Document:

Exhibit 10.1

 

ESCHELON TELECOM, INC.

 

EMPLOYMENT
AGREEMENT

 

THIS
AGREEMENT is made this 23rd day of May, 2005, by and between ESCHELON TELECOM, INC., A Delaware Corporation ( the “Company”
) and RICHARD A. SMITH ( the “Officer” ).

 

RECITALS

 

A.                                   The Officer is the President and Chief
Executive Officer of the Company as of the date of this agreement, and has been
an employee of the Company since October 8, 1998.

 

B.                                     The
Board of Directors of the Company desires to retain the Officer in the employ
of the Company.

 

C.                                     The
Board of Directors believes that it is essential to preserve and maintain the
stability and continuity of management of the Company by providing the Officer
with economic and other security from the uncertainty of risks inherent in a
potential sale or merger of the Company, which might jeopardize the Officer’s
employment.

 

NOW
THEREFORE, in consideration of the foregoing and of the
mutual promises of the parties hereto, the Company and the Officer agree as
follows:

 

1.                                       Terms of Employment

 

(a)                                  As compensation for his services
hereunder, during the Officer’s employment as President and Chief Executive
Officer, the Company agrees to pay the Officer a base salary at the rate of
Three Hundred Thirty Nine Thousand Seven Hundred and Seventy Five Dollars                          (
$339,775 ) per annum, payable in accordance with the Company’s normal payroll
schedule, or on such other periodic basis as may be mutually agreed upon.  The Company may withhold from any amounts
payable under this agreement such Federal, State and/or Local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.  The Officer’s salary shall be subject to
annual review based on corporate policy and contributions made by the Officer,
with non-guaranteed increases each year consistent with other Company
executives.

 

 

(b)                                 The
Officer shall be eligible to receive an annual cash bonus award based upon
performance metrics set by the Chairman of the Board and the Board of
Directors.  Upon satisfaction of the
performance metrics, the Officer shall receive one of three bonuses: ( 1 ) the
base bonus of sixty percent ( 60% ) of the Officer’s then current annual base
salary, ( 2 ) the target bonus of ninety percent ( 90% ) of the Officer’s then
current annual base salary, and ( 3 ) the stretch bonus of one hundred and
twenty percent ( 120% ) of the Officer’s then current annual base salary.  No bonus is guaranteed and any bonus is
expressly conditioned upon the Officer and the Company satisfying the
performance metrics set by the Chairman of the Board and Board of Directors.

 

(c)                                  The
Officer may be eligible to receive stock options/equity grants in the
Company.  The terms and conditions
governing eligibility for, entitlement to, and receipt of any options or other
form of equity in the Company shall be governed by the Stock Option Plan and
Option Grant Agreement, to be executed by the Officer and the Company.

 

(d)                                 In
addition to the compensation provided for above, the Company agrees to pay or
to reimburse the Officer during his employment for all reasonable, ordinary and
necessary, properly vouchered, client-related business or entertainment
expenses incurred in the performance of his services hereunder in accordance
with Company policy in effect from time to time, provided, however, that the
amount available to the Officer for such travel, entertainment and other
expenses may require advance approval by the Chairman of the Board. The Officer
shall submit vouchers and receipts for all expenses for which reimbursement is
sought.

 

(e)                                  During
each calendar year, the Officer shall be entitled to the standard amount of
vacation provided by the Company for senior level executives.

 

(f)                                    In
addition to the compensation provided herein, the Officer shall be entitled to
the benefits available generally to Company employees pursuant to Company
programs, including, by way of illustration, personal leave, paid holidays,
sick leave, profit-sharing, 401(K) participation ( 45% match up to a maximum of
$6,000 annually ), disability, dental, vision, group sickness, accidental and
health insurance programs of the Company which may now or, if not terminated,
shall hereafter be in effect, or in any other or additional such programs are
or may from time to time be in effect, as determined by the Company and the
terms hereof, subject to the applicable terms and conditions of the benefit
plans in effect at that time.

