ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is entered into as of July 31, 2018, by and between TELECON WIRELESS RESOURCES, INC ., a New York corporation having its office and principal place of business at 299A North Comrie Avenue, Johnstown, New York (“Buyer” or “TWR”)), and KONATEL, INC ., a Nevada corporation having its office and principal place of business at 13601 Preston Rd. STE E816, Dallas, TX 75240 (“Seller”).  Buyer and Seller are each referred to herein as a “Party” and collectively as the “Parties”.

WHEREAS , Seller is the owner of various assets employed in connection with a wireless service provider and telecommunications business currently operating a retail office under the fictitious business name of “Telecon Wireless” at 299A North Comrie Avenue, Johnstown, New York (the “Premises”); and

WHEREAS , William Sullivan, the principal of TWR shall guarantee all of the obligations of Buyer hereunder; and

WHEREAS , Seller desires to sell, and Buyer desires to purchase, certain assets of Seller, as described on Schedule “1” attached hereto and made part hereof for all purposes (hereafter, the assets described on Schedule “1” are referred to collectively as the “Acquired Assets”.

NOW, THEREFORE , in consideration of the foregoing recitals, and mutual promises herein contained, and for other good and valuable consideration, the receipt and adequacy of which is hereby mutually acknowledged, the Parties hereto agree as follows:

Section 1.  Definitions.

“Acquired Assets” means (a) all right, title, and interest, free and clear of all claims, liens and encumbrances, in and to all of the assets of Seller, identified in Schedule 1, attached hereto and incorporated herein by reference, subject to the exclusions set forth below; (b) the conveyance of any rights Seller may have to occupy the Premises; and (c) the trade name “Telecon Wireless” and any other intellectual property of any kind or description associated with the fictitious trade name being transferred hereunder; (The term “Acquired Assets” does not include (a) any patents, trademarks, service marks, trade names, copyrights, licenses (trade secrets, proprietary information, Intellectual Property (as is defined below) or any other intangible property except as specifically set forth herein or in any Schedule hereto); or (b) any financial books or records.

“Liabilities” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for any Tax, as hereinafter defined.

“Tax” means any federal, state, local, or foreign income, gross receipts, sales, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

Section 2.  Purchase and Sale.

(a)

Conditional upon the execution of this Agreement by all Parties, Seller hereby sells, transfers, assigns, and conveys the Acquired Assets to Buyer subject to the terms and conditions of this

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Agreement.  The purchase price shall be $406,289.90 (“Purchase Price”), which shall be payable as follows:

(i)

Buyer shall pay Seller’s American Express account number 371551894573008 in an amount of not less than $40,246.85 on or before Closing;

(ii)

Buyer shall pay Seller the sum of $ $266,043.05 in cash on or before Closing (the “Cash Payment”; and

the then remaining balance of $100,000.00 shall be evidenced by a Promissory Note (the “Note”) from Buyer to Seller, in a form agreed to by the Parties, which shall be secured by a first priority purchase money security interest in and to the Acquired Assets evidenced by that certain Security Agreement and UCC-1 Financing Statements also in a form agreed to by the Parties.

(b) The Parties hereto acknowledge that Buyer is in the retail wireless telecommunications business, and Seller is in the wholesale wireless telecommunications business.  As further security for the repayment of the Note, until such time as the Note has been satisfied in full, Buyer shall not purchase any “Telecommunications Services” from any other supplier, vendor, or provider other than Seller.  , The term “Telecommunications Services” shall mean all wholesale wireless voice minutes, wireless messaging (“SMS” and “MMS” text messaging), wireless data or any other wholesale telecommunications services which Buyer desires to use for resale or internal use or otherwise.  Buyer’s execution of Seller’s standard Wholesale Telecommunications Agreement is a condition precedent to the Closing.

Section 3. Closing.

The closing of the sale and purchase of the Acquired Assets (the “Closing”) shall take place as of before July 31, 2018, unless extended by the parties in a writing executed by both of them.   It is acknowledged by the Parties that the execution and delivery of the necessary documents and instruments (including, but not limited to this Agreement) evidencing this transaction may occur several days following the “as of” Closing date.

(a)

Buyer’s Deliveries at Closing .  At the Closing, the Buyer shall deliver to the Seller:

(i)

evidence of payment of American Express payable set forth in Section 2(a)(i) above;

(ii)

the Cash Payment and the executed Note, Security Agreement and UCC-1 Financing Statements;

(iii)

seller’s standard Wholesale Telecommunications Agreement executed by Buyer in accord with the provisions of Section 2(b), above.

