                                     | Consents                                                   |   |
| 4.4                                                     | Brokers                                                    |   |
| 4.5                                                     | Legal Proceedings                                          |   |
| 4.6                                                     | Financial Ability                                          |   |
|                                                    |                                                       |
| Section 5  Representations and Warranties of the Seller |                                                       |
|                                                    |                                                       |
| 5.1                                                     | Authorization and Enforcement                              |   |
| 5.2                                                     | No Violations; Permits and Compliance with  Applicable Law |   |
| 5.3                                                     | Financial  Information                                     |   |
| 5.4                                                     | Litigation                                                 |   |
| 5.5                                                     | Defaults                                                   |   |
| 5.6                                                     | Equipment                                                  |   |
| 5.7                                                     | Title to Sale Assets                                       |   |
| 5.8                                                     | Expenses of the Business                                   |   |
| 5.9                                                     | Taxes                                                      |   |
| 5.10                                                    | Full Disclosure                                            |   |
| 5.11                                                    | No Brokers                                                 |   |
|                                                    |                                                       |   |
| Section 6  Pre-Closing Covenants                        |                                                       |

 

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| 6.1                                                | Access to Sale Assets                     |   |
|----------------------------------------------------|-------------------------------------------|--------|
| 6.2                                                | Preservation of Sale Assets               |   |
|                                               |                                      |   |
| Section 7  Conditions to Obligations of the Buyer  |                                      |
|                                               |                                      |
| 7.1                                                | Representations, Warranties and Covenants |   |
| 7.2                                                | No Governmental Proceeding or Litigation  |   |
| 7.3                                                | No Injunction                             |   |
| 7.4                                                | Approvals                                 |   |
| 7.5                                                | No Material Adverse Change                |   |
|                                               |                                      |   |
| Section 8  Conditions to Obligations of the Seller |                                      |
|                                               |                                      |
| 8.1                                                | Representations, Warranties and Covenants |   |
|                                               |                                      |   |
| Section 9  Termination                             |                                      |
|                                               |                                      |
| 9.1                                                | Right of Parties to Terminate             |   |
| 9.2                                                | Effect of Termination                     |   |
|                                               |                                      |   |
| Section 10  Closing                                |                                      |
|                                               |                                      |
| 10.1                                               | Time and Place of Closing                 |   |
| 10.2                                               | Obligations of the Seller at Closing      |   |
| 10.3                                               | Obligations of Buyer at Closing           |   |
|                                               |                                      |   |
| Section 11  Indemnification                        |                                      |
|                                               |                                      |
| 11.1                                               | Indemnity by Seller                       |   |
| 11.2                                               | Indemnity by Buyer                        |   |
| 11.3                                               | Third Party Claims                        |   |
|                                               |                                      |   |
| Section 12  Survival                               |                                      |
|                                               |                                      |
| 12.1                                               | Warranties                                |   |
|                                               |                                      |   |
| Section 13  Other Provisions                       |                                      |
|                                               |                                      |
| 13.1                                               | Further Assurances                        |   |
| 13.2                                               | Benefit and Assignment                    |   |
| 13.3                                               | Entire Agreement                          |   |
| 13.4                                               | Amendment, Waiver                         |   |
| 13.5                                               | Governing Law, Jurisdiction               |   |
| 13.6                                               | Notices                                   |   |
| 13.7                                               | Interpretation                            |   |
| 13.8                                               | Counterparts                              |   |
| 13.9                                               | Extension; Waiver                         |   |
| 13.10                                              | Severability                              |   |

 

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SCHEDULES

 
| Schedule 2.1.1    |   | Non-Franchise Phone Equipment |
|-------------------|--------|-------------------------------|
| Schedule 2.1.2    |   | Franchise Phone Equipment     |
| Schedule 2.1.3    |   | Assigned Contracts            |
| Schedule 2.1.3(a) |   | Transition Agreements         |
| Schedule 2.1.4    |   | Miscellaneous Equipment       |
| Schedule 2.1.6    |   | Service Agreements            |
| Schedule 2.1.10   |   | ANI’s                    |
| Schedule 5.3      |   | Monthly Coin Revenue Reports  |
| Schedule 9.1      |   | Income Statement              |

 

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**Asset Sale Agreement**

 

This AssetSale Agreement (this “Agreement”) is entered into and effective on June 30,2005 between ETS Payphones, Inc., a Delaware corporation, (“ETS” or “Seller”)and Empire Payphones, Inc., a New York corporation (“Empire” or “Buyer”).

 

W I T N E S S E T H:

 

**WHEREAS**, ETSsuccessfully emerged as a reorganized debtor under a confirmed plan ofreorganization (“Plan of Reorganization”) in a Chapter 11 Case (the “ReorganizationCase”) (No. 00-03570) then pending in the United States Bankruptcy Court forthe District of Delaware and, as such, Seller continues to engage in thebusiness of owning, licensing, installing, operating and servicing public paytelephones within several states including the states of New York, New Jersey,Massachusetts and Connecticut (the “Business”, and with respect to operationsin New York, New Jersey, Massachusetts and Connecticut, the “Northeast Business”);

 

**WHEREAS**, Empire isto be engaged in the business of owning, installing, operating and servicingpublic pay telephones;

 

**WHEREAS**, the Sellerdesires to sell, and the Buyer desires to buy, substantially all of the Seller’sassets used or useful in the operation of the Northeast Business, as moreparticularly hereinafter described and defined, for cash and otherconsideration subject to the terms and conditions set forth herein;

 

**WHEREAS**, inconjunction with the purchase of such assets, ETS and Empire shall also enterinto such other agreements as may be necessary to facilitate transition of theNortheast Business to Buyer.

 

**NOW, THEREFORE**, theparties hereto hereby agree to the above recitations and as follows:

 

Section 1Index of Definitions

 

The definitions of thefollowing terms used in this Agreement can be found in the following Sections:

 
| **Defined Terms  Agreement** | ** ** | **Section  Preamble** | ** ** |
|------------------------------|------------|-----------------------|------------|
| ANI                          |       | 2.1.10                |       |
| Approvals                    |       | 7.4                   |       |
| Assigned  Contracts          |       | 2.1.2                 |       |
| Assumed  Liabilities         |       | 2.4                   |       |
| Authorities                  |       | 2.5                   |       |
| Authorizations               |       | 2.1.8                 |       |
| Business                     |       | Recitals              |       |
| Buyer                        |       | Preamble              |       |