 

2

 

2.                                       Employment Period and Termination Considerations

 

(a)                                  As noted above, the Officer is employed
by the Company as of the date of this Agreement; the Officer’s employment shall
continue until terminated upon the earlier to occur of the following
events:  ( 1 ) the close of business on November 22,
2008 ( the “Second Term” ) or ( 2 ) the death or permanent disability ( as
described below ) of the Officer.  This
Agreement may be renewed by mutual agreement of the parties.

 

(b)                                 The
Officer may terminate the employment relationship at any time for any reason by
giving the Company written notice at least thirty ( 30 ) days prior to the
effective date of termination.  The
Company, at its election, may ( 1 ) require Officer to continue to perform his
duties hereunder for the full thirty ( 30 ) day notice period, or ( 2 )
terminate Officer’s employment at any time during such thirty ( 30 ) day notice
period, provided that any such termination shall not be deemed to be a
termination of the Officer’s employment by the Company without Cause.  Unless otherwise provided by this section,
all compensation and benefits paid by the Company to the Officer shall cease
upon his last day of employment.  The
obligations imposed on the Officer with respect to confidentiality,
non-disclosure and assignment of rights to inventions or developments in any other
agreement executed by the parties shall continue, notwithstanding the
termination of the employment relationship between the parties.

 

(c)                                  If
the Officer’s employment is terminated for “cause” the Officer will not be
entitled to and shall not receive any compensation or benefits of any type
following the effective date of termination. 
As used in this agreement, the term “cause” shall include a termination
for insubordination; dishonesty ( including but not limited to any acts of
embezzlement or misappropriation of funds ); fraud; serious dereliction of
fiduciary obligation; criminal activity; moral turpitude; conviction of a
felony; plea of guilty or nolo contendere
to a felony charge or any criminal act involving moral turpitude; a willful
unauthorized disclosure of confidential information belonging to the Company,
or entrusted to the Company by a client, customer, or other third party; a
violation of any material Company rule, regulation or policy; any act
materially adverse to the interests of the Company; material neglect of the
Company’s business; repeatedly being under the influence of drugs or alcohol (
other than prescription medicine or other medically-related drugs to the extent
that they are taken in accordance with their directions ) during the
performance of his duties under this

 

3

 

Agreement
or, while under the influence of such drugs or alcohol, engaging in grossly
inappropriate conduct during the performance of his duties under this agreement;
engaging in behavior that would constitute grounds for liability for harassment
( as proscribed by the Equal Employment Opportunity Commission Guidelines or
any other applicable state or local regulatory body ) or other egregious
conduct that violates laws governing the workplace; or a material breach of any
promise or obligation under this agreement, including, without limitation, a
refusal to substantially perform the Officer’s duties hereunder, except in the
event that the Officer becomes permanently disabled as set forth in paragraph 2(e) below.  Anything herein to the contrary
notwithstanding, the Company shall provide the Officer with written notice
prior to terminating Officer’s employment for “cause” under any other
circumstance where the conduct constituting “cause” is reasonably open to a
cure ( for instance, where the “cause” does not involve a violation of trust or
otherwise adversely affect the relationship between the Officer and the Company
on a going-forward basis ) , setting forth the exact nature of any alleged
breach and the conduct required to cure such breach.  Officer shall have fifteen ( 15 ) days from
the giving of such notice within which to cure.

 

(d)                                 Upon
fifteen ( 15 ) days written notice, the Company shall retain the right to terminate
the Officer without cause.  If the
Officer’s employment is terminated by the Company without cause, the Officer
shall continue to receive his base salary for a period of fifteen ( 15 ) months
( the “severance period” ).  During the
severance period, the Company shall continue medical benefits for the Officer
by paying the premium for the Officer’s health insurance continuation coverage
under COBRA to the extent that the Officer elects COBRA coverage ( or continue
to contribute the employer portion of the premium normally paid by the Company
for it’s current employees ). 
Furthermore, the obligations imposed on the Officer with respect to
confidentiality, non-disclosure and assignment of rights to inventions or
developments in this agreement or any other agreement executed by the parties
shall continue, notwithstanding the termination of the employment relationship
between the parties.

