Document:

Exhibit 4.5

 

Duquesne Light
Holdings, Inc.

 

OFFICER’S
CERTIFICATE

 

(Under Section 301
of the Indenture,

dated as of August 16,
2005)

 

I, Stevan R. Schott, the
Senior Vice President and Chief Financial Officer of Duquesne Light Holdings, Inc.
(the “Company”), in accordance with Section 301 of the Indenture, dated as
of August 16, 2005 (the “Indenture”, capitalized terms used herein and not
defined herein having the meanings specified in the Indenture), of the Company
to J.P. Morgan Trust Company, National Association, trustee (the “Trustee”), do
hereby establish a series of Securities having the terms and characteristics
set forth in this Officer’s Certificate.

 

PART I

 

Set forth below in this Part I
are the terms and characteristics of the series of Securities established
hereby referred to in clauses (a) through (u) in the second paragraph of Section 301
of the Indenture (the lettered clauses set forth herein corresponding to such
clauses in said Section 301).

 

(a) the title of the
Securities of such series, being Series No. 1 under the Indenture,
shall be “6.25% Senior Notes due 2035” (the Securities of such series, for
purposes of this Officer’s Certificate, being sometimes hereinafter called the “Notes”);

 

(b) the aggregate
principal amount of Notes which may be authenticated and delivered under the
Indenture shall not be limited;

 

(c) interest on the
Notes shall be payable to the Person or Persons in whose names the Notes are
registered at the close of business on the Regular Record Date for such
interest, except as otherwise expressly provided in the form of Note attached
hereto and hereby authorized and approved;

 

(d) the principal of
the Notes shall be payable on August 15, 2035;

 

(e) the Notes shall
bear interest at the rate of six and one-quarter percent (6.25%) per annum;
interest on the Notes shall accrue from August 16, 2005 or the most recent
date to which interest has been paid or duly provided for; interest on any
Notes shall be payable on August 15 and February 15 of each year
(each an “Interest Payment Date”), commencing February 15, 2006; and the
Regular Record Date with respect to each Interest Payment Date shall be the
close of business on August 1 or February 1, as the case may be,
immediately preceding

 

 

such Interest
Payment Date whether or not such day is a business day.

 

(f) the corporate
trust office of the Trustee located at One Oxford Centre, 301 Grant Street, Suite 1100,
Pittsburgh, Pennsylvania 15219 shall be the place at which (i) the
principal of, premium, if any, and interest, if any, on the Notes at Maturity
shall be payable upon presentment, interest prior to Maturity to be paid as
specified in the form of Note attached hereto, (ii) registration of
transfer of the Notes may be effected, (iii) exchanges of Notes may be
effected and (iv) notices and demands to or upon the Company in respect of
the Notes and the Indenture may be served; and the Trustee shall be the
Security Registrar and a Paying Agent for the Notes; provided, however, that
the Company reserves the right to change, by one or more Officer’s Certificates
supplemental to this Officer’s Certificate, any such place or the Security
Registrar or such Paying Agent; and provided, further, that the Company
reserves the right to designate, by one or more Officer’s Certificates supplemental
to this Officer’s Certificate, its principal corporate office in Pittsburgh,
Pennsylvania as any such place or itself as the Security Registrar;

 

(g) The Notes are subject to redemption, in whole
at any time or in part from time to time, upon notice to the Holders of such
Notes to be redeemed by mail in accordance with the Indenture not less than
thirty (30) nor more than sixty (60) days before the date fixed for redemption,
at a redemption price equal to the greater of:

 

(1)   100% of the principal amount of the Notes then outstanding to be
redeemed, and

 

(2)   the sum of the present values of the remaining scheduled payments
of principal and interest on the Notes being redeemed (not including any
portion of such interest payments accrued to the date of redemption) discounted
to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate (as defined below)
plus 30 basis points, as calculated by an Independent Investment Banker;

 

plus, in either of the above cases, accrued and unpaid
interest thereon to the date of redemption.

 

Unless the Company defaults in payment of the
redemption price, on and after the redemption date, interest will cease to
accrue on the Notes or portions thereof called for redemption.

 

 “Comparable
Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining
term of the Notes to be redeemed that would be used, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
Notes.

 

 “Comparable
Treasury Price” means, with respect to any redemption date, (1) the average
of the bid and asked prices for the Comparable Treasury Issue (expressed in
each case as a percentage of its principal amount) on the third Business Day
preceding such redemption date, as set forth in the daily statistical release
(or any successor release) published by the Federal Reserve Bank of New York
and designated “Composite 3:30 p.m.

 

 

Quotations for U.S. Government Securities” or (2) if
such release (or any successor release) is not published or does not contain
such prices on such third Business Day, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations, or (B) if
the Independent Investment Bank obtains fewer than five such Reference Treasury
Dealer Quotations, the average of all such Quotations.

 

 “Independent
Investment Banker” means J.P. Morgan Securities Inc. or Lehman Brothers Inc.,
or either of the respective successors, or if both such firms are unwilling or
unable to serve as such, an independent investment banking institution of
national standing appointed by the Company.

 

 “Reference
Treasury Dealer” means J.P. Morgan Securities Inc. and Lehman Brothers Inc. and
their respective successors, and if either of these parties ceases to be a
primary U.S. Government Securities Dealer in New York City, the Company will
substitute another primary U.S. Government Securities Dealer selected by the
Company, and any other primary U.S. Government Securities Dealer selected by
the Company.

 

 “Reference
Treasury Dealer Quotation” means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Independent
Investment Banker, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Independent Investment Banker by such Reference Treasury
Dealer at or before 5:00 p.m., New York City time, on the third Business
Day preceding such redemption date.

 

 “Treasury Rate” means, with respect to any
redemption date, the rate per year equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date;

 

(h) inapplicable;

 

(i) the Notes shall
be issued in denominations of $1,000 and any integral multiple thereof;

 

(j) inapplicable;

 

(k) inapplicable;

 

(l) inapplicable;

 

(m) inapplicable;

 

(n) inapplicable;

 

(o) inapplicable;

 

(p) inapplicable;

 

 

(q) the Notes are
initially to be issued in global form, registered in the name of Cede &
Co., as nominee for The Depository Trust Company (the “Depositary”).  Such Notes shall not be transferable or
exchangeable, nor shall any purported transfer be registered, except as
follows:

 

(i) such
Notes may be transferred in whole, and appropriate registration of transfer
effected, if such transfer is by such nominee to the Depositary, or by the
Depositary to another nominee thereof, or by any nominee of the Depositary to
any other nominee thereof, or by the Depositary or any nominee thereof to any
successor securities depositary or any nominee thereof; and

 

(ii) such
Notes may be exchanged for definitive Notes registered in the respective names
of the beneficial holders thereof, and thereafter shall be transferable without
restriction, if:

 

(A) The
Depositary, or any successor securities depositary, shall have notified the
Company and the Trustee that it is unwilling or unable to continue to act as
securities depositary with respect to such Notes and the Trustee shall not have
been notified by the Company within ninety (90) days of the identity of a
successor securities depositary with respect to such Notes; or

 

(B) the
Company shall have delivered to the Trustee a Company Order to the effect that
such Notes shall be so exchangeable on and after a date specified therein;

 

it being understood that
any such registration of transfer or exchange shall be effected in accordance
with Section 305 of the Indenture;

 

(r) inapplicable;

 

(s) no service charge
shall be made for the registration of transfer or exchange of the Notes;
provided, however, that the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection with such
transfer or exchange;

 

(t) Section 113 of
the Indenture shall apply to the Notes; and

 

(u) Section 507 of
the Indenture shall apply to the Notes.