** **

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| CLEC                           |   | 2.3.2    |   |
|--------------------------------|--------|----------|--------|
| Closing                        |   | 10.1     |   |
| Closing Date                   |   | 10.1     |   |
| Coin Amount                    |   | 3.1      |   |
| Commissions                    |   | 2.4      |   |
| Cure Costs                     |   | 2.1      |   |
| Customer  Data                 |   | 2.1.9    |   |
| Dial Around  Service Providers |   | 3.1      |   |
| DOITT                          |   | 2.1.2    |   |
| DOITT Franchise                |   | Recitals |   |
| DOITT  Franchise Agreement     |   | 2.1.2    |   |
| DOITT  Transfer Approval       |   | 2.1.2    |   |
| Empire                         |   | Preamble |   |
| Equipment                      |   | 2.1.5    |   |
| Escrow Agent                   |   | 10.1     |   |
| ETS                            |   | Preamble |   |
| Excluded  Costs                |   | 2.3      |   |
| Franchise  Phone Equipment     |   | 2.1.2    |   |
| Hit List                       |   | 3.1      |   |
| ILEC                           |   | 2.3.2    |   |
| Indemnifying  Party            |   | 11.3.1   |   |
| Indemnified  Party             |   | 11.3.1   |   |
| Initial  Payment               |   | 3.1      |   |
| Installment  Payment           |   | 3.1      |   |
| Installment  Payment Default   |   | 3.5      |   |
| July  Commissions              |   | 2.1      |   |
| Legal  Authority               |   | 4.2      |   |
| Material  Adverse Change       |   | 9.1      |   |
| Mettel                         |   | 3.5      |   |
| Miscellaneous  Equipment       |   | 2.1.4    |   |
| Monthly Coin  Revenue Reports  |   | 5.3      |   |
| Non-Franchise  Phone Equipment |   | 2.1.1    |   |
| Non-Reporting  Phone           |   | 3.1      |   |
| Northeast  Business            |   | Recitals |   |
| Phone  Equipment               |   | 2.1.2    |   |
| Plan of  Reorganization        |   | Recitals |   |
| Purchase  Price                |   | 3.1      |   |
| Recipient  Party               |   | 3.4      |   |
| Regulatory  Approvals          |   | 2.1.2    |   |
| Reorganization  Case           |   | Recitals |   |
| Rules                          |   | 5.2      |   |
| Sale Assets                    |   | 2.1      |   |
| Security  Codes                |   | 2.1.7    |   |
| Seller                         |   | Preamble |   |
| Service  Agreements            |   | 2.1.6    |   |

 

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Section 2Purchase and Sale of Assets

 

## 2.1                                 Purchase and Sale.  Subject to all the terms and conditions ofthis Agreement, in reliance upon the warranties, representations, conditionsand covenants herein contained, and for the consideration herein stated, on theClosing Date (as defined below), the Seller agrees to sell, convey and transferto the Buyer, and the Buyer agrees to purchase, accept and assume from theSeller, all of Seller’s right, title and interest in and to the followingassets, free and clear of any and all liens, claims and encumbrances of any kind(collectively, the “Sale Assets”):

##  

### 2.1.1                        The payphones and relatedequipment, including all originals and all copies of all keys, installed at thesites listed on **Schedule 2.1.1**,the content of which will be agreed to by Buyer and Seller prior to the Closing(as defined below), which Seller represents are all of its non-franchisepayphones in the States of New York, New Jersey, Massachusetts and Connecticut(the “Non-Franchise Phone Equipment”) together with all cash and cashequivalents, including coins, in the public pay telephones conveyed to Buyerhereunder as of 12:01 a.m. on the Closing Date.

###  

### 2.1.2                        Subject to (i) Buyer obtainingall required approvals (“Regulatory Approvals”) by the New York CityDepartment of Information Technology and Telecommunications (“DOITT”) tooperate the Franchise Phone Equipment (as defined below) and (ii) Sellerobtaining the authorization or consent to the transfer and assignment of theDOITT Franchise Agreements identified on **Schedule 2.1.3** (the “DOITT Franchise Agreement”) to Buyer (the “DOITTTransfer Approval”), the payphones and related equipment, including alloriginals and all copies of all keys, installed at the sites listed on **Schedule 2.1.2**,****the content of which will beagreed to by Buyer and Seller prior to the Closing, which Seller represents areall of its franchise payphones in the State of New York (“Franchise PhoneEquipment”; and together with the Non-Franchise Phone Equipment,collectively, the “Phone Equipment”), together with all cash and cashequivalents, including coins, in the public pay telephones conveyed to Buyerhereunder as of 12:01 a.m. on the Closing Date. In the event neither the Regulatory Approval nor the DOITT TransferApproval has been obtained prior to the Closing Date, on the Closing Date, andas a condition thereof, Seller and Purchaser shall enter into such agreementsas may be necessary to facilitate transition of the Franchise Phone Equipmentin the form of **Schedule 2.1.3 (a).** Until such time as title to the FranchisePhone Equipment is conveyed to Buyer, both Seller and Buyer’s consent shall berequired in order to change the entity that services, maintains, collects andoperates the Franchise Phone Equipment. At such time as the Regulatory Approval and DOITT Transfer Approval are obtained,and thereupon all right, title and interest in and to the Franchise PhoneEquipment shall be conveyed to Buyer absolutely.

###  

### 2.1.3                        The franchise agreements andsite location contracts with various third parties which allowed Seller toinstall and operate the Phone Equipment at

###  

### 3

### ****

###  

### third party sites in New York, New Jersey,Massachusetts and Connecticut, the office lease for the Brooklyn, New Yorkoffice space and any other contracts which are being specifically assigned toBuyer as part of this transaction listed on **Schedule2.1.3,**the content of which will be agreed to by Buyer and Sellerprior to the Closing, in each case together with all deposits and prepaidamounts thereunder, if any (the “Assigned Contracts”).

###  

### 2.1.4                        Miscellaneous office equipment,furniture, fixtures, general supplies, computers, promotional materials,customer lists, tools, and spare parts inventory used or useful in theoperation of the Northeast Business listed on **Schedule 2.1.4**the content of which will be agreed to by Buyer and Seller prior tothe Closing (the “Miscellaneous Equipment”).

###  

### 2.1.5                        All telephone booths,enclosures, stations, pedestals, apparatus, fixtures, circuit boards, coinbanks, locks and any other equipment physically connected to or installed in orwith the Phone Equipment (the Phone Equipment and such equipment collectively,the “Equipment”);

###  

### 2.1.6                        All maintenance, service andwarranty agreements, if any, associated with the Equipment or any item of MiscellaneousEquipment listed on **Schedule 2.1.6**(collectively, the “Service Agreements”);

###  

### 2.1.7                        Security codes for access to allPhone Equipment and the Northeast Business as it relates thereto (collectively,the “Security Codes”), together with all licenses and rights of use, ifany, granted with respect thereto;

###  

### 2.1.8                        to the extent transferable, allregistries, applications, permits, franchises, licenses, authorizations andapprovals submitted or filed by Seller to or with any governmental orregulatory authority, or issued or granted by any such authority to Seller, inconnection with operation of the Equipment and the Northeast Business as itrelates thereto, with the exception of the DOITT Franchise Agreement(collectively, “Authorizations”);

###  

### 2.1.9                        All customer data, books andrecords associated with the Sale Assets including, without limitation, allassociated customer service records, all related computer tapes and/or recordsand files (written, printed or otherwise), all revenue data and history reports,and all customer service and provisioning history (the “Customer Data”).

###  

### 2.1.10                  All of the Seller’s interest inand to the pay telephone numbers (“ANI’s”) listed on **Schedule 2.1.10** the content of which willbe agreed to by Buyer and Seller prior to the Closing hereto.

###  

Seller warrants and representsthat it will transfer title to the Sale Assets, free and clear of allmortgages, pledges, liens, security interests, conditional sales agreements,charges, claims and encumbrances of any kind or nature whatsoever, including,without limitation, any and all agreements and/or claims for bonuses, commissions(with the exception of the

 

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July, 2005 commission run, (the“July Commissions”)) or salaries associated with any of the SaleAssets.  Any and all defaults under anyAssigned Contract that exist prior to Closing will be cured by Seller prior tothe Closing and Seller will pay all costs, to the extent required, of same (“CureCosts”).  Upon assignment to Buyer,and as a condition thereof, no such default shall exist.  Pursuant to Section 11 hereof, Seller shallindemnify and hold Buyer harmless from and against any liabilities under any ofthe Assigned Contracts arising prior to the Closing Date.