 

(e)                                  In
the event the Officer becomes permanently disabled during employment with the
Company, the Company may terminate this agreement by giving thirty ( 30 ) days
notice to the Officer of its intent to terminate, and unless the Officer
resumes performance of his duties within fifteen ( 15 ) days of the date of the
notice and continues performance for the remainder of the notice period, this
agreement shall terminate at the end of the thirty ( 30 ) day period.  The Officer will not be entitled to and shall
not receive any severance compensation or benefits of any type following the effective
date of termination other than normal short and long term disability coverage
currently provided to employees under existing Company Short and Long Term
Benefit Plans.

 

4

 

“Permanently
disabled” for the purposes of this agreement means the inability, due to
physical or mental ill health, to perform the essential functions of the
Officer’s job, with or without a reasonable accommodation, for ninety ( 90 )
during any one employment year irrespective of whether such days are
consecutive.

 

(f)                                    This
agreement will terminate immediately upon the Officer’s death and the Company
shall not have any further liability or obligation to the Officer, his
executors, heirs, assigns or any other person claiming under or through his
estate, except that the Officer’s estate shall receive any accrued but unpaid
salary or bonuses along with any and all considerations outlined in Section 8.

 

(g)                                 If
the agreement expires at the end of this second term or any renewal term after
proper advance notice by either party of its/his intent not to renew, the
agreement shall expire and the Officer shall not be entitled to any Termination
Compensation or severance of any kind, except as required by law.

 

3.                                       Eligibility for Severance Pay

 

In
addition to the foregoing, the Officer shall be eligible to receive severance
pay in the amounts and at the times described in section 5, if:

 

(a)                                  The
Officer’s employment with the Company and all of its subsidiaries ( if any ) is
terminated within twenty four ( 24 ) months after there has been a “change in
control”, as such term is hereinafter defined; and

 

(b)                                 The
Officer’s termination of employment was not:

 

(i)             For
conduct involving willful misconduct ( such as commission by the Officer of a
felony or a common law fraud against the Company ) which is detrimental in a
significant way to the business of the Company or any of its subsidiaries; or

 

(ii)                                  On
account of the Officer’s voluntary resignation; provided that a resignation
shall not be considered to be voluntary for the purposes of this agreement if
it occurs under the circumstances described in Section 4(a), or if,
subsequent to the change in control, there has been; ( 1 ) a reduction of 25%
or more in the Officer’s annual compensation; or ( 2 ) a change in the place in
which the Officer is required to perform his duties, if the new place is more
than 50 miles from the place the Officer performed his services immediately
prior to the “change in control”.

 

5

 

4.                                       Change in Control

 

For
the purposes of this agreement, a “change in control” shall be deemed to have
occurred if:

 

(a)                                  There
occurs any sale or other disposition to a person unrelated to the Company or
any of the holders of its securities of ( 1 ) representing, after the sale or
disposition, more than 50% of the outstanding voting securities of the Company
as measured by the voting power on an as if converted basis or ( 2 ) more than
50% of the aggregate assets of the Company and its subsidiaries, in the single
transaction or series of transactions; or

 

(b)                                 The
Company or any combination of the Company and its subsidiaries aggregating to
more than 50% of the consolidated assets of the Company and its wholly-owned
subsidiaries becomes a party to any merger or consolidation ( excluding a
merger or consolidation where the Company or one of such subsidiaries is the
surviving corporation).