 

PART II

 

Set forth below in this Part II
are additional terms of the Notes, as contemplated by clause (v) of the
second paragraph of Section 301 of the Indenture.

 

(a) the Notes shall
have such further terms as are set forth in the form of note attached hereto as
Exhibit A;

 

 

Exhibit A

 

CUSIP: 266233AB1

 

DUQUESNE LIGHT HOLDINGS, INC.

6.25% SENIOR NOTE DUE 2035

 

	
  No.  1

  	
  $120,000,000

  

 

Duquesne Light Holdings, Inc.,
a corporation duly organized and existing under the laws of the Commonwealth of
Pennsylvania (herein called the “Company”, which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby
promises to pay to

 

CEDE &
CO.

 

or registered assigns, the
principal sum of

 

ONE
HUNDRED TWENTY MILLION DOLLARS ($120,000,000)

 

on August 15, 2035 and
to pay interest thereon from August 16, 2005 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually in arrears on August 15 and February 15 of each year,
commencing February 15, 2006 at the rate of 6.25% per annum, until the
principal hereof is paid or made available for payment.  The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be August 1 or February 1
(whether or not a Business Day), as the case may be, immediately preceding such
Interest Payment Date.  The amount of
interest payable will be computed on the basis of a 360-day year consisting of
twelve 30-day months.  If any date on
which interest is payable on the Securities is not a Business Day, then payment
of the interest payable on that date will be made on the next succeeding day
which is a Business Day (and without any additional interest or other payment
in respect of any delay), with the same force and effect as if made on such
date.

 

Payment of the principal of (and premium, if any)
and any such interest on this Security will be made upon presentation at the
corporate trust office of the Trustee located at One Oxford Centre, 301 Grant
Street, Suite 1100, Pittsburgh, Pennsylvania 15219, in Dollars.

 

Reference is hereby made to the further provisions
of this Security set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this place.

 

Unless the certificate of authentication hereon has
been executed by the Trustee referred to on the reverse hereof by manual
signature, this Security shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.

 

IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.

 

Dated: August 16, 2005

 

 

	
   

  	
  DUQUESNE LIGHT HOLDINGS,
  INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  William F. Fields

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President and

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Treasurer

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
									

 

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

This
is the 6.25% Senior Note due 2035 described in the within-mentioned Indenture
and authorized by the Officer’s Certificate dated August 16, 2005.

 

	
   

  	
   

  	
  J.P. Morgan
  Trust Company, National

  
	
   

  	
  Association,

  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated: August 16,
  2005

  	
   

  	
   

  	
   

  
							

 

 

Reverse of Security

 

This
Security is one of a duly authorized issue of securities of the Company (herein
called the “Securities”), issued and issuable in one or more series under an
Indenture, dated as of August 16, 2005 (such Indenture as originally
executed and delivered and as supplemented and amended from time to time
thereafter, together with any constituent instruments establishing the terms of
particular Securities, being herein called the “Indenture”), between the
Company and J.P. Morgan Trust Company, National Association, as Trustee (herein
called the “Trustee”, which term includes any successor trustee under the
Indenture), to which Indenture reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms and
conditions upon which the Securities are, and are to be, authenticated and
delivered.  This Security is one of the
series designated on the face hereof, initially limited in aggregate principal
amount to $120,000,000.

 

The Securities of this series are subject to
redemption, in whole at any time or in part from time to time, upon notice to
the Holders of such Securities to be redeemed by mail in accordance with the
Indenture not less than thirty (30) nor more than sixty (60) days before the
date fixed for redemption, at a redemption price equal to the greater of:

 

(1)   100% of
the principal amount of the Securities then outstanding to be redeemed, and

 

(2)   the sum
of the present values of the remaining scheduled payments of principal and
interest on the Securities being redeemed (not including any portion of such
interest payments accrued to the date of redemption) discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate (as defined below) plus 30 basis
points, as calculated by an Independent Investment Banker;

 

plus,
in either of the above cases, accrued and unpaid interest thereon to the date
of redemption.

 

Unless the Company defaults in payment of the
redemption price, on and after the redemption date, interest will cease to
accrue on the Securities or portions thereof called for redemption.

 

 

 “Comparable
Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining
term of the Securities to be redeemed that would be used, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of the Securities.

 

 “Comparable
Treasury Price” means, with respect to any redemption date, (1) the
average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S.
Government Securities” or (2) if such release (or any successor release)
is not published or does not contain such prices on such third Business Day, (A) the
average of the Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Independent Investment Bank obtains fewer than
five such Reference Treasury Dealer Quotations, the average of all such
Quotations.

 

 “Independent
Investment Banker” means J.P. Morgan Securities Inc. or Lehman Brothers Inc.,
or either of the respective successors, or if both such firms are unwilling or
unable to serve as such, an independent investment banking institution of
national standing appointed by the Company.

 

 “Reference
Treasury Dealer” means J.P. Morgan Securities Inc. and Lehman Brothers Inc. and
their respective successors, and if either of these parties ceases to be a
primary U.S. Government Securities Dealer in New York City, the Company will
substitute another primary U.S. Government Securities Dealer selected by the
Company, and any other primary

 

 

U.S. Government Securities Dealer selected by the Company.

 

 “Reference
Treasury Dealer Quotation” means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Independent
Investment Banker, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Independent Investment Banker by such Reference Treasury
Dealer at or before 5:00 p.m., New York City time, on the third Business
Day preceding such redemption date.

 

 “Treasury Rate” means, with respect to any redemption
date, the rate per year equal to the semiannual equivalent yield to maturity of
the Comparable Treasury Issue, assuming a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date.

 

If an Event of Default under the Indenture shall occur
and be continuing, the principal of this Security may be declared due and
payable in the manner and with the effect provided in the Indenture.