 

## 2.2                                 Delivery of Assets.  On the Closing Date, Seller shall deliver theoriginals of the Assigned Contracts to the extent available, shall execute anddeliver such other transition agreements and the Buyer shall take title to theMiscellaneous Equipment and the remaining Sale Assets wherever it may belocated.  Upon Seller obtaining DOITTTransfer Approval and Buyer obtaining Regulatory Approval, Seller shalltransfer the Franchise Phone Equipment immediately to Buyer and deliver absolutetitle to the same and thereupon Buyer shall be the owner of all right, titleand interest thereto.

##  

## 2.3                                 Excluded Assets.  The parties expressly understand and agreethat the following items (collectively, the “Excluded Assets”) arespecifically excepted from the Sale Assets being conveyed to Buyer hereunder:

##  

### 2.3.1                        all general intangibles, allproceeds thereof, any claims related thereto, and all accounts receivable andnotes receivable generated by or arising out of the Sale Assets before theClosing Date, including but not limited to all commissions and dial-aroundcompensation earned by and due and owing to Seller in respect of operatorservice and dial-around calls made or dialed around from the Phone Equipmentbefore the Closing Date;

###  

### 2.3.2                        all ILEC, CLEC and localtelephone company deposits and other prepaid expenses, credits and deferredcharges pertaining to the Phone Equipment and the Northeast Business includingall disputed telephone bills, disputed end user common line charges, newservices test refunds or credits, universal service fund refunds or credits andany proceeds arising from the Sale Assets or Northeast Business prior to theClosing Date;

###  

### 2.3.3                        all contracts, agreements,commitments, arrangements and understandings, both oral and written, pursuantto which, among other things, Seller has engaged or appointed a third party toprovide operator or other telecommunications services for it or any of itsphones; and

###  

### 2.3.4                        all assets of ETS not relatedto, or used in, the Northeast Business.

###  

## 2.4                                 Assumed and Excluded Liabilities.  Buyer shall assume from the Seller andthereafter pay, perform, and/or discharge in accordance with their respectiveterms: (i) all liabilities arising from the Sale Assets arising or becoming dueafter the Closing; and (ii) Seller’s obligations for commissions due andpayable under the Assigned Contracts (to the extent set forth in **Schedule 2.1.3**) as of the Closing Date(excluding, however, the July Commissions) (the “Commissions”, andcollectively the “Assumed

 

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Liabilities”).  Buyer shall not assume, and shall not beresponsible for: (i) the Cure Costs necessary to cure any defaults that mayexist under any of the Assigned Contracts unless waived in writing by Buyer;(ii) any obligations under any employment agreements or any obligations to anyof Seller’s employees; (iii) any other liabilities arising from, or otherwiserelating to, the Sale Assets or the Northeast Business arising prior to theClosing; or (iv) any other liabilities that are not Assumed Liabilities.  Seller represents that it has not enteredinto any special discounting or offered promotional terms that may affect theobligations to customers under any of the Assigned Contracts.  The parties hereby further acknowledge andagree that except for the obligations arising under the Assigned Contracts orotherwise with respect to the Sale Assets as herein provided after the ClosingDate, neither Buyer, nor any affiliate, officer, director, employee,shareholder or agent of Buyer shall assume, or be deemed to assume, anyliabilities or obligations of Seller arising out of acts or occurrences priorto the Closing, or otherwise based on any event, facts or circumstances inexistence prior to the sale of the Sale Assets or in connection with or arisingfrom any activities of Seller.  Pursuantto, and as otherwise provided in Section 11.1 of this Agreement, Sellershall indemnify and hold Buyer harmless from and against any liabilities thatare not Assumed Liabilities.

##  

## 2.5                                 Authorizations.  The parties acknowledge that theAuthorizations are transferred only to the extent that they may be transferredwithout the approval of the permitting authority.  Seller shall obtain the approvals of any andall required government or regulatory agencies or authorities (“Authorities”)to facilitate the transfer of any Authorizations, wherever commerciallyreasonable and to the extent necessary. Seller shall bear all costs and expenses necessary to obtain theapprovals of Authorizations for the transfer of any Authorizations or PhoneEquipment.  Notwithstanding anything tothe contrary, this Agreement shall not constitute an assignment of anycontract, agreement, license, permit or commitment where any attemptedassignment of the same, without the consent of the other party thereto, wouldconstitute a breach thereof or otherwise be ineffective to complete suchassignment.

##  

## 2.6                                 Further Assurances.  After the Closing, each party shall from timeto time, at the reasonable request of the other, execute and deliver such otherinstruments of conveyance and transfer and take such other actions as mayreasonably be requested, in order to more effectively consummate thetransactions contemplated hereby and to vest in Buyer title to the Sale Assetsbeing transferred hereunder.

##  

Section 3Purchase Price

 

## 3.1                                 Purchase Price.

##  

#### (a)                                  Subjectto the terms and conditions of this Agreement, and in reliance on therepresentations, warranties, covenant, agreements and conditions hereincontained, as full consideration for the Sale Assets, Buyer agrees to pay toSeller:

####  

##### (i)                                     $200,000in immediately available funds by wire transfer confirmed at the Closing;

#####  

##### 6

##### ****

#####  

##### (ii)                                  anamount equal to ninety-five****(95%) of thecoin in the Phone Equipment as reported by the Hit List (defined below) to berun on or about 12:00 a.m. on the night immediately preceding the Closing Dateand to pay subsequent amounts attributable to Non-Reporting Phones (ashereinafter defined) (the “Coin Amount”) 15 days after the ClosingDate.  (The amounts required to be paidunder subparagraphs (i) and (ii) shall collectively be referred to as the “InitialPayment”); and

#####  

##### (iii)                               $750,000(without interest) less the amount of the Commissions being assumed by Buyer(in the amount of $52,731.42), in 12 equal installments, of $58,105.72,commencing 30 days after the closing date (the “Installment Payments”).  Notwithstanding anything to the contraryherein contained, in the event the DOITT Transfer Approval is not obtainedwithin six (6) months after the Closing Date through no fault of Buyer, orBuyer’s right to perform services set forth in whatever transition agreementsmay be executed in conjunction herewith is terminated through no fault ofBuyer, Buyer’s obligation to continue making Installment Payments shall besuspended and deferred until such time as the DOITT Transfer Approval isobtained, and thereupon the obligation to make Installment Payments shallresume.

#####  

(The Initial Payment and theInstallment Payments together shall be referred to as the “Purchase Price”).

 

#### (b)                                 Inconjunction with the Closing, the Seller shall perform a computerized pollingof its payphones listed on **Schedules 2.1.1 and 2.1.2**on or about 12:00 a.m. on the night immediately preceding the Closing Date andshall produce a computerized report reflecting the Seller’s functioning andnon-functioning Phone Equipment and the amount of coin in the payphones, hereincalled a “Hit List.”  The Seller willprovide a copy of the Hit List to Buyer at the Closing.  The result of the Hit List shall be binding,absent manifest error, for the purpose of determining the amount of coin in thepayphones.  Any payphone that does notreport as a properly functioning payphone on the Hit List shall be deemed a “Non-ReportingPhone.” Within five (5) business days of the Closing Date, representatives ofthe Seller and Buyer shall visit each Non-Reporting Phone site so that thepayphone may be polled, or to collect the coin in the payphone.  For each Non-Reporting Phone that is found, theparties shall collect the payphone and report the amount of coin in thepayphone and turn such amount over to the Seller within five (5) business daysafter the Closing, along with a new Hit List reflecting those payphones, to theextent such revised Hit List is feasible.

