Document:

Unassociated Document

    

      Exhibit
        10.1

      

      Purchase
        Agreement

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    
      

      

    

     

    __________________________________________________

     

     

    ASSET
      PURCHASE AGREEMENT

     

    __________________________________________________

     

    effective
      as of August 30, 2007

     

    between

     

    DAVEL
      COMMUNICATIONS, INC.

     

    AS
      SELLER,

     

    AND

     

    STERLING
      PAYPHONES, LLC

     

    AS
      BUYER

     

    

     

     

    
      

      

    

    

    
      
        
        

      

      
        
        

      

      
        
        

      

    

     

    ASSET
      PURCHASE AGREEMENT

     

    This
      ASSET
      PURCHASE AGREEMENT
      (this
“Agreement”), effective as of August 30, 2007, is made and entered into by and
      between Sterling Payphones, LLC, a Delaware limited liability company with
      a
      mailing address at P.O. Box 2974, Huntington Station, NY 11746 (“Buyer”) and
      Davel Communications, Inc., a Delaware corporation, with its principal business
      located at 200 Public Square, Suite 700, Cleveland, Ohio 44114
      (“Seller”).

     

    WHEREAS,
      Seller
      desires to sell and assign to Buyer, and Buyer desires to purchase from Seller,
      free and clear of all liens, claims and encumbrances, except as otherwise
      provided herein, and on the terms and subject to the conditions set forth in
      this Agreement, the assets of Seller identified in Article I of this Agreement;
      

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants, representations, warranties and
      agreements and the conditions set forth in this Agreement, Buyer and Seller
      hereby agree as follows:

     

    Article
      1.   Transfer
      of Assets

     

    1.1.  Transfer
      of Assets.
      On the
      terms and subject to the conditions set forth in this Agreement, Seller shall,
      at the Closing (as hereinafter defined), sell, transfer and assign to Buyer,
      and
      Buyer shall purchase and acquire from Seller free and clear of all liens, claims
      and encumbrances, except as otherwise provided herein, all of Seller’s right,
      title and interest, as of the Closing Date (as hereinafter defined), in the
      assets of Seller (collectively, the “Acquired Assets”) identified
      below:

     

    (a)  Subject
      to Sections 2.3 and 2.4 hereof, the agreements entered into by Seller with
      respect to the locations at which the Telephones (as hereinafter defined) are
      or
      are to be installed and maintained, whether such agreements be in the form
      of
      contracts, licenses, leases or otherwise, written and oral, and, if not
      assignable, the right to act on Seller’s behalf to cause the existing agreement
      to be cancelled and a new agreement in favor of Buyer to be substituted
      therefor, (collectively, the “Location Contracts”). The attached Schedule 1 to
      this Agreement identifies specifically the Location Contracts and their sites
      and automatic number identifier (“ANI”) associated with each Telephone installed
      pursuant to the applicable Location Contract to be acquired by
      Buyer;

     

    (b)  All
      presently installed and existing pay telephones, enclosures and keys
      (collectively, the “Telephones”) installed pursuant to the Location Contracts,
      which Telephones number approximately 21,405, including telephone booths,
      stations, pedestals, apparatus, fixtures, signage, circuit boards, coin banks,
      locks and any other equipment physically connected to or installed in or with
      the Telephones;

     

    (c)  The
      local
      access connection purchased by Seller from the local exchange carrier (“LEC”)
      (or competitive local exchange carrier, “CLEC”) pursuant to the terms specified
      in tariffs filed with the appropriate state regulatory agencies and which are
      attributable to the Telephones and Location Contracts identified on Schedule
      1
      to this Agreement (the “Local Access”) together with all of the telephone
      numbers associated with each of the Telephones provided,
      however, that
      Buyer shall not be required to continue or maintain service with any LEC or
      CLEC
      except as otherwise provided in Section 9.2(c) and 9.2 (d) hereof; 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d)  All
      coin
      in the Telephones (the “Coin in the Box”) as of the Closing Date (the value of
      which shall be estimated and paid at closing with a subsequent adjustment
      thereto paid as a post-closing adjustment pursuant to Section 3.3(a)
      hereof);

     

    (e)  Spare
      parts consisting of telephones, pedestals, apparatus, fixtures, circuit boards,
      coin banks, locks and other parts shown on Schedule 1.1(e) (the “Inventory”)
      including the Inventory located at the premises maintained by TU, LLC, together
      with the oral agreement by and between Seller and TU, LLC extending on a month
      to month basis the contract to warehouse and refurbish equipment so maintained,
      a copy of which is annexed as Schedule 1.1(e) to the Disclosure Schedule (the
      “TU Agreement”);

     

    (f)  Sublease
      dated September 18, 2003 by and between BP America, Inc., as sublandlord, and
      Seller, as subtenant, of Seller’s offices and supporting space in the building
      known as 200 Public Square, Cleveland, Ohio 44114 (the “Premises”) a copy of
      which is annexed as Schedule 1.1(f)-1 to the Disclosure Schedule ((the
“Cleveland Lease”) and the written or oral agreements for infrastructure support
      services copies of which, if written, are annexed as Schedule 1.1 (f)-2 to
      the
      Disclosure Schedule or, if oral, summaries of the material terms of which are
      annexed as Schedule 1.1(f)-3 to the Disclosure Schedule (the “Support
      Agreements”); 

     

    (g)  All
      of
      Seller’s office furniture, fixtures and equipment, including computers and
      supporting software, used by Seller at the Premises as more particularly
      described in Schedule 1.1(g) of the Disclosure Schedule (the “Furniture,
      Fixtures and Equipment”); and

     

    (h)  All
      polling equipment and supporting software as more particularly described in
      Schedule 1.1(h) of the Disclosure Schedule (the “Polling
      Equipment”).

     

    Article
      2. 
      Excluded Assets and Assumption of Liabilities

     

    2.1.  Excluded
      Assets.
      It is
      intended that Buyer shall purchase only the Acquired Assets. The following
      assets (the “Excluded Assets”) are specifically not included in the Acquired
      Assets, and Seller shall not sell to Buyer and Buyer shall not purchase from
      Seller the following:

     

    (a)  Contracts
      Not Acquired.
      Any
      rights to and under any contracts, leases, agreements (other than the Location
      Contracts, Cleveland Lease, the Support Agreements and TU Agreement) or other
      documents or instruments not expressly acquired by Buyer pursuant to Section
      1.1, and specifically, the ten (10) Location Contracts, ANIs and Telephones
      identified on Schedule 2.1(a);

     

    (b)  Cash
      and Cash Equivalents.
      All cash
      and cash equivalents other than Coin in the Box.

     

    (c)  Dial
      Around Compensation.
      Any and
      all rights to receive dial around compensation with respect to the Telephones
      for dates prior to the Closing Date, regardless of the timing of the
      collections; and 

     

    (d)  Other
      Regulatory Receipts and Litigation Awards.
      Any and
      all rights to apply for and receive retroactive regulatory reimbursements,
      including but not limited to, those reimbursements or refunds associated with
      the end user common line charge, new services test, dial around compensation
      or
      any other federal, state or local regulatory refunds that may be attributable
      to
      the Telephones for periods prior to the Closing Date, regardless of when such
      receipts are received.

     

    
      
        
        

      

      
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    2.2.  Assumption
      of Debts, Liabilities and Obligations of Seller.
      Buyer
      will assume and undertake to perform and pay (i) all of the debts, liabilities
      and obligations of Seller arising under the Cleveland Lease, the Support
      Agreements and TU Agreement from and after the Closing Date, and (ii) Seller’s
      obligations under the TU Agreement arising prior to Closing but only to the
      extent they do not exceed $50,000. Buyer will not assume or undertake to perform
      or pay any other debt, liability or obligation of Seller of any kind whatsoever
      except for the Miscellaneous Obligations (as hereinafter defined). The debts,
      liabilities and obligations of Seller to be assumed by Buyer pursuant to this
      Agreement are hereinafter called the "Assumed Liabilities". 