(b)

Seller’s Deliveries at Closing .  At the Closing, (i) Seller will deliver to Buyer the various instruments and documents referred to herein, including, but not limited to, a Bill of Sale in form and content reasonably acceptable to Buyer covering the Acquired Assets; (ii) evidence of compliance with the New York State “Bulk Sales” law, or evidence that this transaction is exempt from the same; and (iii) such other instruments as Buyer and its counsel may reasonably request.

(c)

Mutual Cooperation After Closing .  Buyer and Seller acknowledge that this transaction is being negotiated and closed quickly, and as a result of the speed with which the transaction is taking place, that there may be documents and instruments and acts that must be executed and performed, respectively, by each of them following the execution hereof to appropriately evidence and implement the transactions and obligations contemplated hereby.  Both parties hereby mutually covenant and agree that each shall cooperate with the other

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and execute all documents and instruments and perform all other acts and things which necessary and/or expedient in consummating may be and performing the various transactions and obligations contemplated by this Agreement.

(d)

The Parties agree to allocate the Purchase Price (and all other capitalizable costs) among the Acquired Assets for all purposes (including financial accounting and tax purposes) in accord with the Allocation Schedule attached hereto as Schedule 2 Allocation of Purchase Price attached hereto and made part hereof for all purposes.  Buyer shall pay all sales tax imposed on the Acquired Assets by any governmental taxing authority having or exercising jurisdiction over this Agreement.  The parties agree that they shall cooperate in whatever manner possible (other than purchase price allocation) to keep the sales tax as low as possible, including, but not limited to, jointly applying for any exemption from sales tax otherwise applicable to this transaction.

Section 4.  Representations and Warranties of Buyer.

Buyer represents and warrants to Seller that the statements contained in this Section 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3).

(a)

Organization of Buyer.  Buyer is a corporation, duly organized, validly existing, and in good standing under the laws of the State of New York and is duly authorized to do business within the State of New York.

(b)

Authorization of Transaction.  Buyer has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder.  This Agreement constitutes the valid and legally binding obligation of Buyer, enforceable in accord with its terms and conditions.

(c)

Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Buyer is subject or any provision of its charter or bylaws or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any Party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets is subject.  Except as set forth herein, Buyer does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transaction contemplated by this Agreement.

(d)  Buyer expressly acknowledges and agrees that the Acquired Assets are being conveyed to Buyer in AS IS WHERE IS condition, without any warranty whatsoever from the Seller (other than title and freedom from liens, claims and encumbrances which Seller expressly warrants), including, but not limited to, any warranty of merchantability or fitness for particular purpose.

Section 5.  Representations and Warranties of Seller.

(a)

Title to Assets.  Seller has good and marketable title to the Acquired Assets free and clear of all claims, liens and encumbrances.

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(b)

Organization of Seller.  Seller is a corporation, duly organized, validly existing, and in good standing under the laws of the State of Nevada and is duly authorized to do business within the State of New York and Nevada.

(c)

Authorization of Transaction.  Seller has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder.  This Agreement constitutes the valid and legally binding obligation of Seller, enforceable in accord with its terms and conditions.

(d)

Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Seller is subject or any provision of its charter or bylaws or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any Party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which Seller is a party or by which it is bound or to which any of its assets is subject.  Except as set forth herein, Seller does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transaction contemplated by this Agreement.

Section 6. Conditions to Obligation of Seller .

The obligation of Seller to consummate the transaction to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

(i)

the representations and warranties set forth in Section 3, above, shall be true and correct in all material respects at and as of the Closing Date;

(ii)

Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; and

(iii)

no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction against either Party wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect).

Section 7. Guaranty.

As further consideration for this Agreement, William Sullivan unconditionally and irrevocably guarantees to Seller and to Seller’s successors and assigns, the full and prompt payment of all sums owed to Seller under the Note, and any renewals, modifications, extensions or replacements of the Note, and the full, prompt and complete performance of all obligations of Buyer as set forth in the Note, Security Agreement and this Agreement.

Section 8. Post-Closing Adjustments.

It is contemplated by the Parties that the Closing of this transaction shall be as of July 31, 2018.  The parties hereto acknowledge that all liabilities of any kind or nature arising out of the operation of the business known as Telecon Wireless occurring prior to 12:00 pm July 31, 2018 (the “Cut Off Date” shall be the sole responsibility of the Seller, unless such liability arose primarily from either the grossly negligent actions of  

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William Sullivan, Buyer’s principal during his employment with KonaTel or actions of William Sullivan that were outside the scope of his employment with KonaTel.  All liabilities of any kind or nature arising out of the operation of the business known as Telecon Wireless after the Cut Off Date shall be the sole responsibility of the Buyer.   The Parties shall mutually indemnify each other and hold each other harmless from and against any and all claims, costs, losses and or judgments, including any costs associated with the defense of such claims arising out of the respective periods of time for which they each have sole responsibility.