####  

#### (c)                                  Theamounts due to Seller from providers of dial-around telecommunications servicesto the Seller (the “Dial Around Service Providers”) in the

 

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quarter in which the Closingtakes place shall be prorated by the number of days elapsed in such quarterprior to the Closing Date.  It shall bethe obligation of the Seller to make submissions for the calendar quarter inwhich the Closing takes place.  TheSeller shall promptly remit to Buyer (i) receipts from Dial Around ServiceProviders on account of the balance of the calendar quarter ending after theClosing Date and (ii) copies of any and all data returned to the Seller fromthe Dial Around Service Providers, including, but not limited to, any computerdiscs and printed copies of reports from Dial Around Service Providers.  Under no circumstances will more than sevendays elapse following receipt of payment reports from Dial Around ServiceProviders before the relevant funds are forwarded to Buyer.  The Seller shall provide the Buyer withcopies of all submissions for payment to Dial Around Service Providers for thequarter in which the Closing takes place. It shall be the obligation of theBuyer to make submissions for all calendar quarters after the quarter in whichthe Closing takes place.  The Buyer shallpromptly remit to Seller (i) receipts from Dial Around Service Providers forperiods prior to Closing (including pro-rated amounts for the quarter in whichthe closing took place) and (ii) copies of any and all data returned to theSeller from the Dial Around Service Providers, including, but not limited to,any computer discs and printed copies of reports from Dial Around ServiceProviders that relate to any period prior to Closing.

####  

#### (d)                                 Sellerand Buyer agree that Seller shall retain the right to any and all revenuegenerated by the Sale Assets up to and including the Closing Date and shall beresponsible for and shall pay any and all expenses related to the operation ofthe Phone Equipment up to and including the Closing Date.  Seller and Buyer agree that Buyer shallretain the right to any and all revenue generated by the Phone Equipment afterthe Closing Date and shall be responsible for and shall pay any and allexpenses related to the operation of the Phone Equipment after the ClosingDate.  Seller and Buyer agree to programthe Phone Equipment on the evening of the Closing Date to cause the Sale Assetsto utilize a provider of Buyer’s choice for long distance and operator services.  Notwithstanding the foregoing, in the eventthe Phone Equipment is not programmed in accordance with the foregoing sentenceand as a result Seller receives any revenue or incurs any expense attributableto the Phone Equipment for a date following the Closing Date, Seller shallforward such revenue to Buyer within ten (10) business days following receiptof said revenue and Buyers shall reimburse Seller for any such expense withinten (10) business days following receipt of reasonable evidence to support theincurrence of such expense.

####  

## 3.2                                 Payment Procedure.  The Seller shall provide Buyer with wiringinstructions in writing at least two (2) days prior to the Closing Date.  Buyer shall wire the Initial Payment toSeller for confirmed receipt on or before 4:00 p.m. on the Closing Date.

##  

## 3.3                                 Prorations.  Expenses and receipts, including but notlimited to, any taxes owing with regard to the Sale Assets, and all othersimilar items of expense or receipt related to the Sale Assets shall beprorated between the Seller and the Buyer as of the Closing Date.

##  

## 8

## ****

##  

## 3.4                                 Pay-over Obligation andResolution.  Except as otherwise expressly providedherein, if either the Buyer or Seller receives or otherwise holds funds that theother (the “Recipient Party”) is so entitled to, the Buyer or Seller, asthe case may be, shall hold the funds in trust for the Recipient Party.  Commencing upon the Closing Date andcontinuing thereafter for one year, on the last day of each month, the Sellershall report to Buyer, and Buyer shall report to the Seller, the amounts ofsuch payments held by the responsible party and such amounts shall be paid tothe Recipient Party as soon as reasonably practicable, but not less frequentlythan monthly.  After such one-yearperiod, Seller shall co-operate with Buyer and Buyer shall co-operate withSeller to allocate and remit to the Recipient Party any accounts receivablecollected by the responsible party and shall continue to hold such payments intrust for the Recipient Party and remit such payments so held periodically asreceived.

##  

## 3.5                                 Right of Setoff.  In the event Buyer fails to make anyInstallment Payment, when due, and fails to cure any such default within ten(10) days after written notice thereof is received by Buyer from Seller (an “InstallmentPayment Default”), then in such event Buyer and Seller expresslyacknowledge that Seller shall be permitted, without further notice, to offsetthe amount of such Installment Payment Default from any amount that may be duefrom Seller to Manhattan Telecommunications Corporation (“Mettel”),Buyer’s affiliate, for CLEC services purchased by Seller from Mettel.  Mettel shall expressly acknowledge such rightof setoff by executing this Agreement for such limited purpose as providedbelow.

##  

Section 4Representations and Warranties of the Buyer

 

Buyerrepresents and warrants to the Seller that as of the Closing Date the followingshall be true and correct:

 

## 4.1                                 Authorization and Enforceability.  Buyer is a corporation duly organized andvalidly existing under the laws of the State of New York, is legally qualifiedto do business, and has all requisite corporate power and authority (corporateor otherwise) to own, lease and operate its properties and to carry on itsbusiness as now conducted.  Buyer hastaken or is taking all action necessary to authorize its execution, deliveryand performance of this Agreement and all other agreements and instrumentsreasonably necessary to complete the transactions contemplated by thisAgreement and has or will have full power and authority to enter into thisAgreement and such other agreements and instruments and carry out the termshereof and thereof on the Closing Date. Buyer has duly executed and delivered this Agreement and this Agreementis the valid and binding obligation of Buyer enforceable in accordance with itsterms, subject to applicable bankruptcy or similar laws or equitable principalsaffecting creditor’s rights generally.

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## 4.2                                 Compliance.  The execution, delivery and performance ofthis Agreement by the Buyer, the compliance by the Buyer with the provisions ofthis Agreement and the consummation of the transactions contemplated by thisAgreement will not conflict with or result in the breach of any of the terms orprovisions of or constitute a default under:

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#### (a)                                  thecertificate of incorporation or by-laws of Buyer and shall have been approvedin accordance with the same;

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#### (b)                                 anynote, indenture, mortgage, deed of trust, loan agreement, lease or otheragreement or instrument to which Buyer is a party; or

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#### (c)                                  anymaterial statute or any order, rule or regulation or any decision of anyfederal, state, local or foreign court or regulatory authority oradministrative or arbitrative body, agency or tribunal, or any othergovernmental body whatsoever (“Legal Authority”) applicable to Buyer.

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## 4.3                                 Consents.  Buyer has obtained, or shall have obtainedprior to the Closing, all material consents, authorizations or approvals of anythird parties and limited partners required to be obtained in connection withthe execution, delivery and performance of this Agreement, subject to Sellerobtaining all required Authorizations (to the extent transferable).  Buyer has made, or will have made prior tothe Closing, all material registrations or filings with any Legal Authorityrequired for the execution and delivery of this Agreement by Buyer and theconsummation of the transactions contemplated hereby if any are required.  Buyer will use its best efforts to obtain allRegulatory Approvals, including after Closing until the DOITT FranchiseAgreement is transferred and assigned.

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## 4.4                                 Brokers.  The Seller has no obligation to pay any feesor commissions to any broker, finder, agent or other intermediary in connectionwith the negotiation or consummation of the transactions contemplated hereby asa result of any action or agreement of Buyer.

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## 4.5                                 Legal Proceedings.  There are no claims, actions, suits,inquiries, investigations or proceedings before any Legal Authority pending or,to Buyer’s knowledge, threatened against the Buyer relating to the transactionscontemplated hereby.

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## 4.6                                 Financial Ability.  Buyer has, and will continue to have, thefinancial ability to perform the payment and other obligations contemplatedhereby.  Buyer represents that it issolvent and has the ability to pay its debts as they become due.