     

    2.3.  Miscellaneous
      Obligations.
      Seller
      shall assign and Buyer shall assume the debts, liabilities and obligations
      of
      Seller identified on Schedule 2.3 (the “Miscellaneous
      Obligations”).

     

    2.4.  Non-Assumed
      Liabilities. Buyer
      shall not assume or become liable to pay, perform or discharge any liability
      or
      obligation of the Seller other than the Assumed Liabilities (“Non-Assumed
      Liabilities”). 

     

    2.5.  Employees.
      Buyer
      may
      offer employment, effective on the first business day after the Closing Date,
      to
      such employees of Seller, and upon such terms and conditions, as Buyer may
      determine, in its sole discretion. Seller hereby agrees to terminate the
      employment of those employees who accept Buyer’s offer of employment, effective
      on the Closing Date. In connection with those Employees so employed by Buyer
      (the “Retained Employees”), Buyer shall assume the amount of any vacation and
      personal time liability recorded on Seller’s books with respect to the Retained
      Employees. On or before the Closing Date, Buyer shall provide Seller with a
      list
      of the names of the Retained Employees. Immediately following the processing
      by
      Seller of payment of the final wages earned by the Retained Employees for
      periods up to and including the Closing Date, Seller shall provide Buyer with
      a
      list of the amounts of accrued vacation and personal time owed to the Retained
      Employees, which liability shall be assumed by Buyer (the “Accrued Vacation
      Liability”). To the extent the Accrued Vacation Liability is used by, or paid
      to, the Retained Employees at any time Buyer may seek reimbursement for such
      amounts so used or paid as a Claim (as hereinafter defined) in accordance with
      the Section 12.4 and the terms of the Indemnification Escrow Agreement. Seller
      shall be solely responsible for ensuring compliance with the WARN Act (to the
      extent applicable), payment of accrued vacation and paid time off leave for
      employees other than the Retained Employees and any other obligations of Seller
      in respect of all its employees other than any obligations in respect of the
      Accrued Vacation Liability. 

     

    Article
      3. 
      Purchase Price

     

    3.1.  Amount.
      The
      purchase price (the “Purchase Price”) for the Assets shall be paid in cash on
      the Closing Date and shall be Three Million One Hundred Twenty Thousand Nine
      Hundred Dollars ($3,120,900), subject to the closing adjustments provided in
      Section 3.2. The Purchase Price shall be paid as follows:

     

    
      
        
        

      

      
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    (a)  On
      the
      signing of this Agreement, the sum of Three Hundred Thousand Dollars ($300,000)
      by good check payable to payable to Seyfarth Shaw, LLP, as Escrow Agent, subject
      to collection, the receipt or which is hereby acknowledged, to be held in escrow
      and released pursuant to the Downpayment Escrow Agreement annexed hereto as
      Exhibit A (the “Downpayment”);

     

    (b)  On
      the
      Closing Date, the sum of Five Hundred Thousand Dollars ($500,000) in immediately
      available funds by bank check payable to the Escrow Agent or by wire transfer
      for credit to the Escrow Agent to an account designated by the Escrow Agent
      to
      be held in escrow for twelve months after the Closing Date (the “Escrow Period”)
      and applied in accordance with the Indemnification Escrow Agreement annexed
      hereto as Exhibit B.; 

     

    (c)  On
      the
      Closing Date and to the extent invoiced and processed prior to Closing, the
      amount of Key Provider Obligations (as hereinafter defined) shall be paid by
      bank checks payable to each key provider or as otherwise directed by the
      provider; 

     

    (d)  On
      the
      Closing Date an amount equal to $700,000 in immediately available funds by
      bank
      check payable to the Escrow Agent or by wire transfer for credit to the Escrow
      Agent to be held in escrow to secure the payment of invoices not yet received
      and processed by Seller at Closing in connection with the Key Provider
      Obligations to be held in escrow for a period not to exceed sixty (60) days
      and
      applied in accordance with the Key Provider Escrow Agreement annexed hereto
      as
      Exhibit “E”;

     

    (e)  On
      the
      Closing Date, an amount equal to the broker commission set forth in Paragraph
      5.4 in immediately available funds by bank check payable to Alliance Payphones,
      Inc. or by wire transfer for credit to the account of Alliance Payphones, Inc.;
      and 

     

    (f)  On
      the
      Closing Date, the remaining balance of the Purchase Price (as adjusted pursuant
      to Section 3.2) in
      immediately available funds by bank check payable to Seller or by wire transfer
      for credit to Seller in accordance with the wire transfer instruction on
      Schedule 3.1(d).

     

    3.2.  Closing
      Adjustments. The following items shall be adjusted at Closing:

     

    
      	1.  	
              the
                Estimated Coin; and

            

    

     

    
      	2.  	
              the
                Cleveland Lease rent.

            

    

     

    3.3.  Post-Closing
      Payments and Adjustments.

     

    (a)  Immediately
      prior to the Closing, Seller shall electronically poll the Telephones and
      prepare a report in reasonable detail identifying the aggregate amount of Coin
      in the Box as of the Closing Date, subject to the review and reasonable approval
      of Buyer (the “Polling Report”). Ninety-nine percent (99%) of the amount of the
      Coin in the Box as shown on the Polling Report (the “Estimated Coin”) shall be
      added to the Purchase Price. [At the Closing, Seller shall be entitled to
      payment of the Estimated Coin, and an adjustment therefore shall be made as
      herein provided.] As of the Closing Date, Seller shall poll the Telephones
      and
      determine the Coin in the Box and (the “Closing Date Polled Coin”) and shall
      calculate the difference between the Estimated Coin and ninety-nine percent
      (99%) of the Closing Date Polled Coin (the “Actual Coin”). The difference
      between the Estimated Coin and the Actual Coin shall be paid to the Seller
      or
      the Buyer, as the case may be, within fifteen (15) days following the Closing
      Date.

     

    
      
        
        

      

      
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    (b)  Within
      sixty (60) days following the Closing Date, Seller shall provide Buyer with
      a
      list identifying in reasonable detail the Local Access invoices paid by Seller
      for service provided by the local exchange carriers (or competitive local
      exchange carriers) relating to the Telephones for periods after the Closing
      Date
      (the “Prepaid Local Access Fees” and the “Prepaid Local Access Fee Report”).
      Buyer shall have fifteen (15) days after receipt of the Prepaid Local Access
      Fee
      Report to challenge the validity of any amount contained therein. In the event
      of a dispute, the parties hereto will use reasonable efforts to expeditiously
      resolve the amount of any such dispute. Buyer shall pay Seller an amount equal
      to the aggregate amount of the Prepaid Local Access Fees within twenty (20)
      days
      following receipt of the Prepaid Local Access Fee Report. Payments made to
      Seller pursuant to this Section 3.3 (a) and (b) shall be made via wire transfer
      in accordance with the instructions set forth on Schedule 3.1(d).

     

    (c)  Seller
      and Buyer agree that Seller shall retain the right to any and all revenue
      generated by the Telephones 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 Telephones 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 Telephones
      after the Closing Date and shall be responsible for and shall pay any and all
      expenses related to the operation of the Telephones after the Closing Date.
      Buyer agrees to program the Telephones on the evening of the Closing Date to
      cause the Telephones to utilize an inter-exchange carrier provider of Buyer’s
      choice for long distance and operator services. Notwithstanding the foregoing,
      in the event the Telephones are not programmed in accordance with the foregoing
      sentence and as a result Seller receives any revenue or incurs any expense
      attributable to the Telephones for a date following the Closing Date, Seller
      shall forward such revenue to Buyer within ten business days following receipt
      of said revenue and Buyer shall reimburse Seller for any such expense within
      ten
      business days following receipt of reasonable evidence to support the incurrence
      of such expense. In addition, (i) Seller shall promptly reimburse Buyer the
      amount of all Key Provider Obligations and LEC and CLEC charges that Buyer
      must
      pay after Closing in respect of periods up to and including the Closing Date
      and
      (ii) Seller shall promptly forward to Buyer all other revenue received by Seller
      in respect of periods after the Closing Date, including revenue paid by location
      owners in respect of semi-public Telephones. 