 

5.               Certain Changes in Control and Severance Payments

 

In the
event of a qualifying change of control, the Officer shall receive the
following payments:

 

(a)                                  A
lump sum cash payment, no later than thirty ( 30 ) days after the date on which
the Officer’s employment terminates, in an amount equal to two ( 2 ) times the
Officer’s average annual compensation ( as defined below ); and

 

(b)                                 Continuation
of coverage under the Company’s group medical, group life, and group long term
disability plans, if any, and under any individual policy or policies of life
insurance maintained by the Company, with the same rate of employer
contributions as for active employees, until the earlier to occur of:

 

(i)             The
expiration of twenty four ( 24 ) months from the date on which the Officer’s
employment terminates; or

 

(ii)                                  The
date on which the Officer obtains comparable coverage provided by a new
employer; and

 

6

 

(c)                                  A
lump sum cash payment, payable no later than thirty ( 30 ) days after the date
on which the Officer’s employment terminates, in an amount equal to the sum of:

 

(i)             The
amount by which the fair market value of that number of shares of stock subject
to any stock option which is forfeited or which otherwise becomes
non-exercisable by the Officer by reason of the termination of his employment (
determined as of the date of such termination ) exceeds the option price for such
shares; and

 

(ii)                                  Such
additional amounts ( or the fair market value of such additional property ) in
excess of the amount determined pursuant to subparagraph (I) that would have
been paid or distributed to the Officer upon the exercise of any such forfeited
stock options, had such options been exercisable, and exercised, by the Officer
as of the date his employment terminated.

 

It is
understood and agreed that the payment provided in this Section 5 (c) is
expressly conditioned upon the Officer’s inability to exercise his options
subsequent to termination of his employment under the provisions of the Officer’s
stock option agreements.

 

For
purposes of this section 5, the term “average annual compensation” shall
mean the higher of; ( 1 ) the average rate of annual salary payable to the
Officer for the calendar year in which the Officer’s employment terminates and
for the two immediately preceding calendar years, plus the average annual bonus
or incentive payments awarded to the Officer for the same three ( 3 ) calendar
years or ( 2 ) $200,000; provided, that if bonus or incentive
compensation awards have not been determined for the calendar year immediately
preceding the year in which the Officer’s employment terminates.  The Officer’s average annual compensation
shall be determined prior to any reduction for deferred compensation, 401(K)
plan contributions, and similar items, and any reduction in the Officer’s rate
of salary occurring within twenty four ( 24 ) months after a change in control
shall be disregarded.  In addition, the
insurance coverage provided under this paragraph shall be governed by the
insurance coverage provided to such Officer immediately prior to any reduction
in such coverage occurring within twenty four ( 24 ) months after any change in
control.

 

7

 

6.               Floor Value of Options Upon a Change in Control

 

In
consideration of the value that the Officer brings to the Company if a change
in control occurs on or before November 22, 2008, then the Officer may put
any number of his options to the Company in exchange for a single lump sum
payment of up to $1,750,000 ( the “Officer Option Payment” ) ; provided,
however, that the Officer Option Payment shall be zero ( 0 ) if Bain Capital,
Wind Point Partners, and Stolberg Equity Partners ( the “Investors” )
collectively fail to receive at least $35,000,000 ( or their pro-rata
investment back if less than 100% is sold ). 
If, however, the Investors receive $35,000,000 ( or their pro-rata
investment back if less than 100% is sold ), then the Officer Option payment
shall be $750,000; the Officer Option Payment shall increase proportionally
with the increased return to the Investors up to the maximum which will be paid
to the Officer upon return to the Investors in the amount of $70,000,000 ( or
two ( 2 ) times their pro-rata investment back if less than 100% is sold
).  The foregoing calculations are
premised upon the Officer exercising the put right with respect to all of his
options; the actual value of any payment to the Officer pursuant to this section shall
be proportionate to the percentage of available option shares put by the
Officer.

 

7.               No Funding of Severance Pay

 

Nothing
herein contained shall require or be deemed to require the Company or a subsidiary
to segregate, earmark, or otherwise set aside any funds or other assets to
provide for any payments required to be made hereunder, and the rights of the
Officer to severance pay hereunder shall be solely those of a general,
unsecured creditor of the Company.

 

8.               Death Considerations

 

In the
event of the Officer’s death, any amount or benefit payable or distributable to
the Officer pursuant to section 5(a) and 5(b) shall be paid to
the beneficiary designated by the Officer for such purpose in the last written
instrument, if any, received by the Board of Directors of the Company prior to
the Officer’s death, or, if no beneficiary has been designated, to the Officer’s
estate.  In addition, all granted but
unvested options shall immediately vest and the estate will not be required to
exercise the options immediately.