 

The Indenture permits, with certain exceptions as
therein provided, the Trustee to enter into one or more supplemental indentures
for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, the Indenture with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Securities of all series then Outstanding under the Indenture, considered as
one class; provided however, that if there shall be Securities of more than one
series Outstanding under the Indenture and if a proposed supplemental indenture
shall directly affect the rights of the Holders of Securities of one or more,
but less than all, of such series, then the consent only of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of all
series so directly affected, considered as one class, shall be required; and
provided, further, that if the Securities of any series shall have been issued
in more than one Tranche and if the proposed supplemental indenture shall
directly affect the rights of the Holders of Securities of one or more, but
less than all, of such Tranches, then the consent only of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of all
Tranches so directly affected, considered as one class, shall be required; and
provided, further, that the Indenture permits the Trustee to enter into one or
more supplemental indentures for limited purposes without the consent of any
Holders of Securities. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the registration of
transfer hereof or in exchange therefor or in lieu hereof, whether or not notation
of such consent or waiver is made upon this Security.

 

 

No reference herein to the Indenture and no provision
of this Security or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of and
interest, if any, on this Security at the times, place and rate, in the coin or
currency, and in the manner, herein prescribed.

 

As provided in the Indenture and subject to certain
limitations therein set forth, this Security or any portion of the principal
amount hereof shall be deemed to have been paid for all purposes of the
Indenture and to be no longer outstanding thereunder, and, at the election of
the Company, the Company’s entire indebtedness in respect thereof shall be
deemed to have been satisfied and discharged, if there has been irrevocably
deposited with the Trustee or any Paying Agent (other than the Company), in
trust, money in an amount which shall be sufficient and/or, in the case of a
deposit made prior to the Maturity of such Securities or portions thereof,
Eligible Obligations, the principal of and interest on which when due, without
regard to any reinvestment thereof, shall provide moneys which, together with
moneys so deposited, shall be sufficient, to pay when due the principal of and
interest on this Security when due.

 

The Indenture contains terms, provisions and
conditions relating to the consolidation or merger of the Company with or into,
and the conveyance, or other transfer or lease of all of its properties, as or
substantially as an entity, to another Person, to the assumption by such other
Person, in certain circumstances, of all of the obligations of the Company
under the Indenture and on the Securities and to the release and discharge of
the Company, in certain circumstances, from such obligations.

 

The Securities of this series are issuable only as
registered Securities, without coupons, and except as otherwise provided in the
Indenture, in denominations of $1,000 and integral multiples thereof. Any
registration of transfer or exchange of the Securities shall be effected in
accordance with the Indenture.

 

No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.

 

Prior to due presentment of this Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Security is registered
as the absolute owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.

 

This Security shall be governed by and construed in
accordance with the laws of the State of New York.

 

As provided in the Indenture, no recourse shall be had
for the payment of the principal of or premium, if any, or interest, if any, on
any Securities, or any part thereof, or for any claim based thereon or otherwise
in respect thereof, or of the indebtedness represented thereby, or upon any
obligation, covenant or agreement under the Indenture, against, any
incorporator, stockholder, officer or director, as such, past, present or
future of the Company or of any predecessor or successor corporation of either
of them (either directly or through the Company or a predecessor

 

 

or successor corporation), whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly agreed and
understood that the Indenture and all the Securities are solely corporate
obligations and that any such personal liability is hereby expressly waived and
released as a condition of, and as part of the consideration for, the execution
of the Indenture and the issuance of the Securities.

 

Unless the certificate of authentication hereon has
been executed by the Trustee or an Authenticating Agent by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.

 

 

IN WITNESS WHEREOF, I
have executed this Officer’s Certificate this 16th day of August, 2005.

 

 

	
   

  	
  DUQUESNE LIGHT
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stevan R. Schott

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President
  and

  Chief Financial OfficerExhibit 10.1

 

Asset Sale Agreement

 

Between

 

ETS Payphones, Inc.,

 

as the Seller

 

and

 

Empire Payphones, Inc.

 

as the Buyer

 

 

Entered into and effective June 30, 2005

 

 

 

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

  	
   

  

 

i

 

	
  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

  	
   

  

 

ii

 

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

  

 

iii

 

Asset Sale Agreement

 

This Asset
Sale 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, ETS
successfully emerged as a reorganized debtor under a confirmed plan of
reorganization (“Plan of Reorganization”) in a Chapter 11 Case (the “Reorganization
Case”) (No. 00-03570) then pending in the United States Bankruptcy Court for
the District of Delaware and, as such, Seller continues to engage in the
business of owning, licensing, installing, operating and servicing public pay
telephones within several states including the states of New York, New Jersey,
Massachusetts and Connecticut (the “Business”, and with respect to operations
in New York, New Jersey, Massachusetts and Connecticut, the “Northeast Business”);

 

WHEREAS, Empire is
to be engaged in the business of owning, installing, operating and servicing
public pay telephones;

 

WHEREAS, the Seller
desires to sell, and the Buyer desires to buy, substantially all of the Seller’s
assets used or useful in the operation of the Northeast Business, as more
particularly hereinafter described and defined, for cash and other
consideration subject to the terms and conditions set forth herein;

 

WHEREAS, in
conjunction with the purchase of such assets, ETS and Empire shall also enter
into such other agreements as may be necessary to facilitate transition of the
Northeast Business to Buyer.

 

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

 

Section 1

Index of Definitions

 

The definitions of the
following 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

  	
   

  

 

 

	
  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

  	
   

  

 

2

 

Section 2

Purchase and Sale of Assets

 

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

 

2.1.1                        The payphones and related
equipment, including all originals and all copies of all keys, installed at the
sites 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-franchise
payphones in the States of New York, New Jersey, Massachusetts and Connecticut
(the “Non-Franchise Phone Equipment”) together with all cash and cash
equivalents, including coins, in the public pay telephones conveyed to Buyer
hereunder as of 12:01 a.m. on the Closing Date.

 

2.1.2                        Subject to (i) Buyer obtaining
all required approvals (“Regulatory Approvals”) by the New York City
Department of Information Technology and Telecommunications (“DOITT”) to
operate the Franchise Phone Equipment (as defined below) and (ii) Seller
obtaining the authorization or consent to the transfer and assignment of the
DOITT Franchise Agreements identified on Schedule 2.1.3 (the “DOITT Franchise Agreement”) to Buyer (the “DOITT
Transfer Approval”), the payphones and related equipment, including all
originals and all copies of all keys, installed at the sites listed on Schedule 2.1.2, the content of which will be
agreed to by Buyer and Seller prior to the Closing, which Seller represents are
all of its franchise payphones in the State of New York (“Franchise Phone
Equipment”; and together with the Non-Franchise Phone Equipment,
collectively, the “Phone Equipment”), together with all cash and cash
equivalents, including coins, in the public pay telephones conveyed to Buyer
hereunder as of 12:01 a.m. on the Closing Date. 
In the event neither the Regulatory Approval nor the DOITT Transfer
Approval has been obtained prior to the Closing Date, on the Closing Date, and
as a condition thereof, Seller and Purchaser shall enter into such agreements
as may be necessary to facilitate transition of the Franchise Phone Equipment
in the form of Schedule 2.1.3 (a).  Until such time as title to the Franchise
Phone Equipment is conveyed to Buyer, both Seller and Buyer’s consent shall be
required in order to change the entity that services, maintains, collects and
operates 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 Phone
Equipment shall be conveyed to Buyer absolutely.