     

    (d)  On
      the
      last day of the calendar quarter following the Closing Date, Buyer agrees to
      properly submit the necessary data to the appropriate clearing house in order
      that dial around compensation (“DAC”) may be collected by the parties on the
      Telephones for such calendar quarter. Notwithstanding the foregoing, in the
      event the Closing Date occurs on the last day of the calendar quarter, Seller
      agrees that it shall be responsible to make the foregoing submission. The
      parties hereto understand and acknowledge that the DAC for the entire calendar
      quarter may be paid to Buyer from the clearing houses. Buyer agrees to forward
      any monies collected for DAC for periods prior to or on the Closing Date,
      determined on a pro-rata basis based upon the number of days in the quarter,
      to
      Seller within ten business days following receipt of such monies. In the event
      the DAC for the entire calendar quarter which includes the Closing Date is
      paid
      to Seller from the clearing houses, Seller agrees to forward any monies
      collected for DAC for periods after the Closing Date to Buyer within ten (10)
      business days following receipt of such monies.

     

    
      
        
        

      

      
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    3.4.  Allocation
      of Purchase Price.
      The
      parties have made a good faith determination that no portion of the purchase
      price shall be allocated to goodwill or intangible assets and that the entire
      purchase price shall be allocated to the Telephones and related tangible
      personal property.
      The
      allocation in this Section 3.4 shall be conclusive and binding upon Seller
      and
      Buyer for all purposes. Seller and Buyer shall not file any tax return or other
      document with, or make any statement or declaration to, any Legal Authority
      that
      is inconsistent with such allocation.

     

    Article
      4. 
      Closing

     

    4.1.  Closing.
      Subject
      to the prior satisfaction of the conditions set forth in Article 9 of this
      Agreement, the closing of the transactions contemplated by this Agreement (the
      “Closing”) will take place via email, fax, mail and overnight courier on August
      31, 2007, or alternatively, to the extent that the conditions set forth in
      Article 9 hereof have not been satisfied by such date, then the Closing shall
      occur at such later date as agreed to by the parties that is within five (05)
      days after the conditions of Article 9 have been satisfied. The date on which
      the Closing occurs is referred to herein as the “Closing Date,” and the Closing
      shall be deemed effective as of 11:59 p.m, eastern standard time, on the Closing
      Date.

     

    4.2.  General
      Procedure.
      At the
      Closing, each party shall deliver to the party entitled to receipt thereof
      the
      documents required to be delivered pursuant to Article 9 hereof and such other
      documents, instruments and materials (or complete and accurate copies thereof,
      where appropriate) as may be reasonably required in order to effectuate the
      intent and provisions of this Agreement, and all such documents, instruments
      and
      materials shall be satisfactory in form and substance to counsel for the
      receiving party. The conveyance, transfer, assignment and delivery of the
      Acquired Assets shall be effected by Seller’s execution and delivery to Buyer of
      a bill of sale substantially in the form attached hereto as Exhibit C (the
“Bill
      of Sale”) and such other instruments of conveyance, transfer, assignment and
      delivery as Buyer shall reasonably request to cause Seller to transfer, convey,
      assign and deliver the Acquired Assets to Buyer, free and clear of liens, claims
      and encumbrances.

     

    4.3.  Agency
      Agreement.
      At the
      Closing, Seller and Buyer shall enter into an Agency Agreement (the
“Agency
      Agreement"),
      in
      mutually acceptable form and substance, pursuant to which the Seller shall
      appoint the Buyer as its agent to operate the Telephones and collect DAC until
      all required Authorizations (as hereinafter defined) are obtained. Buyer may
      cause subcontractors of its choice to service, maintain, collect coin and
      operate the Telephones. The Agency Agreement shall terminate as to each
      Telephone on such date as Buyer shall have received such Authorizations as
      may
      be required as to such Telephone. Buyer and Seller shall use commercially
      reasonable efforts to obtain the Authorizations. Buyer shall bear all costs
      and
      expenses necessary to obtain the Authorizations except to the extent such costs
      or expenses relate to periods prior the Closing Date. 

     

    Article
      5. 
      Representations and Warranties of Seller

     

    Seller
      hereby represents and warrants to Buyer that, except as set forth in the
      Disclosure Schedule, delivered by Seller to Buyer on the date hereof (the
“Disclosure Schedule”) (which Disclosure Schedule sets forth the exceptions to
      the representations and warranties contained in this Article 5):

     

    
      
        
        

      

      
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    5.1.  Incorporation
      and Corporate Power.
      Seller
      is a corporation duly incorporated, validly existing and in good standing under
      the laws of the State of Delaware and is qualified to do business and has all
      requisite corporate power and authority to own and operate the Acquired Assets
      and to carry on its business as now conducted.

     

    5.2.  Execution,
      Delivery; Valid and Binding Agreement.
      The
      execution, delivery and performance of this Agreement by Seller and the
      consummation of the transactions contemplated hereby have been duly and validly
      authorized by the Board of Directors of Seller, and except as otherwise set
      forth in the Disclosure Schedule, no other proceedings on its part are necessary
      to authorize the execution, delivery and performance of this Agreement. This
      Agreement has been duly executed and delivered by Seller and, assuming that
      this
      Agreement is the valid and binding agreement of Buyer, constitutes the valid
      and
      binding obligation of Seller, enforceable in accordance with its terms, except
      as such enforcement may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or other laws of general application affecting
      enforcement of creditors’ rights or by general principles of
      equity.

     

    5.3.  Good
      Condition.
      Except
      as hereinafter provided, the equipment being sold to Buyer is in “as is”
condition with no representation or warranty as to the condition thereof. All
      Acquired Assets of the Seller being conveyed to the Buyer hereunder are in
      good
      working order, reasonable wear and tear excepted, and are usable and saleable
      in
      the ordinary course of business. All Telephones include a coin bank, a lock
      and
      an enclosure for each Telephone, and a pedestal for each Telephone that is
      not
      mounted to the outside of a building or a wall inside a building.

     

    5.4.  Brokerage.
      No
      third party except Alliance Payphones, Inc. shall be entitled to receive any
      brokerage commissions, finder’s fees, fees for financial advisory services or
      similar compensation in connection with the transactions contemplated by this
      Agreement based on any arrangement or agreement made by or on behalf of Seller.
      Seller shall promptly pay Alliance Payphones, Inc. all such compensation due
      to
      it and shall indemnify and hold Buyer harmless from and against any such
      claims.

     

    5.5.  Absence
      of Certain Developments.
      Except
      as otherwise set forth on the Disclosure Schedule, Seller has not mortgaged,
      pledged, or subjected to any lien, charge or any other encumbrance any of the
      Acquired Assets.

     

    5.6.  Title
      to the Assets.
      Except
      as otherwise set forth on Schedule 5.6 of the Disclosure Schedule with respect
      to the title of Seller, Seller owns good and marketable title to the Acquired
      Assets and the same are, or shall at the Closing be, free and clear of liens,
      claims and encumbrances. 

     

    5.7.  Assignment
      and Transfer of Location Contracts.
      Seller
      covenants and agrees that it will assign and transfer to Buyer the Location
      Contracts identified in Schedule 1 pursuant to the terms of this Agreement.
      

     

    5.8.  Assignment
      and Transfer of Lines.
      Seller
      covenants and agrees that it will assign and transfer to Buyer the Local Access
      Lines identified in Schedule 1 to this Agreement and that it will coordinate
      and
      cooperate fully with the phone companies in effecting the orderly assignment
      of
      these lines.

     

    
      
        
        

      

      
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    5.9.  Accuracy
      of NAC Schedules, Inventory Schedules and Polling Report.
      The NAC
      Schedules previously delivered to Buyer, the Inventory Schedule annexed to
      the
      Disclosure Schedule as Section 1.1(e) are, and the Polling Report when delivered
      will be, true and correct in all material respects. 