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Section 5Representations and Warranties of the Seller

 

The Sellerrepresents and warrants to Buyer that as of the Closing Date the followingshall be true and correct:

 

## 5.1                                 Authorization and Enforcement.  The Seller is a corporation, duly organizedand validly existing under the laws of the State of Delaware, is legallyqualified to do business, and has all requisite corporate power and authorityto own, lease and operate its properties and to carry on the Business as nowconducted.  Seller has taken or is takingall action necessary to authorize its execution, delivery and performance of thisAgreement and all other agreements and instruments reasonably necessary tocomplete the transactions contemplated by this Agreement and has or will

 

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have full power and authorityto enter into this Agreement and such other agreements and instruments andcarry out the terms hereof and thereof on the Closing Date.  Seller has duly executed and delivered thisAgreement, and this Agreement is the valid and binding obligation of Sellerenforceable in accordance with its terms, subject to applicable bankruptcy orsimilar laws or equitable principles affecting the rights of creditorsgenerally.

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## 5.2                                 No Violations; Permits andCompliance with Applicable Law.

 

#### (a)                                  Neitherthe execution, delivery and performance of this Agreement or any of the other agreementsand instruments reasonably necessary to complete the transactions contemplatedby this Agreement, nor compliance by the Seller with any of the provisionshereof shall (i) conflict with or result in any breach or default of anyprovision of the certificate of incorporation or by-laws of the Seller; (ii)violate any provision of the Seller’s Plan of Reorganization; (iii) resultin a default (or give rise to any right of termination, cancellation oracceleration) under any of the terms, conditions or provisions of any note,bond, mortgage, indenture, license, agreement, lease or other instrument orobligation to which the Seller or any of the Sale Assets may be bound, exceptfor such defaults (or rights of termination, cancellation or acceleration) asto which requisite waivers or consents have been obtained before the Closing orthe obtaining of which has been expressly waived in writing by the Seller; or(iv) violate any Legal Authority applicable to the Seller or any of theSale Assets, in each case except for such conflicts, breaches, defaults orviolations which do not have a material adverse affect on the Sale Assets or onSeller’s obligation hereunder.  AllAuthorizations issued or held in respect of the Sale Assets or the NortheastBusiness are valid, and there are no violations thereof.  Seller possesses all Authorizations necessaryfor operation of the Phone Equipment and conduct of the Northeast Business, andall such Authorizations are in full force and effect and freelytransferable.  All material rules,regulations, orders, laws, and ordinances applicable to the Sale Assets and theNortheast Business have been complied with, and the Seller has not received anywritten notice alleging any noncompliance therewith.  Notwithstanding anything to the contraryherein contained, the parties acknowledge and agree that Seller is currentlyattempting to obtain DOITT Transfer Approval, and that Seller’s ability toconvey title to such Franchise Phone Equipment to Buyer is subject to, andcontingent upon, the DOITT Transfer Approval.

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#### (b)                                 Tothe extent the Phone Equipment is subject to rules, regulations, ordinances orlaws governing or otherwise affecting public pay telephones, including but notlimited to municipal or local ordinances relating to permits and otherrequirements for public pay telephones, Seller is in full compliance with allsuch rules, regulations, ordinances and laws (the “Rules”).  Seller has (i) obtained all licenses,permits, authorizations and approvals required by the Rules subject toobtaining the DOITT Transfer Approval; (ii) paid all license, occupancyand other fees due and owing thereon current to the Closing Date;(iii) made the necessary filings and paid the requisite fees to effectuateand transfer to the Seller all such licenses, permits, authorizations andapprovals; and (iv) otherwise complied in all material respects with theterms and provisions of the Rules.

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## 5.3                                 Financial Information.  Attached hereto as **Schedule 5.3** are true, complete and correctcopies of the Monthly Coin Revenue Reports of the Seller, which reportsaccurately and completely set forth the gross coin revenue achieved withrespect to the Phone Equipment for the May, 2004 through April, 2005 period, ineach case on a per ANI and per calendar month basis.  All other financial information provided bythe Seller, including but not limited to copies of telephone bills, any and allinformation regarding coin collections, long distance revenues, ILEC, CLEC and othertelephone company charges, operator service provider revenues, parts andsupplies expenses and commissions, is true, complete and correct in allmaterial respects.

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## 5.4                                 Litigation.  Except for the existing dispute betweenSeller and DOITT, there are no claims, actions, suits, inquiries,investigations or proceedings pending or, to the best of the Seller’sknowledge, threatened against the Seller, whether at law or in equity andwhether civil or criminal in nature, before or by any federal, state, municipalor other court, arbitrator, governmental department, commission, agency orinstrumentality, domestic or foreign, nor are there any judgments, decrees ororders of any such court, arbitrator, governmental department, commission,agency or instrumentality outstanding against the Seller (a) that relateto the Sale Assets being conveyed by the Seller or the Seller’s NortheastBusiness; or (b) that seek specifically to prohibit, restrict or delayconsummation of the transactions contemplated hereby or fulfillment of any ofthe conditions of this Agreement.

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## 5.5                                 Defaults.  There is not any existing default, or eventof default, or event that with or without due notice or lapse of time or bothwould constitute a default or event of default, under any Assigned Contractcovering more than fifteen (15) phones or Authorizations of the Seller, exceptfor such defaults as to which requisite waivers or consents have been obtainedbefore the Closing or the obtaining of which has been expressly waived inwriting by Buyer.  Any existing defaultnot so waived shall be cured by Seller as a condition to closing andassignment.  Each Assigned Contractauthorizes and empowers the Seller to select, or does not prohibit or impede inany way the Seller’s right to select, the operator service provider andinterexchange carrier for such phones. The Seller does not have any knowledge that any of the AssignedContracts covering more than fifteen (15) phones will be terminated or notrenewed, or that any of the Phone Equipment will be required to be uninstalledas a result thereof.  To the best ofSeller’s knowledge, except as previously disclosed to Buyer in writing allrelations with the customers, vendors, suppliers and licensors associated withthe Phone Equipment and the relevant governmental or regulatory authorities arein good standing.

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## 5.6                                 Equipment.  All Equipment of the Seller being conveyed tothe Buyer hereunder is in good working order, reasonable wear and tearexcepted, and is usable and saleable in the ordinary course of business, andall of the Phone Equipment is active with a dial tone and polling.  All Phone Equipment includes a coin bank, alock and an enclosure for each item of Phone Equipment, and a pedestal for eachitem of Phone Equipment that is not mounted to the outside of a building or awall inside a building.

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## 5.7                                 Title to Sale Assets.  Seller has, and at the Closing, except as tothe Franchise Phone Equipment, is transferring good, marketable andindefeasible title to all

 

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of the Sale Assets to Buyer,free and clear of any and all liabilities, mortgages, conditional salesagreements, security interests, leases, liens, pledges, encumbrances, deeds oftrust, equities, charges, claims, imperfections of title or other burdensaffecting title to the Sale Assets.  Uponreceiving the DOITT Transfer Approval to the transfer of the Franchise PhoneEquipment to Buyer, Seller shall transfer good, marketable and indefeasibletitle to the Franchise Phone Equipment to Buyer, free and clear of any and allliabilities, mortgages, conditional sales agreements, security interests,leases, liens, pledges, encumbrances, deeds of trust, equities, charges,claims, imperfections of title or other burdens affecting title to such FranchisePhone Equipment.  The bill of sale andother Seller documents to be executed and delivered to Buyer at and after theClosing will be valid and binding obligations of Seller and will effectivelyvest in Buyer title to the Sale Assets free and clear of any liens, claims andencumbrances.