 

2.1.3                        The franchise agreements and
site location contracts with various third parties which allowed Seller to
install 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 York
office space and any other contracts which are being specifically assigned to
Buyer as part of this transaction listed on Schedule
2.1.3, the content of which will be agreed to by Buyer and Seller
prior to the Closing, in each case together with all deposits and prepaid
amounts 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 the
operation of the Northeast Business listed on Schedule 2.1.4
the content of which will be agreed to by Buyer and Seller prior to
the Closing (the “Miscellaneous Equipment”).

 

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

 

2.1.6                        All maintenance, service and
warranty agreements, if any, associated with the Equipment or any item of Miscellaneous
Equipment listed on Schedule 2.1.6
(collectively, the “Service Agreements”);

 

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

 

2.1.8                        to the extent transferable, all
registries, applications, permits, franchises, licenses, authorizations and
approvals submitted or filed by Seller to or with any governmental or
regulatory authority, or issued or granted by any such authority to Seller, in
connection with operation of the Equipment and the Northeast Business as it
relates thereto, with the exception of the DOITT Franchise Agreement
(collectively, “Authorizations”);

 

2.1.9                        All customer data, books and
records associated with the Sale Assets including, without limitation, all
associated customer service records, all related computer tapes and/or records
and 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 in
and to the pay telephone numbers (“ANI’s”) listed on Schedule 2.1.10 the content of which will
be agreed to by Buyer and Seller prior to the Closing hereto.

 

Seller warrants and represents
that it will transfer title to the Sale Assets, free and clear of all
mortgages, 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

 

4

 

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

 

2.2                                 Delivery of Assets.  On the Closing Date, Seller shall deliver the
originals of the Assigned Contracts to the extent available, shall execute and
deliver such other transition agreements and the Buyer shall take title to the
Miscellaneous Equipment and the remaining Sale Assets wherever it may be
located.  Upon Seller obtaining DOITT
Transfer Approval and Buyer obtaining Regulatory Approval, Seller shall
transfer the Franchise Phone Equipment immediately to Buyer and deliver absolute
title to the same and thereupon Buyer shall be the owner of all right, title
and interest thereto.

 

2.3                                 Excluded Assets.  The parties expressly understand and agree
that the following items (collectively, the “Excluded Assets”) are
specifically excepted from the Sale Assets being conveyed to Buyer hereunder:

 

2.3.1                        all general intangibles, all
proceeds thereof, any claims related thereto, and all accounts receivable and
notes receivable generated by or arising out of the Sale Assets before the
Closing Date, including but not limited to all commissions and dial-around
compensation earned by and due and owing to Seller in respect of operator
service and dial-around calls made or dialed around from the Phone Equipment
before the Closing Date;

 

2.3.2                        all ILEC, CLEC and local
telephone company deposits and other prepaid expenses, credits and deferred
charges pertaining to the Phone Equipment and the Northeast Business including
all disputed telephone bills, disputed end user common line charges, new
services test refunds or credits, universal service fund refunds or credits and
any proceeds arising from the Sale Assets or Northeast Business prior to the
Closing Date;

 

2.3.3                        all contracts, agreements,
commitments, arrangements and understandings, both oral and written, pursuant
to which, among other things, Seller has engaged or appointed a third party to
provide operator or other telecommunications services for it or any of its
phones; and

 

2.3.4                        all assets of ETS not related
to, or used in, the Northeast Business.

 

2.4                                 Assumed and Excluded Liabilities.  Buyer shall assume from the Seller and
thereafter pay, perform, and/or discharge in accordance with their respective
terms: (i) all liabilities arising from the Sale Assets arising or becoming due
after the Closing; and (ii) Seller’s obligations for commissions due and
payable 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”, and
collectively the “Assumed

 

5

 

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

 

2.5                                 Authorizations.  The parties acknowledge that the
Authorizations are transferred only to the extent that they may be transferred
without the approval of the permitting authority.  Seller shall obtain the approvals of any and
all required government or regulatory agencies or authorities (“Authorities”)
to facilitate the transfer of any Authorizations, wherever commercially
reasonable and to the extent necessary. 
Seller shall bear all costs and expenses necessary to obtain the
approvals of Authorizations for the transfer of any Authorizations or Phone
Equipment.  Notwithstanding anything to
the contrary, this Agreement shall not constitute an assignment of any
contract, agreement, license, permit or commitment where any attempted
assignment of the same, without the consent of the other party thereto, would
constitute a breach thereof or otherwise be ineffective to complete such
assignment.

 

2.6                                 Further Assurances.  After the Closing, each party shall from time
to time, at the reasonable request of the other, execute and deliver such other
instruments of conveyance and transfer and take such other actions as may
reasonably be requested, in order to more effectively consummate the
transactions contemplated hereby and to vest in Buyer title to the Sale Assets
being transferred hereunder.

 

Section 3

Purchase Price

 

3.1                                 Purchase Price.

 

(a)                                  Subject
to the terms and conditions of this Agreement, and in reliance on the
representations, warranties, covenant, agreements and conditions herein
contained, as full consideration for the Sale Assets, Buyer agrees to pay to
Seller:

 

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

 

6

 

(ii)                                  an
amount equal to ninety-five (95%) of the
coin in the Phone Equipment as reported by the Hit List (defined below) to be
run on or about 12:00 a.m. on the night immediately preceding the Closing Date
and to pay subsequent amounts attributable to Non-Reporting Phones (as
hereinafter defined) (the “Coin Amount”) 15 days after the Closing
Date.  (The amounts required to be paid
under subparagraphs (i) and (ii) shall collectively be referred to as the “Initial
Payment”); 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 contrary
herein contained, in the event the DOITT Transfer Approval is not obtained
within six (6) months after the Closing Date through no fault of Buyer, or
Buyer’s right to perform services set forth in whatever transition agreements
may be executed in conjunction herewith is terminated through no fault of
Buyer, Buyer’s obligation to continue making Installment Payments shall be
suspended and deferred until such time as the DOITT Transfer Approval is
obtained, and thereupon the obligation to make Installment Payments shall
resume.