     

    5.10.  Labor
      Matters.
      Seller
      is not a party to or bound by any collective bargaining or similar agreement
      with any labor organization, or work rules or practices agreed to with any
      labor
      organization or employee association applicable to employees of Seller; none
      of
      the employees of Seller is represented by any labor organization and Seller
      has
      no knowledge of any union organizing activities among the employees of
      Seller.

     

    5.11.  Full
      Disclosure.
      To
      Seller’s best knowledge, no representation or warranty of Seller hereunder or
      due diligence materials or other information supplied by Seller to Buyer in
      connection herewith is false or misleading with respect to any material fact,
      and Seller has not omitted to state any material fact required to be stated
      herein or therein necessary to make the statements herein and therein, in light
      of the circumstances under which they are made, not misleading.

     

    5.12.  Compliance
      with Applicable Law.
      The
      Acquired Assets have been operated in compliance in all material respects with
      all applicable laws, rules and regulations and orders and Seller has not
      received any written complaint or notice from any governmental authority
      alleging that the Seller has violated any laws, rules, regulations or
      orders.

     

    5.13.  No
      Violations and Compliance with Applicable Law.
      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 does not (i) conflict with or result in any
      breach or default of any provision of the certificate of incorporation or
      by-laws of Seller or (ii) violate 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 Seller or any of the Acquired Assets. Schedule 5.13 of the
      Disclosure Schedule contains a true and complete list of all registries,
      applications, permits, medallions, franchises, licenses, authorizations and
      approvals submitted or filed by Seller to or with any Legal Authority, or issued
      or granted by any Legal Authority to Seller, required for the operation of
      the
      Telephones (collectively, "Authorizations");

     

    5.14.  Legal
      Proceedings.
      There
      are no claims, actions, suits, inquiries, investigations or proceedings (“Legal
      Actions”) pending or, to Seller’s knowledge, threatened against Seller relating
      to the transactions contemplated hereby or the ownership or operation of the
      Acquired Assets.

     

    5.15.  Intellectual
      Property. Schedule
      5.15 of the Disclosure Schedule contains a complete list of contracts and
      license pursuant to which a third party is licensing its intellectual property
      to Seller (the "Licenses"). The Seller is in compliance with all material terms
      of the Licenses and to the knowledge of the Seller each of the Licenses is
      in
      full force and effect.

     

    5.16.  Lease.
      Seller
      has delivered to Buyer a true and complete copy of the Cleveland Lease, a
      schedule of the Support Agreements and related detail and the written portion
      of
      the TU Agreement which has been extended orally on a month to month basis.
      The
      Cleveland Lease, Support Agreements and the TU Agreement are each in full force
      and effect and are valid and enforceable in accordance with its terms. There
      is
      no default under the Cleveland Lease, Support Agreements and the TU Agreement
      by
      Seller, or any event that with notice or lapse of time or both would constitute
      such a default by Seller. To the best of Seller's knowledge, there is not under
      the Cleveland Lease, the Support Agreements and the TU Agreement any default
      by
      any other party thereto or any event that with notice or lapse of time or both
      would constitute such a default thereunder by such party. Seller
      has made no alterations to the Premises which must be removed or repaired prior
      to surrender of the Premises which would involve a cost exceeding
      $10,000.

     

    
      
        
        

      

      
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    5.17.  Material
      Contracts.
      Schedule 5.17 of the Disclosure Schedules contains a true and complete list
      of
      all contracts that are material to the day-to-day operation of the Acquired
      Assets by Seller.

     

    5.18.  Accounts
      Payable.
      Schedule 5.18 of the Disclosure Schedule contains a true and complete list
      of
      Seller’s accounts payable and Seller’s accrued and unpaid obligations under the
      TU Agreement, whether or not yet billed or due and payable, as of the Closing
      Date will not exceed $50,000. Key Provider Obligations as of the Closing Date,
      whether or not yet billed or due and payable, will not exceed $700,000 plus
      the
      sum of Key Provider Obligations paid from the Purchase Price under Section
      3.2(c).

     

    Article
      6. 
      Representations and Warranties of Buyer 

     

    Buyer
      hereby represents and warrants to Seller that:

     

    6.1.  Incorporation
      and Corporate Power.
      Buyer
      is a limited liability company duly organized, validly existing and in good
      standing under the laws of the State of Delaware, with
      the
      requisite corporate power and authority to enter into this Agreement and perform
      its obligations hereunder.
      

     

    6.2.  Execution,
      Delivery; Valid and Binding Agreement.
      The
      execution, delivery and performance of this Agreement by Buyer and the
      consummation of the transactions contemplated hereby have been duly and validly
      authorized by all requisite corporate action, and no other corporate proceedings
      on its part are necessary to authorize the execution, delivery or performance
      of
      this Agreement. This Agreement has been duly executed and delivered by Buyer
      and
      constitutes the valid and binding obligation of Buyer, enforceable in accordance
      with its terms, except as such enforcement may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium or other laws of general
      application affecting enforcement of creditors’ rights or by general principles
      of equity.

     

    6.3.  Brokerage.
      No
      third party shall be entitled to receive any brokerage commissions, finder’s
      fees, fees for financial advisory services or similar compensation in connection
      with the transactions contemplated by this Agreement based on any arrangement
      or
      agreement made by or on behalf of Buyer. 

     

    
      
        
        

      

      
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    Article
      7. 
      Covenants of Seller

     

    7.1.  Conduct
      of the Business.
      Seller
      agrees to observe each term set forth in this Section 7.1 and agrees that,
      from
      the date hereof until the Closing Date, unless otherwise consented to by Buyer
      in writing:

     

    (a)  Seller
      shall not, directly or indirectly, sell, pledge, dispose of, lease, license
      or
      otherwise encumber any of the Acquired Assets and will continue to operate
      the
      Acquired Assets in the ordinary course of business.

     

    (b)  Seller
      shall work to transfer and assign all Local Access and Location Contracts to
      Buyer and transfer all necessary keys of the Acquired Assets.

     

    (c)  Seller
      shall not cancel, fail to maintain in force, or change any policy of insurance
      relating to the Acquired Assets.

     

    (d)  Seller
      shall negotiate in good faith with Buyer to arrive at the terms of a mutually
      acceptable Transition Services and Agency Agreements.

     

    7.2.  Conditions.
      Seller
      shall take all commercially reasonable actions necessary to cause the conditions
      set forth in Article 9 to be satisfied and to consummate the transactions
      contemplated herein as soon as reasonably possible after the satisfaction
      thereof (but in any event within ten business days of such date).

     

    Article
      8. 
      Covenants of Buyer 

     

    Buyer
      covenants and agrees with Seller as follows:

     

    8.1.  Conditions.
      Buyer
      shall take all commercially reasonable actions necessary to cause the conditions
      set forth in Article 9 to be satisfied and to consummate the transactions
      contemplated herein as soon as reasonably possible after the satisfaction
      thereof (but in any event within ten (10) business days of such
      date).

     

    8.2.  Regulatory
      Certifications.
      Buyer
      shall use its best efforts to secure certification from the appropriate
      regulatory bodies, to the extent required and not already obtained by Buyer,
      in
      each state in which the Acquired Assets reside. 

     

    8.3. Transition
      Services, Agency and Coinmach Corporation (“Coinmach”) Agreement.
      Buyer
      shall negotiate in good faith with Coinmach to arrive at the terms of a mutually
      acceptable agreement. Buyer shall negotiate in good faith with Seller to arrive
      at the terms of a mutually acceptable Transition Services and Agency
      Agreements.