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## 5.8                                 Expenses of the Business.  There is no delinquency in the payment of anybills, taxes, fees, charges, expenses, debts, commissions or other amounts duerelating to the Assigned Contracts, the Authorizations (except with respect toDOITT) or the Equipment or any telephone lines associated therewith.  All operating expenses of the Seller’sNortheast Business, including but not limited to those represented by suchbills, taxes, fees, charges, expenses, debts, commissions or other amounts,have been paid currently.  Alloutstanding commissions due to customers with respect to the Phone Equipmentshall have been paid through the Closing Date.

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## 5.9                                 Taxes.  From and since the effective date of its Planof Reorganization, Seller has filed or caused to be filed (or obtained validextensions for the filing of), all federal, state and local tax returns thatare required to be filed by it in connection with its Business, and has paid orcaused to be paid, or has made adequate provisions on its books (i.e.,reserves) for amounts sufficient for the payment of, all taxes as shown on suchreturns or on any assessment received by it and has made all estimated taxpayments required to be made by it in order to avoid the imposition of penalties,interest and other additions to tax.  Notax liens have been filed against the Seller, and the Seller has not beennotified of or otherwise has knowledge of, any claim being asserted withrespect to any such taxes.  There is noaction, suit, proceeding, investigation or audit pending or threatened againstSeller in respect of any tax or assessment, nor is any claim for additional taxor assessment being asserted by any taxing authority whatsoever.  All taxes that the Seller is required by lawto withhold or collect have been duly withheld or collected and, to the extentrequired, paid over to the proper governmental authorities on a timelybasis.  None of the officers, directorsor employees of the Seller have been notified or otherwise advised that such anaudit may occur.

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## 5.10                           Full Disclosure.  To the best of Seller’s knowledge, norepresentation or warranty to the other Buyer contained in this Agreement orany list, document or other writing furnished to the other Buyer pursuant tothe provisions hereof, contains any untrue statement of a material fact oromits to state a material fact necessary in order to make the statement hereinor therein not misleading.

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## 5.11                           No Brokers.  Seller has not engaged, consented to orauthorized any broker, finder, investment banker or other third party to act onits behalf, either directly or

 

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indirectly, as a broker orfinder in connection with this Agreement and the transactions contemplatedhereby.

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Section 6Pre-Closing Covenants

 

## 6.1                                 Access to Sale Assets.  Prior to the Closing Date, the Seller shallafford to the Buyer and its authorized representatives (including counsel,accountants and other representatives) reasonable access to all books, records,personnel and other data reasonably related to the Sale Assets during normalbusiness hours at the Seller’s offices. Buyer shall have the full opportunity to make such investigations as itshall reasonably require with respect to the Sale Assets and the transactionscontemplated herein.

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## 6.2                                 Preservation of Sale Assets.

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#### (a)                                  Exceptas otherwise required by law or expressly permitted by this Agreement, theSeller and Buyer agree that they shall not after the date of this Agreement anduntil the Closing:

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##### (i)                                     disposeof, or agree to dispose of, any of the Sale Assets other than in the ordinarycourse of business or lease or license, or agree to lease or license, any ofthe Sale Assets;

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##### (ii)                                  cancel,fail to maintain in force or change any policy of insurance relating to theSale Assets or any policy or bond providing substantially the same coverageunless such cancellation or change is effective only on or after the Closing;and

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##### (iii)                               waive,release, grant or transfer any rights of value or modify or change any existinglicense, lease, contract or other agreement or arrangement affecting the SaleAssets.

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#### (b)                                 Exceptas otherwise required by law, Seller shall after the date of this Agreement anduntil the Closing: (i) maintain all of the Sale Assets in good operatingcondition, reasonable wear and tear excepted; (ii) maintain all AssignedContracts in full force and effect in the ordinary course of its business; and(iii) operate its business on a going concern basis and in the ordinary course.

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Section 7Conditions to Obligations of the Buyer

 

Theobligations of the Buyer under Sections 2 and 3 of this Agreement are subjectto satisfaction, at or prior to the Closing, of each of the followingconditions, any one or more of which may be waived in writing by Buyer:

 

## 7.1                                 Representations, Warranties andCovenants.  All representations and warranties of theSeller made in this Agreement and the documents and instruments

 

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executed or to be executed inconnection herewith shall in all material respects be true and correct on andas of the Closing Date with the same force and effect as if made as of thatdate.  All of the terms, covenants,conditions and agreements set forth in this Agreement and the seller documentsto be complied with and performed by the Seller at or prior to the Closingshall in all material respects have been complied with or performed thereby.

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## 7.2                                 No Governmental Proceeding orLitigation.  No suit, action, investigation, inquiry orother proceeding by any governmental body or other person or legal oradministrative proceeding shall have been instituted or threatened whichquestions the validity or legality of the transactions contemplated hereby.

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## 7.3                                 No Injunction.  On the Closing Date there shall be noeffective injunction, writ, preliminary restraining order or any order of anynature issued by a court of competent jurisdiction directing that thetransactions provided for herein or any of them not be consummated as soprovided or imposing any conditions on the consummation of the transactioncontemplated hereby which the Buyer deems unacceptable in its sole discretion.

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## 7.4                                 Approvals.  Seller shall have made and obtained allnotices to, filings with, and authorizations, consents and approvals of governmentsand government agencies in order to effect the transfer of the Sale Assets (the“Approvals”) that Buyer or the Seller may be required to give, make, orobtain in order to effect the transfer to Buyer of the Sale Assets, including,without limitation, the Authorizations, as contemplated by this Agreement.  In the event that the Buyer has obtainedRegulatory Approval but Seller has not obtained DOITT Transfer Approval andeffectuated the transfer of the Franchise Phone Equipment to Buyer within six(6) months of the Closing Date, Buyer shall have the right to suspendInstallment Payments until such time as such DOITT Transfer Approval has beenobtained.  In such case, Buyer shall havethe right to negotiate with DOITT directly for the settlement and resolution ofany terms of the DOITT Transfer Approval; provided however, that any settlementwith DOITT shall be subject to the approval of Seller, which approval shall notbe unreasonably withheld.

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## 7.5                                 No Material Adverse Change.  There shall have been no material adversechange in the business or assets of the Company prior to the Closing Date.  For purposes of this Agreement, “materialadverse change” shall have the meaning ascribed to such term in Section 9.1 ofthis Agreement.

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Section 8Conditions to Obligations of the Seller

 

Theobligations of the Seller under Section 2 of this Agreement are subject tosatisfaction, at or prior to the Closing, of each of the following conditions,any one or more of which may be waived in writing by the Seller:

 

## 8.1                                 Representations, Warranties andCovenants.  All representations and warranties of Buyermade in this Agreement and the documents and instruments executed

 

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in connection therewith shallin all material respects be true and correct on and as of the Closing Date withthe same force and effect as if made on and as of that date.  All of the terms, covenants, conditions andagreements to be complied with and performed by Buyer on or prior to theClosing shall in all material respects have been complied with or performedthereby.