 

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

 

(b)                                 In
conjunction with the Closing, the Seller shall perform a computerized polling
of 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 and
shall produce a computerized report reflecting the Seller’s functioning and
non-functioning Phone Equipment and the amount of coin in the payphones, herein
called a “Hit List.”  The Seller will
provide 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 the
payphones.  Any payphone that does not
report as a properly functioning payphone on the Hit List shall be deemed a “Non-Reporting
Phone.” Within five (5) business days of the Closing Date, representatives of
the Seller and Buyer shall visit each Non-Reporting Phone site so that the
payphone may be polled, or to collect the coin in the payphone.  For each Non-Reporting Phone that is found, the
parties shall collect the payphone and report the amount of coin in the
payphone and turn such amount over to the Seller within five (5) business days
after the Closing, along with a new Hit List reflecting those payphones, to the
extent such revised Hit List is feasible.

 

(c)                                  The
amounts due to Seller from providers of dial-around telecommunications services
to the Seller (the “Dial Around Service Providers”) in the

 

7

 

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

 

(d)                                 Seller
and Buyer agree that Seller shall retain the right to any and all revenue
generated by the Sale Assets up to and including the Closing Date and shall be
responsible for and shall pay any and all expenses related to the operation of
the Phone Equipment up to and including the Closing Date.  Seller and Buyer agree that Buyer shall
retain the right to any and all revenue generated by the Phone Equipment after
the Closing Date and shall be responsible for and shall pay any and all
expenses related to the operation of the Phone Equipment after the Closing
Date.  Seller and Buyer agree to program
the Phone Equipment on the evening of the Closing Date to cause the Sale Assets
to utilize a provider of Buyer’s choice for long distance and operator services.  Notwithstanding the foregoing, in the event
the Phone Equipment is not programmed in accordance with the foregoing sentence
and as a result Seller receives any revenue or incurs any expense attributable
to the Phone Equipment for a date following the Closing Date, Seller shall
forward such revenue to Buyer within ten (10) business days following receipt
of said revenue and Buyers shall reimburse Seller for any such expense within
ten (10) business days following receipt of reasonable evidence to support the
incurrence of such expense.

 

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

 

3.3                                 Prorations.  Expenses and receipts, including but not
limited to, any taxes owing with regard to the Sale Assets, and all other
similar items of expense or receipt related to the Sale Assets shall be
prorated between the Seller and the Buyer as of the Closing Date.

 

8

 

3.4                                 Pay-over Obligation and
Resolution.  Except as otherwise expressly provided
herein, if either the Buyer or Seller receives or otherwise holds funds that the
other (the “Recipient Party”) is so entitled to, the Buyer or Seller, as
the case may be, shall hold the funds in trust for the Recipient Party.  Commencing upon the Closing Date and
continuing thereafter for one year, on the last day of each month, the Seller
shall report to Buyer, and Buyer shall report to the Seller, the amounts of
such payments held by the responsible party and such amounts shall be paid to
the Recipient Party as soon as reasonably practicable, but not less frequently
than monthly.  After such one-year
period, Seller shall co-operate with Buyer and Buyer shall co-operate with
Seller to allocate and remit to the Recipient Party any accounts receivable
collected by the responsible party and shall continue to hold such payments in
trust for the Recipient Party and remit such payments so held periodically as
received.

 

3.5                                 Right of Setoff.  In the event Buyer fails to make any
Installment 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 “Installment
Payment Default”), then in such event Buyer and Seller expressly
acknowledge that Seller shall be permitted, without further notice, to offset
the amount of such Installment Payment Default from any amount that may be due
from Seller to Manhattan Telecommunications Corporation (“Mettel”),
Buyer’s affiliate, for CLEC services purchased by Seller from Mettel.  Mettel shall expressly acknowledge such right
of setoff by executing this Agreement for such limited purpose as provided
below.

 

Section 4

Representations and Warranties of the Buyer

 

Buyer
represents and warrants to the Seller that as of the Closing Date the following
shall be true and correct:

 

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

 

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

 

9

 

(a)                                  the
certificate of incorporation or by-laws of Buyer and shall have been approved
in accordance with the same;

 

(b)                                 any
note, indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which Buyer is a party; or

 

(c)                                  any
material statute or any order, rule or regulation or any decision of any
federal, state, local or foreign court or regulatory authority or
administrative or arbitrative body, agency or tribunal, or any other
governmental body whatsoever (“Legal Authority”) applicable to Buyer.

 

4.3                                 Consents.  Buyer has obtained, or shall have obtained
prior to the Closing, all material consents, authorizations or approvals of any
third parties and limited partners required to be obtained in connection with
the execution, delivery and performance of this Agreement, subject to Seller
obtaining all required Authorizations (to the extent transferable).  Buyer has made, or will have made prior to
the Closing, all material registrations or filings with any Legal Authority
required for the execution and delivery of this Agreement by Buyer and the
consummation of the transactions contemplated hereby if any are required.  Buyer will use its best efforts to obtain all
Regulatory Approvals, including after Closing until the DOITT Franchise
Agreement is transferred and assigned.

 

4.4                                 Brokers.  The Seller has no obligation to pay any fees
or commissions to any broker, finder, agent or other intermediary in connection
with the negotiation or consummation of the transactions contemplated hereby as
a result of any action or agreement of Buyer.

 

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 transactions
contemplated hereby.

 

4.6                                 Financial Ability.  Buyer has, and will continue to have, the
financial ability to perform the payment and other obligations contemplated
hereby.  Buyer represents that it is
solvent and has the ability to pay its debts as they become due.

 

Section 5

Representations and Warranties of the Seller

 

The Seller
represents and warrants to Buyer that as of the Closing Date the following
shall be true and correct:

 

5.1                                 Authorization and Enforcement.  The Seller is a corporation, duly organized
and validly existing under the laws of the State of Delaware, is legally
qualified to do business, and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on the Business as now
conducted.  Seller has taken or is taking
all action necessary to authorize its execution, delivery and performance of this
Agreement and all other agreements and instruments reasonably necessary to
complete the transactions contemplated by this Agreement and has or will

 

10

 

have full power and authority
to enter into this Agreement and such other agreements and instruments and
carry out the terms hereof and thereof on the Closing Date.  Seller has duly executed and delivered this
Agreement, and this Agreement is the valid and binding obligation of Seller
enforceable in accordance with its terms, subject to applicable bankruptcy or
similar laws or equitable principles affecting the rights of creditors
generally.