     

    Article
      9. 
      Conditions to Closing

     

    9.1.  Conditions
      to Buyer’s Obligations.
      The
      obligation of Buyer to consummate the transactions contemplated by this
      Agreement is subject to the satisfaction of the following conditions on or
      before the Closing Date:

     

    
      
        
        

      

      
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    (a)  The
      representations and warranties set forth in Article 5 hereof and otherwise
      in
      this Agreement shall be true and correct in all material respects at and as
      of
      the Closing Date as though then made, except that any such representation or
      warranty made as of a specified date (other than the date hereof) shall only
      need to have been true on and as of such date;

     

    (b)  Seller
      shall have performed in all material respects all of the covenants and
      agreements required to be performed and complied with by it under this Agreement
      prior to the Closing;

     

    (c)  On
      the
      Closing Date, Seller shall have delivered to Buyer the following:

     

       (1)
  the
      Bill
      of Sale and such other instruments of conveyance, transfer, assignment and
      delivery as Buyer shall have reasonably requested pursuant to Article 4 hereof
      conveying and assigning the Acquired Assets;

     

    (2)
        to
      the
      extent in its possession, the Location Contracts listed in Schedule 1 to this
      Agreement; 

     

    (3)
        a
      certified copy of the resolutions of the board of directors and sole shareholder
      of Seller authorizing the execution, delivery and performance of the Agreement
      and all documents, instruments and transactions contemplated
      herein;

     

    (4)
        a
      certificate dated not more than fifteen (15) business days prior to the Closing
      from the Secretary of State of the State of Delaware to the effect that Seller
      is in good standing;

     

    (5)
        evidence
      of the release of all outstanding liens affecting the Acquired Assets, including
      but not limited to the lien of Cornell Capital, Inc. and any federal, state
      or
      local tax liens;

     

    (6)
        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;

     

    (7)
        Seller’s
      undertaking to protect the confidential proprietary information relating to
      the
      Acquired Assets upon request of Buyer and at Buyer’s sole cost and expense
      (including the cost of Seller’s personnel involved in such matter) and without
      Seller incurring any expense in respect thereof;

     

    (8)
        all
      other
      documents and instruments as may be reasonably necessary and required to
      consummate the transactions contemplated by this Agreement, including, but
      not
      limited to assignment certificates as requested on a case by case
      basis.

     

    
      
        
        

      

      
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    (d)  Buyer
      shall have entered into an agreement with Coinmach, in form and substance
      reasonably satisfactory to Buyer;

     

    (e)  Key
      Provider Obligations shall have been resolved to the reasonable satisfaction
      of
      Buyer and Seller. Key Provider Obligations shall mean the amounts that must
      be
      paid to CLEC and LEC service providers, TU LLC, Inc, and Coinmach, Intera,
      Inc.
      Markcom, Inc. and similar service providers, (and any other key service provider
      identified on Schedule 9.1(e)) in order for the provider to recognize the
      transfer of the Telephones being transferred to Buyer and to agree to continue
      to provide service to the Telephones after the Closing Date. To the extent
      that
      the amount of Key Provider Obligations can not be fixed prior to Closing, Seller
      shall promptly pay any outstanding Key Provider Obligations after Closing in
      accordance with the Transition Services Agreement and Exhibit E. 

     

    (f)  Buyer
      and
      Seller shall enter into a transition services agreement in a mutually acceptable
      form (the “Transition Services Agreement”); 

     

    (g)     
      Buyer
      and
      Seller shall enter into an Agency Agreement in a mutually acceptable form (the
      “Agency Agreement”).

     

    9.2.  Conditions
      to Seller’s Obligations.
      The
      obligations of Seller to consummate the transactions contemplated by this
      Agreement are subject to the satisfaction of the following conditions on or
      before the Closing Date:

     

    (a)  The
      representations and warranties set forth in Article 6 hereof will be true and
      correct in all material respects at and as of the Closing as though then
      made;

     

    (b)  Buyer
      shall have performed in all material respects all the covenants and agreements
      required to be performed by it under this Agreement prior to the
      Closing;

     

    (c)  With
      respect to those Telephones identified on Schedule 2 to this Agreement for
      which
      Local Access is provided by American Fiber Network, Inc. or its affiliates
      (“AFN, Inc.”) Buyer shall have delivered to Seller a Local Access Services
      Agreement in the form set forth on Exhibit D duly executed by
      Buyer;

     

    (d)  With
      respect to approximately five thousand (5,000) Telephones for which Local Access
      is provided by Manhattan Telecommunications Corporation d/b/a Metropolitan
      Communications a/k/a MetTel (“MetTel”) on the Closing Date listed on Schedule
      9.2(d) of the Disclosure Schedule (the “Mettel Lines”), Buyer agrees to maintain
      local access services with Mettel, Inc. through October 31, 2007 (the “Mettel
      Commitment Period”) under the Agency Agreement except that any Mettel Line may
      be disconnected if the underlying Telephone is de-installed or abandoned by
      Buyer. In the event Buyer, during the Mettel Commitment Period, provides Seller
      with evidence of one or more fully documented competitive offer(s) to provide
      local access rates to all or any portion of the Mettel Lines at a rate superior
      to those currently provided on the Mettel Lines (the “Competitive Offer(s)”),
      Buyer shall be entitled to seek indemnification pursuant to Section 12.4 and
      the
      terms of the Indemnification Escrow Agreement of up to sixty two thousand five
      hundred dollars ($62,500) for each dollar of savings that could be achieved
      by
      Buyer pursuant to the terms of the Competitive Offer(s) for the remaining
      balance of the Mettel Commitment Period. Buyer and Seller agree to work together
      in good faith with Mettel, Inc. to seek alternatives which would be commercially
      valuable for both Buyer and Seller. Buyer shall only be responsible to Seller
      for the cost of service to the Mettel Lines on or before October 31, 2007,
      unless service is continued by Buyer in the name of Seller after October 31,
      2007 in which event Buyer’s obligations will be governed by the Agency
      Agreement. If Seller incurs any penalty payable to Mettel for not maintaining
      the required 5,000 Mettel Lines through October 31, 2007 (a “shortage fee”)
      Buyer shall not be responsible to Seller for the shortage fee except to the
      extent the shortage fee arises from Buyer’s migration of Mettel Lines to another
      dial tone service provider on or before October 31, 2007 . Buyer shall not
      be
      responsible to Seller for any other disconnect charges imposed by MetTel for
      change of dial tone service provider; 

     

    
      
        
        

      

      
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    (e)  There
      shall not be threatened, instituted or pending any action or proceeding, before
      any court or governmental authority or agency, domestic or foreign, challenging
      or seeking to make illegal, or to delay or otherwise directly or indirectly
      restrain or prohibit, the consummation of the transactions contemplated hereby
      or seeking to obtain material damages in connection with such
      transactions;

     

    (f)  Key
      Provider Obligations shall have been resolved to the reasonable satisfaction
      of
      Buyer and Seller;

     

    (g)  Buyer
      and
      Seller shall have entered into the Transition Services Agreement;
      and.

     

    (h)  Buyer
      and
      Seller shall have entered into the Agency Agreement.

     

    Article
      10. 
      Post-Closing Covenants

     

    10.1  Seller’s
      Post-Closing Obligations.
      Within
      sixty (60) days following the Closing Seller shall deliver to Buyer the
      landlord’s and sub-landlord’s written consents to the assignment of the
      Cleveland Lease with landlord’s and sub-landlord’s certificate confirming that
      rent is paid through the Closing Date and that there is no tenant default or
      event which would constitute a default with the passage of time (the “Cleveland
      Lease Consents”); provided, however, that no default shall occur under this
      Section 10.1 in the event that Seller is unable to secure the Cleveland Lease
      Consents as a result of the financial inadequacy of Buyer. The parties
      acknowledge that no rent security has been delivered under the Cleveland Lease.
      Seller shall be responsible for payment of all sums payable to the landlord
      and
      sublandlord in connection with obtaining the Cleveland Lease
      Consents.