 

9.               Rights in the Event of a Dispute

 

If a
claim or dispute arises concerning the rights of the Officer or a beneficiary
to benefits under this agreement, regardless of the party by whom such claim or
dispute is initiated, the prevailing party in such dispute shall be entitled to
recover its legal expenses, including reasonable attorney’s fees, court costs,
and ordinary and necessary out-of-pocket costs of attorneys incurred in
connection with the bringing, prosecuting, defending, litigating, negotiating,
or settling such claim or dispute; provided, that:

 

8

 

(a)                                  The
prevailing party obtains a judgement in its favor from a court of competent
jurisdiction from which no appeal may be taken, whether because the time to do
so has expired or otherwise; and provided further, that

 

(b)                                 In
the case of any claim or dispute initiated by the Officer, such claim shall be
made, or notice of such dispute given, with specific reference to the
provisions of this agreement, to the Board of Directors of the Company within
one year after the occurrence of the event giving rise to such claim or
dispute.

 

10.         Amendment

 

This
agreement may not be amended or modified except by a written instrument signed
by both parties as of a date contemporaneous herewith or subsequent hereto.

 

11.         No Obligation to Mitigate Damages

 

In the
event that the Officer becomes eligible to receive benefits hereunder, the
Officer shall have no obligation to seek other employment in an effort to
mitigate damages.  To the extent the
Officer shall accept other employment after the termination of his employment,
the compensation and benefits due under this agreement, except as provided in section 5(b).

 

12.         Other Benefits

 

The
benefits provided under this agreement shall, except to the extent otherwise
specifically provided herein, be in addition to, and not in derogation or
diminution of, any benefits that the Officer or the Officer’s beneficiary may
be entitled to receive under any other plan or program now or hereafter
maintained by the Company or by any of its subsidiaries.

 

13.         Successors

 

The
Company will require any successor ( whether direct or indirect, by purchase,
merger, consolidation, or otherwise ) to all or substantially all of the
business and/or assets of the Company, to the expressly assume and agree to
perform the Company’s obligations under this agreement in the same manner and
to the same extent that the Company would be required to perform them if no
such succession had taken place unless, in the opinion of legal counsel
mutually acceptable to the Company and the Officer, such obligations have been
assumed by the successor as a matter of law. 
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession ( unless the foregoing opinion is rendered
to the Officer )

 

9

 

shall
entitle the Officer to terminate his employment and to receive the payments
provided for in section 5 above; provided that the Officer has given
notice of such failure to the Company after such effectiveness and such
agreement is not so assumed within ten ( 10 ) days after the Company’s receipt
of such notice.  As used in this
agreement, “Company” shall mean the Company, as presently constituted, and any
successor to its business and/or assets which executes and delivers the
agreement provided for in this section 13 or which otherwise becomes bound
by all the terms and provisions of this agreement as a matter of law.

 

The
Officer’s rights under this agreement shall inure to the benefit of, and shall
be enforceable by, the Officer’s legal representative or other successors in
interest, but shall not otherwise be assignable or transferable.

 

14.         Notices

 

Any
notices referred to herein shall be in writing and shall be sufficient if
delivered in person or sent by U.S. registered or certified mail to the Officer
at his address on file with the Company ( or to such other address as the
Officer shall specify by notice ), or to the Company at 730 Second Avenue
South, Suite 900, Minneapolis, Minnesota 55402-2456 Attention the Chairman
of the Board and/or the Chief Financial Officer.

 

15.         Waiver

 

Any
waiver of any breach of any of the provisions of this agreement shall not
operate as a waiver of any other breach of such provisions or any other
provisions, nor shall any failure to enforce any provision of this agreement
operate as a waiver of any party’s right to enforce such provision or any other
provision.