 

5.2                                 No Violations; Permits and
Compliance with Applicable Law.

 

(a)                                  Neither
the execution, delivery and performance of this Agreement or any of the other agreements
and instruments reasonably necessary to complete the transactions contemplated
by this Agreement, nor compliance by the Seller with any of the provisions
hereof shall (i) conflict with or result in any breach or default of any
provision of the certificate of incorporation or by-laws of the Seller; (ii)
violate any provision of the Seller’s Plan of Reorganization; (iii) result
in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement, lease or other instrument or
obligation to which the Seller or any of the Sale Assets may be bound, except
for such defaults (or rights of termination, cancellation or acceleration) as
to which requisite waivers or consents have been obtained before the Closing or
the 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 the
Sale Assets, in each case except for such conflicts, breaches, defaults or
violations which do not have a material adverse affect on the Sale Assets or on
Seller’s obligation hereunder.  All
Authorizations issued or held in respect of the Sale Assets or the Northeast
Business are valid, and there are no violations thereof.  Seller possesses all Authorizations necessary
for operation of the Phone Equipment and conduct of the Northeast Business, and
all such Authorizations are in full force and effect and freely
transferable.  All material rules,
regulations, orders, laws, and ordinances applicable to the Sale Assets and the
Northeast Business have been complied with, and the Seller has not received any
written notice alleging any noncompliance therewith.  Notwithstanding anything to the contrary
herein contained, the parties acknowledge and agree that Seller is currently
attempting to obtain DOITT Transfer Approval, and that Seller’s ability to
convey title to such Franchise Phone Equipment to Buyer is subject to, and
contingent upon, the DOITT Transfer Approval.

 

(b)                                 To
the extent the Phone Equipment is subject to rules, regulations, ordinances or
laws governing or otherwise affecting public pay telephones, including but not
limited to municipal or local ordinances relating to permits and other
requirements for public pay telephones, Seller is in full compliance with all
such rules, regulations, ordinances and laws (the “Rules”).  Seller has (i) obtained all licenses,
permits, authorizations and approvals required by the Rules subject to
obtaining the DOITT Transfer Approval; (ii) paid all license, occupancy
and other fees due and owing thereon current to the Closing Date;
(iii) made the necessary filings and paid the requisite fees to effectuate
and transfer to the Seller all such licenses, permits, authorizations and
approvals; and (iv) otherwise complied in all material respects with the
terms and provisions of the Rules.

 

11

 

5.3                                 Financial Information.  Attached hereto as Schedule 5.3 are true, complete and correct
copies of the Monthly Coin Revenue Reports of the Seller, which reports
accurately and completely set forth the gross coin revenue achieved with
respect to the Phone Equipment for the May, 2004 through April, 2005 period, in
each case on a per ANI and per calendar month basis.  All other financial information provided by
the Seller, including but not limited to copies of telephone bills, any and all
information regarding coin collections, long distance revenues, ILEC, CLEC and other
telephone company charges, operator service provider revenues, parts and
supplies expenses and commissions, is true, complete and correct in all
material respects.

 

5.4                                 Litigation.  Except for the existing dispute between
Seller and DOITT, there are no claims, actions, suits, inquiries,
investigations or proceedings pending or, to the best of the Seller’s
knowledge, threatened against the Seller, whether at law or in equity and
whether civil or criminal in nature, before or by any federal, state, municipal
or other court, arbitrator, governmental department, commission, agency or
instrumentality, domestic or foreign, nor are there any judgments, decrees or
orders of any such court, arbitrator, governmental department, commission,
agency or instrumentality outstanding against the Seller (a) that relate
to the Sale Assets being conveyed by the Seller or the Seller’s Northeast
Business; or (b) that seek specifically to prohibit, restrict or delay
consummation of the transactions contemplated hereby or fulfillment of any of
the conditions of this Agreement.

 

5.5                                 Defaults.  There is not any existing default, or event
of default, or event that with or without due notice or lapse of time or both
would constitute a default or event of default, under any Assigned Contract
covering more than fifteen (15) phones or Authorizations of the Seller, except
for such defaults as to which requisite waivers or consents have been obtained
before the Closing or the obtaining of which has been expressly waived in
writing by Buyer.  Any existing default
not so waived shall be cured by Seller as a condition to closing and
assignment.  Each Assigned Contract
authorizes and empowers the Seller to select, or does not prohibit or impede in
any way the Seller’s right to select, the operator service provider and
interexchange carrier for such phones. 
The Seller does not have any knowledge that any of the Assigned
Contracts covering more than fifteen (15) phones will be terminated or not
renewed, or that any of the Phone Equipment will be required to be uninstalled
as a result thereof.  To the best of
Seller’s knowledge, except as previously disclosed to Buyer in writing all
relations with the customers, vendors, suppliers and licensors associated with
the Phone Equipment and the relevant governmental or regulatory authorities are
in good standing.

 

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

 

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

 

12

 

of the Sale Assets to Buyer,
free and clear of any and all liabilities, 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 the Sale Assets.  Upon
receiving the DOITT Transfer Approval to the transfer of the Franchise Phone
Equipment to Buyer, Seller shall transfer good, marketable and indefeasible
title to the Franchise Phone Equipment to Buyer, free and clear of any and all
liabilities, 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 Franchise
Phone Equipment.  The bill of sale and
other Seller documents to be executed and delivered to Buyer at and after the
Closing will be valid and binding obligations of Seller and will effectively
vest in Buyer title to the Sale Assets free and clear of any liens, claims and
encumbrances.

 

5.8                                 Expenses of the Business.  There is no delinquency in the payment of any
bills, taxes, fees, charges, expenses, debts, commissions or other amounts due
relating to the Assigned Contracts, the Authorizations (except with respect to
DOITT) or the Equipment or any telephone lines associated therewith.  All operating expenses of the Seller’s
Northeast Business, including but not limited to those represented by such
bills, taxes, fees, charges, expenses, debts, commissions or other amounts,
have been paid currently.  All
outstanding commissions due to customers with respect to the Phone Equipment
shall have been paid through the Closing Date.

 

5.9                                 Taxes.  From and since the effective date of its Plan
of Reorganization, Seller has filed or caused to be filed (or obtained valid
extensions for the filing of), all federal, state and local tax returns that
are required to be filed by it in connection with its Business, and has paid or
caused 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 such
returns or on any assessment received by it and has made all estimated tax
payments required to be made by it in order to avoid the imposition of penalties,
interest and other additions to tax.  No
tax liens have been filed against the Seller, and the Seller has not been
notified of or otherwise has knowledge of, any claim being asserted with
respect to any such taxes.  There is no
action, suit, proceeding, investigation or audit pending or threatened against
Seller in respect of any tax or assessment, nor is any claim for additional tax
or assessment being asserted by any taxing authority whatsoever.  All taxes that the Seller is required by law
to withhold or collect have been duly withheld or collected and, to the extent
required, paid over to the proper governmental authorities on a timely
basis.  None of the officers, directors
or employees of the Seller have been notified or otherwise advised that such an
audit may occur.

 

5.10                           Full Disclosure.  To the best of Seller’s knowledge, no
representation or warranty to the other Buyer contained in this Agreement or
any list, document or other writing furnished to the other Buyer pursuant to
the provisions hereof, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statement herein
or therein not misleading.

 

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

 

13

 

indirectly, as a broker or
finder in connection with this Agreement and the transactions contemplated
hereby.