     

    Article
      11. 
      Termination

     

    11.1.  Termination.
      This
      Agreement may be terminated at any time prior to the Closing:

     

    (a)  by
      the
      mutual consent of Buyer and Seller;

     

    (b)  by
      either
      Buyer or Seller if there has been a material misrepresentation, breach of
      warranty or breach of covenant on the part of the other in the representations,
      warranties, obligations and covenants set forth in this Agreement;

     

    
      
        
        

      

      
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    (c)  by
      either
      Seller or Buyer if the transactions contemplated hereby have not been
      consummated by September 15, 2007; provided that, neither Buyer nor Seller
      will
      be will be entitled to terminate this Agreement pursuant to this Section 11.1(c)
      if such party’s willful breach of this Agreement has prevented the consummation
      of the transactions contemplated hereby; or

     

    11.2.  Effect
      of Termination.
      In the
      event of termination of this Agreement by either Buyer or Seller as provided
      in
      Section 11.1, this Agreement shall become void and there shall be no liability
      on the part of either Buyer or Seller, or their respective stockholders,
      officers, or directors, except with respect to willful breaches of this
      Agreement prior to the time of such termination.

     

    11.3.  Downpayment. If
      Seller
      is not in breach of the terms of this Agreement and the conditions to
      closing set forth in Section 9.1 have been satisfied,
      but
      Buyer shall fail or refuse to comply with and perform all of the terms,
      provisions, conditions, agreements, and obligations on its part to be observed,
      kept and performed pursuant to this Agreement, the Downpayment, in accordance
      with the terms and conditions of the Downpayment Escrow Agreement, shall be
      delivered to Seller as liquidated damages and shall be Seller’s sole and
      exclusive remedy for such failure or refusal of Buyer to consummate the
      transaction contemplated by this Agreement or for any non-compliance,
      non-performance, breach or default by Buyer, it being agreed that the exact
      amount of damages to be sustained by Seller in the event of a default by Buyer
      may be difficult to ascertain. Upon termination of this Agreement prior to
      Closing for any other reason, the Downpayment, in accordance with the terms
      and
      conditions of the Downpayment Escrow Agreement, shall be delivered to
      Buyer.

     

    Article
      12. Survival;
      Indemnification

     

    12.1.  Survival,
      Indemnification.
      The
      covenants, representations and warranties contained in this Agreement shall
      survive the Closing. Seller agrees to indemnify Buyer with respect to, and
      hold
      Buyer harmless from, any loss, liability or expense (including, but not limited
      to, reasonable legal fees) which Buyer may directly or indirectly incur or
      suffer by reason of, or which results, arises out of or is based upon (a) the
      inaccuracy of any representation or warranty made by Seller in this Agreement,
      or (b) the failure of Seller to comply with any covenants or other commitments
      made by Seller in this Agreement, or (c) any claims made by or on behalf of
      any
      creditor of Seller asserted against Buyer by reason of the transfer of the
      Acquired Assets to Buyer as contemplated herein.

     

    12.2.  Buyer
      agrees to indemnify Seller with respect to, and hold Seller harmless from,
      any
      loss, liability or expense (including, but not limited to, reasonable legal
      fees) which Seller may directly or indirectly incur or suffer by reason of,
      or
      which results, arises out of or is based upon the (a) the inaccuracy of any
      representation or warranty made by Buyer in this Agreement, or (b) the failure
      of Buyer to comply with any covenants made by Buyer in this
      Agreement.

     

    12.3.  Legal
      Proceedings.
      In the
      event Buyer or Seller become involved in any legal, governmental or
      administrative proceeding which may result in indemnification claims hereunder,
      such party shall promptly notify the other party in writing and in full detail
      of the filing, and of the nature of such proceeding. The other party may, at
      its
      option and expense, defend any such proceeding if the proceeding could give
      rise
      to an indemnification obligation hereunder. If the other party elects to defend
      any proceeding, it shall have full control over the conduct of such proceeding,
      although the party being indemnified shall have the right to retain legal
      counsel at its own expense and shall have the right to approve any settlement
      of
      any dispute giving rise to such proceeding, provided that such approval may
      not
      be withheld unreasonably by the party being indemnified. The party being
      indemnified shall reasonably cooperate with the indemnifying party in such
      proceeding.

     

    
      
        
        

      

      
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    12.4.  Claims
      Against Escrow Amount.
      Buyer
      shall give written notice to Seller and Escrow Agent of any claim by Buyer
      for
      indemnification during the Escrow Period (a “Claim”). The Claim shall specify
      with reasonable detail the factual basis for such Claim including the amount
      claimed to be due to Buyer. Within three (3) business days of receipt of such
      Claim, the Escrow Agent shall give Seller and Buyer notice of receipt of such
      Claim (a “Notice of Receipt of Claim”). Seller shall have twenty (20) days from
      receipt of a Notice of Receipt of Claim (the “Investigation Period”) to make
      such investigation of the Claim as Seller deems necessary or desirable. For
      the
      purposes of such investigation, Buyer agrees to make available to Seller and
      its
      authorized representatives copies of any and all documents containing the
      information relied upon by Buyer to substantiate such Claim. If Buyer and Seller
      agree at any time as to the validity and undisputed amount of such Claim they
      shall provide the Escrow Agent with written instructions for disbursement of
      the
      agreed upon amount of the Claim from the escrow account established in
      accordance with Section 3.1(b) (the “Escrow Account”). If Seller fails to send a
      notice of objection to the Escrow Agent and Buyer objecting to the Claim (a
      “Notice of Objection”) prior to the expiration of the Investigation Period, the
      Escrow Agent shall pay Buyer the full amount of the Claim from the Escrow
      Account. The failure of Seller to deliver a timely Notice of Objection objecting
      to a Claim shall be conclusive evidence of the validity of such Claim and shall
      forever bar Seller from contesting such Claim. If Seller sends a Notice of
      Objection in a timely manner and Buyer and Seller fail to agree as to the
      validity and/or amount of any Claim, Buyer and Seller shall resolve such dispute
      or disputes by binding arbitration before a single arbitrator in accordance
      with
      the Commercial Arbitration Rules of the American Arbitration Association then
      in
      effect. The determination or award rendered therein shall be binding and
      conclusive upon Buyer and Seller, and any judgment on the award rendered by
      the
      arbitrator may be entered in any court having jurisdiction thereof. Within
      three
      (3) business days following the expiration of the Escrow Period, the Escrow
      Agent shall send a release notice notifying Buyer and Seller that it will pay,
      by wire transfer to an account designated by Seller, the portion of the Escrow
      Account that remains and is undisputed (the “Release Notice”). The Release
      Notice shall specify the amount on deposit in the Escrow Account and the amount
      that remains undisputed. If Buyer fails to send a notice within three (3)
      business days after receipt of the Release Notice to the Escrow Agent and Seller
      objecting to the Release Notice (a “Release Notice Objection”), the Escrow Agent
      shall pay Seller the undisputed amount. If Buyer sends a timely Release Notice
      Objection specifying the amount proposed to be paid to Seller that Buyer objects
      to being paid out to Seller, such amount shall not be paid out to Seller and
      shall continue to be held by the Escrow Agent. Any portion of the Escrow Account
      thereafter remaining in escrow shall be paid out in accordance with the written
      directions of Buyer and Seller or in accordance with a final, non-appealable
      judgment, order or decree of a court or an arbitration award.

     

    12.5.  Bulk
      Transfer Act Compliance.
      While
      not acknowledging the applicability of any bulk transfers provision of the
      Uniform Commercial Code as in effect in any state having jurisdiction over
      any
      of the Acquired Assets or any similar statute (collectively, the "Bulk Sales
      Act"), the parties do nevertheless agree as follows:

     

    
      
        
        

      

      
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    (a)  Seller
      does hereby represent, warrant and covenant with Buyer that MobilePro, Inc.
      or
      its lender, as applicable (the “Secured Party”) has a perfected, first priority
      lien on the Acquired Assets, that the sums due and owing to the Secured Party
      exceed the fair market value of the Acquired Assets, that the Secured Party
      has
      reviewed and approved the terms of this Agreement and fully and fairly
      investigated the value of the Acquired Assets, and that the sale of the Acquired
      Assets by Buyer pursuant to the terms of this Agreement constitutes an
      arm’s-length transaction negotiated in good faith.