 

16.         Severability

 

If any
provision of this agreement or the application thereof is held invalid or
unenforceable by a court of competent jurisdiction, the invalidity or
unenforceability thereof shall not affect any other provisions or applications
of this agreement which can be given effect without the invalid or
unenforceable provision or application.

 

10

 

17.         Governing Law

 

The
validity, interpretation, construction, and performance of this agreement shall
be governed by the laws of the State of Minnesota, except to the extent
superceded by applicable Federal Law.

 

18.         Headings

 

The
headings and section designations of this agreement are included solely
for convenience of reference and shall in no event be construed to affect or
modify any provisions of this agreement.

 

19.         Gender and Number

 

In
this agreement where the context admits, words in any gender shall include the
other genders, words in the plural shall include the singular, and words in the
singular shall include the plural.

 

The parties hereto have
executed this agreement as of the day and year first written.

 

 

	
  COMPANY

  	
  Eschelon
  Telecom, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
    /s/
  Clifford D. Williams

  	
   

  
	
   

  	
   

  
	
   

  	
  Clifford D
  Williams

  
	
   

  	
  Chairman of the
  Board

  
	
   

  	
   

  
	
   

  	
   

  
	
  OFFICER

  	
  By

  	
    /s/
  Richard A. Smith

  	
   

  
	
   

  	
   

  
	
   

  	
  Richard A Smith

  
	
   

  	
  President &
  Chief Executive Officer

  

 

11EXHIBIT 10.2

                              CONVERSION AGREEMENT
                              --------------------

     This Conversion Agreement (this "Agreement") is made and entered into as of
the 19th day of May, 2005, by and between by and between ABSOLUTE WASTE
SERVICES, INC., a Florida corporation (the "Company"), and AUGUSTINE FUND, L.P.,
an Illinois limited partnership (the "Investor").

                                    RECITALS

     A. Through March 31, 2005, the Investor had advanced certain funds and
other financial accommodations in an aggregate principal amount of $189,877, to,
among other things, provide working capital and fund the operations of the
Company (the "Existing Debt").

     B. The Investor has continued to make additional advances to the Company
from and after April 1, 2005, and will consider further advances from time to
time (the "Additional Advances") in order to fund, among other things, costs,
fees and expenses (including attorneys' fees) incurred in connection with the
Company's compliance with federal securities laws, including but not limited to
the preparation and filing of the Company's filings required by federal and
state securities laws, and such other costs, fees and expenses (including
attorneys' fees) incurred by the Company in its efforts to observe and maintain
corporate formalities and good standing as a Florida corporation (all such uses
of Additional Advances, the "Compliance Costs").

     C. The Company and the Investor desire to (i) convert the Existing Debt
into common stock of the Company at a conversion price of $0.004 per share, and
(ii) establish and document an arrangement to convert Additional Advances into
shares of the Company's common stock.

                                    AGREEMENT

     NOW, THEREFORE, in consideration of the foregoing premises which are
incorporated by reference herein, and the mutual covenants contained herein, the
parties hereby agree as follows:

     1. Conversion of Existing Debt. Effective as of the date hereof, the
Company and the Investor agree that all of the Existing Debt shall automatically
be converted into common stock of the Company at a conversion price of $0.004
per share, such that the Investor will hold 47,469,250 shares of common stock of
the Company (the "Conversion"), and that such Conversion shall satisfy in full
all of the obligations of the Company under the Existing Debt.

     2. Additional Advances. Additional Advances may, at the option of the
Investor upon notice to the Company, be converted into common stock of the
Company at a conversion price of $0.004 per share (in each instance, an
"Additional Conversion") until such time as (i) the Company has completed its
efforts to observe and maintain regulatory and corporate formalities, or (ii)
the Company can fund Compliance Costs from revenues or third party sources
deemed by the Company's Board of Directors to be in the best interests of the
Company and its stockholders. Such option to convert Additional Advances into
common stock of the Company may only be exercised by the Investor within three
(3) days after the end of each of the Company's fiscal quarters until the option
expires. Any amounts not converted shall be available for conversion in
subsequent quarters.