 

Section 6

Pre-Closing Covenants

 

6.1                                 Access to Sale Assets.  Prior to the Closing Date, the Seller shall
afford 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 normal
business hours at the Seller’s offices. 
Buyer shall have the full opportunity to make such investigations as it
shall reasonably require with respect to the Sale Assets and the transactions
contemplated herein.

 

6.2                                 Preservation of Sale Assets.

 

(a)                                  Except
as otherwise required by law or expressly permitted by this Agreement, the
Seller and Buyer agree that they shall not after the date of this Agreement and
until the Closing:

 

(i)                                     dispose
of, or agree to dispose of, any of the Sale Assets other than in the ordinary
course of business or lease or license, or agree to lease or license, any of
the Sale Assets;

 

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

 

(iii)                               waive,
release, grant or transfer any rights of value or modify or change any existing
license, lease, contract or other agreement or arrangement affecting the Sale
Assets.

 

(b)                                 Except
as otherwise required by law, Seller shall after the date of this Agreement and
until the Closing: (i) maintain all of the Sale Assets in good operating
condition, reasonable wear and tear excepted; (ii) maintain all Assigned
Contracts 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.

 

Section 7

Conditions to Obligations of the Buyer

 

The
obligations of the Buyer under Sections 2 and 3 of this Agreement are subject
to satisfaction, at or prior to the Closing, of each of the following
conditions, any one or more of which may be waived in writing by Buyer:

 

7.1                                 Representations, Warranties and
Covenants.  All representations and warranties of the
Seller made in this Agreement and the documents and instruments

 

14

 

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

 

7.2                                 No Governmental Proceeding or
Litigation.  No suit, action, investigation, inquiry or
other proceeding by any governmental body or other person or legal or
administrative proceeding shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby.

 

7.3                                 No Injunction.  On the Closing Date there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein or any of them not be consummated as so
provided or imposing any conditions on the consummation of the transaction
contemplated hereby which the Buyer deems unacceptable in its sole discretion.

 

7.4                                 Approvals.  Seller shall have made and obtained all
notices to, filings with, and authorizations, consents and approvals of governments
and 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, or
obtain 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 obtained
Regulatory Approval but Seller has not obtained DOITT Transfer Approval and
effectuated the transfer of the Franchise Phone Equipment to Buyer within six
(6) months of the Closing Date, Buyer shall have the right to suspend
Installment Payments until such time as such DOITT Transfer Approval has been
obtained.  In such case, Buyer shall have
the right to negotiate with DOITT directly for the settlement and resolution of
any terms of the DOITT Transfer Approval; provided however, that any settlement
with DOITT shall be subject to the approval of Seller, which approval shall not
be unreasonably withheld.

 

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

 

Section 8

Conditions to Obligations of the Seller

 

The
obligations of the Seller under Section 2 of this Agreement are subject to
satisfaction, 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 and
Covenants.  All representations and warranties of Buyer
made in this Agreement and the documents and instruments executed

 

15

 

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

 

Section 9

Termination

 

9.1                                 Right of Parties to Terminate.  This Agreement may be terminated by the Buyer
if:

 

(a)                                  the
Seller shall have breached any of its material obligations under this Agreement;

 

(b)                                 Seller
has not satisfied the conditions set forth in Section 7 of this Agreement or
otherwise satisfied its obligations hereunder by July 1, 2005;

 

(c)                                  prior
to closing, Buyer discovers a material adverse change in the amount and nature
of the Sale Assets.  For purposes of this
Section 9, “Material Adverse Change” shall mean:

 

(i)                                     the
Phone Equipment does not include at least 2600 payphones installed and
operating 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 the
sites within ten days of Buyer notifying Seller of this material adverse
change,

 

(ii)                                  fewer
than 60% of the installed and operating payphones included in the Phone
Equipment have valid site contracts which are assignable and which have a valid
remaining initial or renewal term of at lease one (1) year,

 

(iii)                               average
monthly revenues and expenses for the period of January, 2004 through May, 2005
are not as listed on the Income Statement for the New York Operations attached
hereto as Schedule 9.1; or

 

(iv)                              average
monthly site commissions payable on each item of the installed and operating
Phone Equipment for December, 2004 and January, 2005 exceed $16.00 per phone.

 

9.2                                 Effect of Termination.  If Buyer or the Seller terminates this
Agreement pursuant to Section 9.1, such party shall promptly give written
notice 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 and
employees from any further liabilities and obligations with respect to this
Agreement.

 

16

 

Section 10

Closing

 

10.1                           Time and Place of Closing.  The closing of the transactions contemplated
by 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 first
business day after the fulfillment or waiver of the last of the conditions
precedent to this Agreement as stated in Sections 7 and 8, and on or before
June 30, 2005 or such other date as may be mutually agreed to between the
parties.  The date scheduled for the
Closing pursuant to this Section 10.1 shall be referred to as the “Closing Date”.

 

10.2                           Obligations of the Seller at
Closing.  At the Closing, the Seller shall deliver or
cause to be delivered to the Buyer the following documents and take the other
actions identified below:

 

(a)                                  bills
of sale, conveying to Buyer:  (i) all of
the Non-Franchise Phone Equipment and (ii) Franchise Phone Equipment so long as
the DOITT Transfer Approval has been obtained, (iii) executed copies of any
transition 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 has
not been obtained by the Closing Date, Seller shall deliver to Buyer’s counsel
in escrow a bill of sale for the Franchise Phone Equipment which will be
released to Buyer upon obtaining the DOITT Transfer Approval;

 

(b)                                 a
certified copy of the resolutions of the board of directors of Seller
authorizing the execution, delivery and performance of the Agreement and all
documents, instruments and transactions contemplated herein;

 

(c)                                  duly
executed instruments of Assignment relating to the Assigned Contracts;

 

(d)                                 closing
certificates pursuant to which the Seller represents and warrants to Buyer that
its representations and warranties to Buyer are true and correct in all
material respects as of the Closing Date as if then originally made and that
all covenants required by the terms hereof to be performed by the Seller on or
before the Closing Date, to the extent not waived by the Buyer in writing, have
been so performed in all material respects;

 

(e)                                  copies
of the Assigned Contracts and evidence that all Cure Costs have been or will be
paid;

 

(f)                                    all
other documents and instruments as may be reasonably necessary and required to
consummate the transactions contemplated by this Agreement approving and
authorizing this Agreement and the transactions contemplated thereby,
including, but not limited to assignment certificates as requested on a case by
case basis;

 

(g)                                 such
other documents as Buyer may reasonably request; and

 

17

 

(h)                                 there
shall have been no material adverse change in the Sale Assets or the Northeast
Business of Seller prior to the Closing Date.