     

    (b)  In
      reliance upon the representations, warranties and covenants of Seller in this
      Section 12.5, Buyer does hereby waive the provisions of the Bulk Sales Act
      and
      any other rights or protections that might arise by prior notification of all
      of
      Seller’s creditors or state tax or regulatory authorities and/or the escrow of
      the purchase price pending the receipt of consents or waivers from each of
      Seller’s creditors or state tax or regulatory authorities.

     

    (c)  Seller
      does hereby agree to indemnify and hold Buyer harmless on account of any claims,
      liability, loss or damage which Buyer may incur or suffer arising out of or
      based upon any claims made by or on behalf of any creditor of Seller or state
      tax or regulatory authority in respect of any failure to provide such creditor
      advance notice of the transfer contemplated by this Agreement or otherwise
      comply with the Bulk Sales Act.

     

    Article
      13. 
      Miscellaneous

     

    13.1.  Confidentiality;
      Press Releases and Announcements.
      Except
      as otherwise expressly permitted by this Agreement, Seller and Buyer will not
      disclose, and will cause their respective affiliates not to disclose, the terms
      of this Agreement or the information provided in this Agreement or in any
      instrument, schedule or other document exchanged in connection with the
      transactions contemplated by this Agreement. Notwithstanding anything to the
      contrary in this Agreement, Seller, Buyer and their respective affiliates may
      disclose the terms of this Agreement to any person, whether by providing such
      person with photocopies of all or portions thereof or otherwise: (i) to the
      extent required, in the opinion of counsel to the party making the disclosure,
      by applicable laws, rules or regulations, including but not limited to those
      rules and regulations promulgated by the United States Securities and Exchange
      Commission; (ii) as may be required in the reasonable opinion of Seller, Buyer,
      or their respective affiliates, as the case may be, in connection with the
      consummation of the transactions contemplated by this Agreement; (iii) as may
      be
      required, in the reasonable opinion of Seller, Buyer, or their respective
      affiliates, as the case may be, in the defense of Seller, Buyer, or their
      respective affiliates in any legal action, regulatory proceeding; or (v) as
      may
      be required by Buyer or Seller to comply with a duly served order of a court.
      Prior to the Closing Date, neither party hereto shall issue any press release
      (or make any other public announcement) related to this Agreement or the
      transactions contemplated hereby or make any announcement to the employees,
      customers or suppliers of Seller without prior written approval of the other
      party hereto, except as may be necessary, in the opinion of counsel to the
      party
      seeking to make disclosure, to comply with the requirements of this Agreement
      or
      applicable law. If any such press release or public announcement is so required,
      the party making such disclosure shall consult with the other party prior to
      making such disclosure, and the parties shall use all reasonable efforts, acting
      in good faith, to agree upon a text for such disclosure which is satisfactory
      to
      both parties. If any copy of all or portions of any instrument, schedule or
      other document exchanged in connection with the transactions contemplated by
      this Agreement are proposed to be disclosed, the parties shall negotiate in
      good
      faith to determine the portions of any such disclosure as may be redacted to
      properly preserve the confidentiality thereof.

     

    
      
        
        

      

      
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    13.2.  Expenses.
      Except
      as otherwise expressly provided for herein, Seller and Buyer will pay all of
      their own expenses (including attorneys’ and accountants’ fees) in connection
      with the negotiation of this Agreement, the performance of their respective
      obligations hereunder and the consummation of the transactions contemplated
      by
      this Agreement (whether consummated or not).

     

    13.3.  Further
      Assurances.
      Seller
      agrees that, on and after the Closing Date, it shall take all appropriate action
      (without incurring any out-of-pocket expenses) and execute any documents,
      instruments or conveyances of any kind which may be reasonably necessary or
      advisable to carry out any of the provisions hereof, including, without
      limitation, putting Buyer in possession and operating control of the
      Assets.

     

    13.4.  Amendment
      and Waiver.
      This
      Agreement may not be amended or waived except in a writing executed by the
      party
      against which such amendment or waiver is sought to be enforced. No course
      of
      dealing between or among any persons having any interest in this Agreement
      will
      be deemed effective to modify or amend any part of this Agreement or any rights
      or obligations of any person under or by reason of this Agreement.

     

    13.5.  Notices.
      All
      notices, demands and other communications to be given or delivered under or
      by
      reason of the provisions of this Agreement will be in writing and will be deemed
      to have been given when personally delivered, five business days after being
      mailed by certified mail, return receipt requested, or on the next business
      day
      after been sent by nationally recognized overnight courier service for next
      business day delivery. Notices, demands and communications to Buyer and Seller
      will, unless another address is specified in writing, be sent to the address
      indicated below:

     

    Notices
      to Buyer: 

    Sterling
      Payphones, LLC 

    P.O.
      Box
      2974

    Huntington
      Station, NY 11746

    Attn:
      Paul Contino, Managing Member

     

    With
      a
      copy to: 

    Lamb
      & Barnosky, LLP

    534
      Broadhollow Rd

    Melville,
      NY 11747

    Attn:
      Patrice Dowd Shenn, Esq. 

     

    Notices
      to Seller: 

    Davel
      Communications, Inc.

    200
      Public Square, Suite 700

    Cleveland,
      Ohio 44114

    Attention:
      Chief Executive Officer

    Fax:
      (216) 875-4337

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    

     

    13.6.  Assignment.
      This
      Agreement and all of the provisions hereof will be binding upon and inure to
      the
      benefit of the parties hereto and their respective successors and permitted
      assigns, except that neither this Agreement nor any of the rights, interests
      or
      obligations hereunder may be assigned by either party hereto without the prior
      written consent of the other party hereto, which consent shall not be
      unreasonably delayed or denied.

     

    13.7.  Severability.
      Whenever possible, each provision of this Agreement will be interpreted in
      such
      manner as to be effective and valid under applicable law, but if any provision
      of this Agreement is held to be prohibited by or invalid under applicable law,
      such provision will be ineffective only to the extent of such prohibition or
      invalidity, without invalidating the remainder of such provision or the
      remaining provisions of this Agreement.

     

    13.8.  Complete
      Agreement.
      This
      Agreement and the Exhibits hereto, the Disclosure Schedule and the other
      documents referred to herein contain the complete agreement between the parties
      and supersede any prior understandings, agreements or representations by or
      between the parties, written or oral, which may have related to the subject
      matter hereof in any way.

     

    13.9.  Counterparts.
      This
      Agreement may be executed in one or more counterparts, any one of which need
      not
      contain the signatures of more than one party, but all such counterparts taken
      together will constitute one and the same instrument. This
      Agreement may be executed by facsimile or other "electronic signature" (as
      defined in the Electronic Signatures in Global and National Commerce Act of
      2000) in a manner agreed upon by the parties hereto.

     

    13.10.  Governing
      Law.
      The
      internal law, without regard to conflicts of laws principles, of the State
      of
      New York will govern all questions concerning the construction, validity and
      interpretation of this Agreement and the performance of the obligations imposed
      by this Agreement.

     

    13.11.  No
      Third-Party Beneficiaries.
      This
      Agreement shall not confer any rights or remedies upon any person other than
      the
      parties and their respective successors and permitted assigns; provided,
      however,
      that
      the provisions in Article 12 above concerning indemnification are intended
      for
      the benefit of the individuals specified therein and their respective legal
      representatives. 

     

    

    [SIGNATURES
      ON FOLLOWING PAGE]

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have executed this Agreement as of the effective date set forth
      hereinabove. 

     

    
      	 	
              STERLING
                PAYPHONES, LLC

               

              By:
                /s/ Paul
                Contino                                       
                

                Name:
                Paul
                Contino

                Title:
                Managing
                Member

               

              DAVEL
                COMMUNICATIONS, INC.