     3. Exchange of Common Stock. As soon as practical after the date hereof,
the Company shall deliver to the Investor a certificate or certificates
representing the corresponding common stock (the "New Securities") in the
amounts set forth in Section 1 of this Agreement. The Company shall be further
obligated to promptly deliver to the Investor any certificate or certificates
representing the corresponding common stock for any Additional Conversions made
under Section 2 of this Agreement.

<PAGE>

     4. Further Assurance and Assistance. After the date hereof, each party from
time to time shall, without further consideration, execute and deliver such
further documents and instruments and take such other actions as may be
reasonably requested by the other party hereto in order to carry out the intents
and purposes of this Agreement.

     5. Miscellaneous

     (a) Expenses. Each party hereto will pay, and save other parties hereto
harmless from and against any and all liabilities for the payment of all costs
and expenses incurred by or on behalf of such party in connection with this
Agreement.

     (b) Successors and Assigns. Subject to the terms and conditions set forth
herein, this Agreement shall bind and inure to the benefit of the Company and
the Investor and their respective successors, assigns, heirs and personal
representatives, as applicable.

     (c) Entire Agreement. This Agreement and the other writings referred to
herein or delivered pursuant hereto contain the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous arrangements or understandings with respect thereto.

     (d) Savings Clause. If any provision of this Agreement shall be found by a
court to be invalid or unenforceable, in whole or in part, then such provision
shall be construed and/or modified, restricted or severed to the extent and in
the manner necessary to render the same valid and enforceable, or shall be
deemed excised from this Agreement, as the case may require, and this Agreement
shall be construed and enforced to the maximum extent permitted by law, as if
such provision had been originally incorporated herein as so modified or
restricted, or as if such provision had not been originally incorporated herein,
as the case may be.

     (e) Changes. The terms and provisions of this Agreement may be modified or
amended, and any of the provisions hereof may be waived, temporarily or
permanently, pursuant to a written instrument executed by the Company and the
Investor.

     (f) Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.

     (g) Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.

     (h) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois applicable to contracts made
and to be performed wholly therein.

     (i) Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or sent by nationally-recognized
overnight courier or first class registered or certified mail, return receipt
requested, postage prepaid, addressed to such party at the address set forth
below or such other address as may hereafter be designated in writing by such
party to the other parties:

                                       2

<PAGE>

                        (i) if to the Company, to:

                        Absolute Waste Services, Inc.
                        141 West Jackson Boulevard, Suite 2182
                        Chicago, Illinois 60604
                        Telephone:  (312) 427-5457
                        Attention:  Thomas Duszynski

                        (ii) if to the Investor, to:

                        Augustine Fund, L.P.
                        141 West Jackson Boulevard, Suite 2182
                        Chicago, Illinois 60604
                        Telephone:  (312) 427-5457
                        Attention:  Thomas Duszynski

                        with a copy to (which copy shall not constitute notice):

                        Sachnoff & Weaver, Ltd.
                        10 S. Wacker Drive, Suite 4000
                        Chicago, Illinois 60606
                        Telephone: (312) 207-3879
                        Attention: Evelyn C. Arkebauer

All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of dispatch by nationally-recognized overnight
courier, on the next business day following such dispatch and (c) in the case of
mailing, on the third business day after the posting thereof.

                           [Signature page to follow]

                                       3

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     IN WITNESS WHEREOF, each party hereto has executed this Agreement effective
as of the date first set forth above.

                                           ABSOLUTE WASTE SERVICES, INC.

                                           /s/  Thomas Duszynski
                                           -------------------------------------
                                                Thomas Duszynski,
                                                Chief Executive Officer

                                           INVESTOR:

                                           AUGUSTINE FUND, L.P.

                                           By: AUGUSTINE CAPITAL MANAGEMENT, LLC
                                            Its:  General Partner

                                           By:  /s/  John Porter
                                              ----------------------------------
                                                     John Porter

                                           Its:      Member
                                               ---------------------------------

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