 

10.3                           Obligations of Buyer at Closing.  At the Closing, Buyer shall deliver or cause
to be delivered the following documents, and take the other actions identified
below:

 

(a)                                  payment
of the Purchase Price in accordance with Section 3;

 

(b)                                 a
certified copy of resolutions of Buyer’s board of directors or governing body
authorizing the execution, delivery and performance of this Agreement and all
agreements contemplated hereby;

 

(c)                                  a
closing certificate pursuant to which Buyer represents and warrants to the
Seller that Buyer’s representations and warranties to the Seller are true and
correct in all material respects as of the Closing Date as if then originally
made, and that all covenants required by the terms hereof to be performed by
Buyer on or before the Closing Date, to the extent not waived by the Seller in
writing, have been so performed in all material respects;

 

(d)                                 a
duly executed instrument of assumption of the Assigned Contracts and all other
documents and instruments as may be reasonably necessary and required to
consummate the transactions contemplated by this Agreement and the Sale Order;

 

(e)                                  within
ten (10) business days of Closing, a true and correct copy of Buyer’s Vendex
application, redacted as Buyer deems necessary to protect any confidential
information; and

 

(f)                                    such
other documents as the Seller may reasonably request.

 

The parties
hereto agree that a facsimile transmittal of their signature, confirmed
verbally by telephone by their counsel, shall be binding upon them as a
delivery of the relevant executed document for the Closing, and that documents
may be validly executed through counterpart originals.  However, Seller may demand confirmation of
receipt of the Purchase Price by Seller’s financial institution prior to the
delivery of any documents.

 

Section 11

Indemnification

 

11.1                           Indemnity by Seller.  Subject to the terms and conditions of this
Agreement and the limitations contained in this Section 11, Seller shall
indemnify and hold harmless Buyer from and against (i) any breach of a
representation or warranty made by Seller in this Agreement; (ii) the
breach of any covenant, agreement or undertaking by Seller contained in this
Agreement; (iii) any liability or obligation of Seller not specifically
assumed 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.

 

18

 

11.2                           Indemnity by Buyer.  Subject to the terms and conditions of this
Agreement and the limitations contained in this Section 11, Buyer shall
indemnify and hold harmless Seller from and against (i) any breach of a
representation or warranty made by Buyer in this Agreement; (ii) the
breach of any covenant, agreement or undertaking by Buyer contained in this
Agreement; (iii) any liability or obligation of Seller that is being
specifically assumed by Buyer pursuant to this Agreement; and (iv) any
reasonable costs (including but not limited to reasonable attorneys’ and
accountants’ fees) incurred by the Buyer in connection therewith.

 

11.3                           Third Party Claims.  (a) 
Except as otherwise provided herein, the procedures set forth in the
following paragraphs of this Section 11.3 shall apply to indemnification of
claims arising from the assertion of liability by persons or entities not
parties to this Agreement.

 

11.3.1                  The party seeking
indemnification (the “Indemnified Party”) shall, as promptly as
reasonably practicable, give written notice to the party from which
indemnification is sought (the “Indemnifying Party”) of any assertion of
liability by a third party that might give rise to a claim by the Indemnified
Party against the Indemnifying Party based on the indemnity agreements
contained in this Agreement or in any document executed and delivered in
connection herewith, stating the nature and basis of the assertion and the
amount thereof to the extent known. 
Failure on the part of the Indemnified Party to give prompt notice to
the Indemnifying Party shall not limit or otherwise affect such Indemnified
Party’s right to indemnification hereunder so long as the Indemnifying Party is
not materially adversely affected.

 

11.3.2                  In the event that any Legal
Action is brought against an Indemnified Party with respect to which the
Indemnifying Party may have liability under an indemnity agreement contained in
this Agreement or in any document executed and delivered in connection
herewith, the Indemnifying Party shall have the right, at its sole cost and
expense, to defend the Indemnified Party against such Legal Action (and any
appeal and review thereof), with counsel reasonably acceptable to the
Indemnified Party.  In any such Legal
Action, the Indemnified Party shall have the right to be represented by
advisory counsel and accountants, at its own expense, and the Indemnifying
Party shall keep the Indemnified Party fully informed as to such proceeding at
all stages thereof, whether or not the Indemnified Party is represented by its
own counsel.

 

11.3.3                  Until the Indemnifying Party
shall have assumed the defense of such Legal Action, or if the Indemnified and
Indemnifying Parties are both named parties in such Legal Action and the
Indemnified Party shall have reasonably concluded that there may be defenses
available to it that are different from or in addition to the defenses
available to the Indemnifying Party (in which case the Indemnifying Party shall
not have the right to assume the defense of such Legal Action but shall remain
responsible for its obligation as an indemnitor), all reasonable legal and
other reasonable expenses incurred by the Indemnified Party as a result of such
Legal Action, shall be borne solely by the Indemnifying Party.

 

19

 

In such event the Indemnifying Party shall
make available to the Indemnified Party and its attorneys and accountants, for
review and copying, all of its books and records relating to such Legal Action
and the parties agree to render to each other such assistance as may reasonably
be requested in order to facilitate the proper and adequate defense of any such
Legal Action.

 

11.3.4                  Neither the Indemnifying Party
nor the Indemnified Party shall make any settlement of any claim without the
written consent of the other, which consent shall not be unreasonably
withheld.  Without limiting the
generality of the foregoing, it shall not be deemed unreasonable to withhold
consent to a settlement involving injunction or other equitable relief against
the Indemnified Party or its assets, employees or business.

 

Section 12

Survival

 

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

 

Section 13

Other Provisions

 

13.1                           Further Assurances.  After the Closing, each of the parties will
take such actions and execute and deliver to the other party such further
documents, instruments of assignment, conveyances and transfers as, in the
reasonable opinion of counsel to the requesting party, may be necessary (a) to
ensure, complete and evidence the full and effective transfer of the Sale
Assets to Buyer; and; (b) to fully and completely consummate the transactions
and agreements contemplated by this Agreement.

 

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

 

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

 

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

 

20

 

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

 

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

 

(i)                                     If
to the Buyer:

 

Empire Payphones, Inc.

44 Wall
Street, 6th Floor

New York,
NY  10005

Attn: Andoni
Economou

Facsimile:
(212) 635-5074

 

with copies
to:

 

Burton Weston,
Esq.

Garfunkel,
Wild & Travis, P.C.

111 Great Neck
Road

Great Neck, NY
11021

Facsimile:  (516) 466-5964

 

(ii)                                  If
to the Seller:

 

Michael McClellan, CFO

ETS Payphones, Inc.

1490 Westfork
Drive Suite G

Lithia
Springs, GA  30122

Facsimile:  (770) 819-1682

 

with copies
to:

 

Brian Gannon

Seyfarth Shaw LLP

One Peachtree Pointe

1545 Peachtree Street, N.E.

Suite 700

Atlanta, GA 30309-2401

Facsimile: (404) 892-7056 

 

21

 

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

 

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

 

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

 

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

 

22

 

IN WITNESS
WHEREOF, the parties have executed this Asset Sale Agreement as of the day and
year 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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