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Section 9Termination

 

## 9.1                                 Right of Parties to Terminate.  This Agreement may be terminated by the Buyerif:

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#### (a)                                  theSeller shall have breached any of its material obligations under this Agreement;

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#### (b)                                 Sellerhas not satisfied the conditions set forth in Section 7 of this Agreement orotherwise satisfied its obligations hereunder by July 1, 2005;

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#### (c)                                  priorto closing, Buyer discovers a material adverse change in the amount and natureof the Sale Assets.  For purposes of thisSection 9, “Material Adverse Change” shall mean:

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##### (i)                                     thePhone Equipment does not include at least 2600 payphones installed andoperating at the sites listed on **Schedules 2.1.1 and 2.1.2**and Seller is unable to deliver 2600 payphones installed and operating at thesites within ten days of Buyer notifying Seller of this material adversechange,

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##### (ii)                                  fewerthan 60% of the installed and operating payphones included in the PhoneEquipment have valid site contracts which are assignable and which have a validremaining initial or renewal term of at lease one (1) year,

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##### (iii)                               averagemonthly revenues and expenses for the period of January, 2004 through May, 2005are not as listed on the Income Statement for the New York Operations attachedhereto as **Schedule 9.1**; or

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##### (iv)                              averagemonthly site commissions payable on each item of the installed and operatingPhone Equipment for December, 2004 and January, 2005 exceed $16.00 per phone.

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## 9.2                                 Effect of Termination.  If Buyer or the Seller terminates thisAgreement pursuant to Section 9.1, such party shall promptly give writtennotice thereof to the other party to this Agreement.  Except as otherwise provided in Section 11,such termination shall release the other party, its officers, directors andemployees from any further liabilities and obligations with respect to thisAgreement.

 

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Section 10Closing

 

## 10.1                           Time and Place of Closing.  The closing of the transactions contemplatedby this Agreement (the “Closing”) shall take place at the offices of Garfunkel,Wild & Travis, P.C., 111 Great Neck Road, Great Neck, New York 11021,unless any other location is agreed to in writing by the parties, on the firstbusiness day after the fulfillment or waiver of the last of the conditionsprecedent to this Agreement as stated in Sections 7 and 8, and on or beforeJune 30, 2005 or such other date as may be mutually agreed to between theparties.  The date scheduled for theClosing pursuant to this Section 10.1 shall be referred to as the “Closing Date”.

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## 10.2                           Obligations of the Seller atClosing.  At the Closing, the Seller shall deliver orcause to be delivered to the Buyer the following documents and take the otheractions identified below:

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#### (a)                                  billsof sale, conveying to Buyer:  (i) all ofthe Non-Franchise Phone Equipment and (ii) Franchise Phone Equipment so long asthe DOITT Transfer Approval has been obtained, (iii) executed copies of anytransition agreements set forth in **Schedule 2.1.3(a)**and(iv) the Miscellaneous Equipment and any other Equipment and Sale Assets.  In the event the DOITT Transfer Approval hasnot been obtained by the Closing Date, Seller shall deliver to Buyer’s counselin escrow a bill of sale for the Franchise Phone Equipment which will bereleased to Buyer upon obtaining the DOITT Transfer Approval;

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#### (b)                                 acertified copy of the resolutions of the board of directors of Sellerauthorizing the execution, delivery and performance of the Agreement and alldocuments, instruments and transactions contemplated herein;

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#### (c)                                  dulyexecuted instruments of Assignment relating to the Assigned Contracts;

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#### (d)                                 closingcertificates pursuant to which the Seller represents and warrants to Buyer thatits representations and warranties to Buyer are true and correct in allmaterial respects as of the Closing Date as if then originally made and thatall covenants required by the terms hereof to be performed by the Seller on orbefore the Closing Date, to the extent not waived by the Buyer in writing, havebeen so performed in all material respects;

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#### (e)                                  copiesof the Assigned Contracts and evidence that all Cure Costs have been or will bepaid;

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#### (f)                                    allother documents and instruments as may be reasonably necessary and required toconsummate the transactions contemplated by this Agreement approving andauthorizing this Agreement and the transactions contemplated thereby,including, but not limited to assignment certificates as requested on a case bycase basis;

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#### (g)                                 suchother documents as Buyer may reasonably request; and

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#### (h)                                 thereshall have been no material adverse change in the Sale Assets or the NortheastBusiness of Seller prior to the Closing Date.

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## 10.3                           Obligations of Buyer at Closing.  At the Closing, Buyer shall deliver or causeto be delivered the following documents, and take the other actions identifiedbelow:

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#### (a)                                  paymentof the Purchase Price in accordance with Section 3;

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#### (b)                                 acertified copy of resolutions of Buyer’s board of directors or governing bodyauthorizing the execution, delivery and performance of this Agreement and allagreements contemplated hereby;

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#### (c)                                  aclosing certificate pursuant to which Buyer represents and warrants to theSeller that Buyer’s representations and warranties to the Seller are true andcorrect in all material respects as of the Closing Date as if then originallymade, and that all covenants required by the terms hereof to be performed byBuyer on or before the Closing Date, to the extent not waived by the Seller inwriting, have been so performed in all material respects;

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#### (d)                                 aduly executed instrument of assumption of the Assigned Contracts and all otherdocuments and instruments as may be reasonably necessary and required toconsummate the transactions contemplated by this Agreement and the Sale Order;

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#### (e)                                  withinten (10) business days of Closing, a true and correct copy of Buyer’s Vendexapplication, redacted as Buyer deems necessary to protect any confidentialinformation; and

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#### (f)                                    suchother documents as the Seller may reasonably request.

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The partieshereto agree that a facsimile transmittal of their signature, confirmedverbally by telephone by their counsel, shall be binding upon them as adelivery of the relevant executed document for the Closing, and that documentsmay be validly executed through counterpart originals.  However, Seller may demand confirmation ofreceipt of the Purchase Price by Seller’s financial institution prior to thedelivery of any documents.

 

Section 11Indemnification

 

## 11.1                           Indemnity by Seller.  Subject to the terms and conditions of thisAgreement and the limitations contained in this Section 11, Seller shallindemnify and hold harmless Buyer from and against (i) any breach of arepresentation or warranty made by Seller in this Agreement; (ii) thebreach of any covenant, agreement or undertaking by Seller contained in thisAgreement; (iii) any liability or obligation of Seller not specificallyassumed by Buyer pursuant to this Agreement; and (iv) any reasonable costs(including but not limited to reasonable attorneys’ and accountants’ fees)incurred by Buyer in connection therewith.

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## 11.2                           Indemnity by Buyer.  Subject to the terms and conditions of thisAgreement and the limitations contained in this Section 11, Buyer shallindemnify and hold harmless Seller from and against (i) any breach of arepresentation or warranty made by Buyer in this Agreement; (ii) thebreach of any covenant, agreement or undertaking by Buyer contained in thisAgreement; (iii) any liability or obligation of Seller that is beingspecifically assumed by Buyer pursuant to this Agreement; and (iv) anyreasonable costs (including but not limited to reasonable attorneys’ andaccountants’ fees) incurred by the Buyer in connection therewith.

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## 11.3                           Third Party Claims.  (a) Except as otherwise provided herein, the procedures set forth in thefollowing paragraphs of this Section 11.3 shall apply to indemnification ofclaims arising from the assertion of liability by persons or entities notparties to this Agreement.

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### 11.3.1                  The party seekingindemnification (the “Indemnified Party”) shall, as promptly asreasonably practicable, give written notice to the party from whichindemnification is sought (the “Indemnifying Party”) of any assertion ofliability by a third party that might give rise to a claim by the IndemnifiedParty against the Indemnifying Party based on the indemnity agreementscontained in this Agreement or in any document executed and delivered inconnection herewith, stating the nature and basis of the assertion and theamount thereof to the extent known. Failure on the part of the Indemnified Party to give prompt notice tothe Indemnifying Party shall not limit or otherwise affect such IndemnifiedParty’s right to indemnification hereunder so long as the Indemnifying Party isnot materially adversely affected.