               

              By:
                /s/ Don
                Paliwoda                                     

                Name:
                Don
                Paliwoda

                Title:
                CFO

            

    

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    List
      of
      Exhibits and Schedules

    

    
      	
              Exhibit
                A

            	
              Downpayment
                Escrow Agreement

            
	
              Exhibit
                B

            	
              Indemnification
                Escrow Agreement

            
	
              Exhibit
                C

            	
              Bill
                of Sale

            
	
              Exhibit
                D

            	
              Local
                Access Agreement

            
	
              Exhibit
                E

            	
              Key
                Provider Escrow Agreement

            
	 	 
	
              Schedule
                1

            	
              Location
                Agreements and ANI identifiers

            
	
              Schedule
                1.1(e)

            	
              Inventory

            
	
              Schedule
                1.1 (f) 1

            	
              The
                Cleveland Lease

            
	
              Schedule
                1.1 (f) 2

            	
              Written
                Support Services Agreements

            
	
              Schedule
                1.1 (f) 3

            	
              Material
                Terms of Unwritten Support Agreements

            
	
              Schedule
                1.1 (g)

            	
              List
                of Furniture Fixture and Equipment

            
	
              Schedule
                1.1 (h)

            	
              Polling
                and Software Equipment

            
	
              Schedule
                2

            	
              ANIs
                with local access to AFN

            
	
              Schedule
                2.1

            	
              ANIs
                Not Acquired by Buyer

            
	
              Schedule
                3.1 (d)

            	
              Seller’s
                Wiring Instructions

            
	
              Schedule
                2.3 

            	
              Miscellaneous
                Obligations 

            
	 	 
	
              Schedule
                9.1 

            	
              Key
                Providers

            
	 	
              The
                Disclosure Schedule

            

    

    

    
      
        
        

      

      
        201

     

    BUSINESS
      AND MANAGEMENT SERVICES AGREEMENT

     

    This
      Agreement is dated for reference the 7th
      day of
      February, 2007, and is made between:

    

    Hammond
      Management Corporation (“HAMCO”)

    Suite
      315, 185 - 911 Yates Street

    Victoria,
      B.C., Canada V8V 4Y9

     

    And:

     

    PAX
      BIOFUELS INC. (“PAX”)

    6
      Bulevar
      Mihajla Pupina, 11070 Belgrade, Serbia

    

    

    WHEREAS
      "PAX"
      is in
      the process of developing a biodiesel production facility in
      Serbia;

    

    AND
      WHEREAS“HAMCO”
      has agreed to provide the Business and Management Services specified in this
      Agreement to “PAX”
and
      its
      related parties;

    

    NOW
      THEREFORE
      in
      consideration of the covenants contained in this Agreement and other good and
      valuable consideration (the receipt and sufficiency of which is hereby
      acknowledged), "PAX" and “HAMCO” agree as follows:

    

    
      	1.	
              SCOPE
                OF BUSINESS AND MANAGEMENT
                SERVICES

            

    

    

    
      	
              1.1

            	
              “HAMCO”
                will provide the services of Paul Leslie Hammond, C.A. to carry out
                the
                following functions:

            

    

    

    
      	 	
              1.1.1

            	
              Service
                as the President of “PAX”.

            

    

    

    
      	
            	1.1.2	
              Service
                as Compliance Officer for “PAX” as
                required.

            

    

    

    
      	 	
              1.1.3

            	
              Assumption
                of specific senior executive roles within the projects of “PAX” as defined
                by “PAX”. 

            

    

    

    
      	 	
              1.1.4

            	
              Directing
                the management of the investments of
“PAX.

            

    

    

    
      	 	
              1.1.5

            	
              Leading
                the negotiation and implementation of acquisitions by
                “PAX”.

            

    

    

    
      	 	
              1.1.6

            	
              Provision
                of management, professional and technical expertise in support of
                the
                development and operation of the biodiesel project. These services
                are to
                include:

            

    

    

    defining
      business objectives, policies, organization  structure,
      staffing requirements, business strategies, short and medium term operating
      plans and budgets and their operating and control systems and
      procedures

    

    identification
      of new business opportunities; negotiation of acquisitions and joint venture
      participations; implementation of acquisitions, mergers, and/or joint ventures
      as required from time to time

    

    
      	
            	1.1.7	
              Directing
                the promotional and marketing efforts of the project
                

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2

     

    
      	2.	
              REPORTING
                RELATIONSHIP

            

    

    

    “HAMCO”
      will be responsible to and will only accept instructions from the Chairman
      of
      The Board of PAX for carrying out the functions defined in Clause 1.1 above.
      

    

    
      	3.	
              SERVICE
                REMUNERATION

            

    

    

    “HAMCO”
      will be remunerated for the services referred to in Clause 1.1 above on the
      following basis:

    

    
      	 	
              3.1

            	
              “PAX”
                will pay to “HAMCO” on a monthly basis a monthly retainer fee of $ 6,500
                Cdn. at the beginning of each and every month during the term of
                this
                Agreement.

            

    

    

    
      	
            	3.2	
              “HAMCO”
                will be entitled to participate in any management bonus pool created
                by
                “PAX” for superior operating results. 

            

    

    

    
      	4.	
              TERM
                OF AGREEMENT

            

    

    

    
      	 	
              4.1

            	
              This
                Agreement will commence on the 7th day of February, 2007 and will
                be
                effective until the 31st day of January, 2010, except under the condition
                whereby “HAMCO” is unable to supply the services referred to in Clause 1
                on behalf of “HAMCO” for a continuous period of time which exceeds 30 days
                due to illness, accident or unavoidable circumstances beyond its
                control,
                in which event the contract may be terminated at the discretion of
                "PAX"
                upon the provision of 30 days notice in
                writing.

            

    

    

    
      	 	
              4.2

            	
              Upon
                the mutual agreement of “HAMCO” and "PAX", this Agreement between “HAMCO”
                and “PAX” may be extended for a further period of time according to the
                same or appropriately amended terms and
                conditions.

            

    

    

    
      	 	
              4.3

            	
              This
                Agreement may be terminated by either party upon 90 days written
                receipt
                of notice.

            

    

     

    
      	5.	
              BUSINESS
                EXPENSES

            

    

    

    As
      appropriate, “PAX” will reimburse “HAMCO” for all expenses incurred by “HAMCO”,
      its Officers, employees or subcontractors in respect to the business activities
      of “PAX” upon presentation of an invoice accompanied by suitable proof of having
      incurred the expenses, and of approval having been granted for the expenses
      by
“PAX”.

    

    
      	
              6.

            	
              BENEFIT
                PLANS

            

    

    

    Whereas
      “PAX” provides certain benefit programmes for its personnel, Paul Leslie
      Hammond, C.A. will be entitled to participate in these programmes.

    

    
      	7.	
              ASSIGNMENT
                OF AGREEMENTS

            

    

    

    No
      Agreements between "PAX" and “HAMCO” may be assigned without the express
      approval in writing of all the parties above. 

    

    
      	8.	
              APPLICABLE
                LEGAL JURISDICTIONS

            

    

    

    
      	 	
              8.1

            	
              The
                laws of British Columbia will apply in respect of this
                Agreement.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3

     

    
      	9.	
              EXECUTION
                OF THE INTENT OF THIS
                AGREEMENT

            

    

    

    
      	 	
              9.1

            	
              The
                signatories hereto shall execute and deliver any documents and perform
                any
                acts necessary to carry out the intent of this
                Agreement.

            

    

    

    
      	 	
              9.2

            	
              Time
                is of the essence of this
                Agreement.

            

    

    

    This
      Agreement enures to the benefit of, and is binding upon the signatories hereto
      and their heirs, successors, executors, administrators and permitted
      assigns.

    

    In
      witness whereof the parties have executed this Agreement as of the day and
      year
      first above written.

    

    PAX
      BIOFUELS INC.

    Per:

     

     

                                                                 
      

    M.
      Andric, Director and Authorized Signatory

    

    Hammond
      Management Corporation

    Per:

     

    

                                                                 
      

    P.
      L.
      Hammond, C.A.

    President

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