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### 11.3.2                  In the event that any LegalAction is brought against an Indemnified Party with respect to which theIndemnifying Party may have liability under an indemnity agreement contained inthis Agreement or in any document executed and delivered in connectionherewith, the Indemnifying Party shall have the right, at its sole cost andexpense, to defend the Indemnified Party against such Legal Action (and anyappeal and review thereof), with counsel reasonably acceptable to theIndemnified Party.  In any such LegalAction, the Indemnified Party shall have the right to be represented byadvisory counsel and accountants, at its own expense, and the IndemnifyingParty shall keep the Indemnified Party fully informed as to such proceeding atall stages thereof, whether or not the Indemnified Party is represented by itsown counsel.

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### 11.3.3                  Until the Indemnifying Partyshall have assumed the defense of such Legal Action, or if the Indemnified andIndemnifying Parties are both named parties in such Legal Action and theIndemnified Party shall have reasonably concluded that there may be defensesavailable to it that are different from or in addition to the defensesavailable to the Indemnifying Party (in which case the Indemnifying Party shallnot have the right to assume the defense of such Legal Action but shall remainresponsible for its obligation as an indemnitor), all reasonable legal andother reasonable expenses incurred by the Indemnified Party as a result of suchLegal Action, shall be borne solely by the Indemnifying Party.

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### In such event the Indemnifying Party shallmake available to the Indemnified Party and its attorneys and accountants, forreview and copying, all of its books and records relating to such Legal Actionand the parties agree to render to each other such assistance as may reasonablybe requested in order to facilitate the proper and adequate defense of any suchLegal Action.

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### 11.3.4                  Neither the Indemnifying Partynor the Indemnified Party shall make any settlement of any claim without thewritten consent of the other, which consent shall not be unreasonablywithheld.  Without limiting thegenerality of the foregoing, it shall not be deemed unreasonable to withholdconsent to a settlement involving injunction or other equitable relief againstthe Indemnified Party or its assets, employees or business.

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Section 12Survival

 

## 12.1                           Warranties.  All representations, warranties, covenantsand agreements made in this Agreement or in any exhibit, schedule, certificate,document, instrument or other agreement delivered in accordance with thisAgreement shall survive the execution and delivery of this Agreement.

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Section 13Other Provisions

 

## 13.1                           Further Assurances.  After the Closing, each of the parties willtake such actions and execute and deliver to the other party such furtherdocuments, instruments of assignment, conveyances and transfers as, in thereasonable opinion of counsel to the requesting party, may be necessary (a) toensure, complete and evidence the full and effective transfer of the SaleAssets to Buyer; and; (b) to fully and completely consummate the transactionsand agreements contemplated by this Agreement.

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## 13.2                           Benefit and Assignment.  This Agreement shall be binding upon andshall inure to the benefit of the parties hereto and their respective permittedsuccessors and assigns.

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## 13.3                           Entire Agreement.  This Agreement and the schedules and exhibitsreferred to herein constitute the entire agreement and understanding of theparties and supersede any and all prior agreements and understandings relatingto the Sale Assets and other matters provided for herein.  Seller shall remain obligated to enter intoan exclusive service agreement with Buyer, or an affiliate thereof.

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## 13.4                           Amendment, Waiver.  The provisions of this Agreement may beamended or waived only by an instrument in writing signed by the party againstwhich enforcement of such amendment or waiver is sought.  Any waiver of any term or condition of thisAgreement or any breach hereof shall not operate as a waiver of any other suchterm, condition or breach, and no failure to enforce any provision hereof shalloperate as a waiver of such provision or of any other provision hereof.

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## 13.5                           Governing Law, Jurisdiction.  The construction and performance of thisAgreement will be governed by the laws of the State of New York without regardto its laws or regulations relating to conflicts of law.

##  

## 13.6                           Notices.  Any notice, demand or request required orpermitted to be given under the provisions of this Agreement (a) shall be inwriting; (b) shall be delivered personally, including by means of facsimile,overnight express delivery, or mailed by registered or certified mail, postageprepaid and return receipt requested; (c) shall be deemed given on the date ofpersonal delivery or on the date set forth on the return receipt; and (d) shallbe delivered or mailed to the addresses or facsimile numbers set forth below orto such other address as any party may from time to time direct in writing inaccordance with this section (telephone numbers are provided to assist incoordination, but telephone conversations do not constitute notice):

##  

##### (i)                                     Ifto the Buyer:

#####  

Empire Payphones, Inc.

44 WallStreet, 6th Floor

New York,NY  10005

Attn: AndoniEconomou

Facsimile:(212) 635-5074

 

with copiesto:

 

Burton Weston,Esq.

Garfunkel,Wild & Travis, P.C.

111 Great NeckRoad

Great Neck, NY11021

Facsimile:  (516) 466-5964

 

(ii)                                  Ifto the Seller:

 

Michael McClellan, CFO

ETS Payphones, Inc.

1490 WestforkDrive Suite G

LithiaSprings, GA  30122

Facsimile:  (770) 819-1682

 

with copiesto:

 

Brian Gannon

Seyfarth Shaw LLP

One Peachtree Pointe

1545 Peachtree Street, N.E.

Suite 700

Atlanta, GA 30309-2401

Facsimile: (404) 892-7056

 

21

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## 13.7                           Interpretation.  The headings contained in this Agreement are for referencepurposes only and shall not affect the meaning or interpretation of thisAgreement.

##  

## 13.8                           Counterparts.  This Agreement may be executed in two or morecounterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.

##  

## 13.9                           Extension; Waiver.  At any time after the Closing, either partyto this Agreement that is entitled to the benefits hereof may, but shall not berequired to (a) extend the time for the performance of any of theobligations of the other party hereto, (b) waive any misrepresentation(including an omission) or breach of a representation or warranty of the otherparty hereto, whether contained herein or in any exhibit, schedule or documentdelivered pursuant hereto, or (c) waive compliance of the other partyhereto with respect to any of the terms, conditions or provisions containedherein.  Any such extension or waivershall be valid only if set forth in a written instrument signed by the partygiving the extension or waiver.

##  

## 13.10                     Severability.  If any provision, or part thereof, of thisAgreement shall be held to be invalid or unenforceable, such invalidity orunenforceability shall attach only to such provision and not in any way affector render invalid or unenforceable any other provisions of this Agreement, andthis Agreement shall be carried out as if such invalid or unenforceableprovision, or part thereof, had been reformed so that it would be valid, legaland enforceable to the fullest extent permitted by applicable law.

##  

## 22

## ****

##  

IN WITNESSWHEREOF, the parties have executed this Asset Sale Agreement as of the day andyear first written above.

 

 
|                                      | BUYER:                 |
|-------------------------------------------|------------------------|
|                                      |                   |
|                                      | Empire Payphones, Inc. |
|                                      |                   |
|                                      |                   |
|                                      | By:                    |   |   |
|                                      |                   | Andoni  Economou  Executive Vice President |   |
|                                      |                   |
|                                      |                   |
|                                      | SELLER:                |
|                                      |                   |
|                                      | ETS PAYPHONES, INC.    |
|                                      |                   |
|                                      |                   |
|                                      | By:                    |   |   |
|                                      |                   | Michael H.  McClellan  Chief Financial Officer |   |
|                                      |
|                                      |
| Acknowledged  and Agreed to as to         |
| Section 3.5  only:                        |
| MANHATTAN  TELECOMMUNICATIONS CORPORATION |
|                                      |
|                                      |
| By:                                       |                   |   |
|                                           |                        |  |  |  |  |

** **

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