In addition, and not by way of exclusion, the Parties acknowledge that the Seller owes a certain payable to Sprint in the approximate amount of $144,000.00 that arose out of the operation of Telecon Wireless prior to the Cut Off Date.  Seller shall indemnify Buyer from any and all loss, cost, damage or claim arising out of any attempt by Sprint to collect such payable, including reasonable counsel fees and expenses at both trial and appellate levels.

Further, the Parties acknowledge and agree that there currently is a month to month occupancy agreement for the Premises that may be governed by a holdover provision in a currently expired lease of the Premises.  The Parties further acknowledge that all rent due the landlord of the Premises is either current as of July 31, 2018 or will be made so as of that date within ten (10) days of July 31, 2018.  From and after July 31, 2018, TWR will be solely responsible for all costs associated w3ith the occupancy of the Premises that accrue  after that date, and  shall indemnify Seller from any and all loss, cost, damage or claim arising out of any attempt by the landlord of the Premises to collect any such costs for the occupancy of the Premises by Telecon Wireless after the Cut Off Date, including reasonable counsel fees and expenses at both trial and appellate levels.

The parties agree that there may be some lag involved in switching over deposit directions for revenue, direct-pay options for customers, certain ACH arrangements with customers, and commissions and expenses due Telecon employees, earned by them prior to Closing and that these matters shall be adjusted between them as soon as conveniently possible following the expiration of any such time lag.

Seller further agrees that all commissions and expenses due to KonaTel employees working at Telecon Wireless at the Premises earned by them prior to Closing shall be paid in accord with the prior practices of Seller in paying such compensation and shall in all respects be fully paid to all recipients within ninety (90) days of July 31, 2018.

Section 9.  Miscellaneous.

(a)

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.

(b)

Entire Agreement.  This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they related in any way to the subject matter hereof.

(c)

Succession and Assignment.  This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns.  No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party.

(d)

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

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(e)

Headings.  The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

(f)

Notices.  All notices, requests, demands, claims, and other communications hereunder will be in writing.  Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

If to Seller:

Copy to:

KonaTel, Inc.

Leonard Burningham, Esq.

1301 Preston Road STE E816

Burningham Law Offices

Dallas, TX 75240

2150 South 1300 East, STE 500

Salt Lake City, UT 84106

If to Buyer:

Copy to:

Telecon Wireless Resources, Inc.

Michael D. Assaf, Esq.

299A North Comrie Ave.

Assaf & Siegel, PLLC

Johnstown, New York 12095

16 Corporate Woods Blvd.

Attn:  William Sullivan, President/CEO

Albany, NY  12211

Any Party may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, ordinary mail, or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient.  Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth.

(g)

Governing Law.  This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York.  The Parties agree that all disputes in any way relating to, arising under, connected with, or incident to this Agreement, shall be litigated, if at all, exclusively in a state court of general jurisdiction or any Federal court situated in the state of incorporation of the defending party, unless conflict of laws provisions of that State do not permit such a venue choice due to lack of connection of the dispute to that State, in which case jurisdiction and venue shall be Fulton County, New York and the Federal Northern District of New York.

(h)

Amendments and Waivers.  No amendment of any provision of this Agreement shall be valid unless the same be in writing and signed by Buyer and Seller.  No waiver by any Party of any default, misrepresentations, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior to subsequent default, misrepresentation, breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

(i)

Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

(j)

Expenses.  Each of the Parties will bear his, her or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby.

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(k)

Construction.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.  Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  The word “including” shall mean including without limitation.

(l)

Incorporation of Schedules.  The Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.

(m)

Expenses Related to Disputes.  In the event that any dispute between the parties to this Agreement should result in litigation, the prevailing party in such dispute, whether by settlement or decision in litigation, shall be entitled to recover from the other party all fees, costs, and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including, without limitation, such reasonable fees and expenses of attorneys and accountants, at both the trial and appellate levels.

 

(n)

Survival.  The representations and warranties of Seller and Buyer contained in this Agreement and the indemnification provisions in Section 7 hereof shall survive the Closing and the transfer to Buyer of the Acquired Assets and delivery of any documents of conveyance and shall continue to exist until such time as there is no longer an obligation existing between Buyer and Seller.

IN WITNESS WHEREOF , the Parties hereto have executed this Agreement as of the date first above written.

BUYER: Telecon Wireless Resources, Inc.			SELLER: KonaTel, Inc.
By: /s/William Sullivan, President/CEO	Date: August 9, 2018		By: /s/ Charles Schneider, Jr. CEO	Date: August 9, 2018

/s/ William Sullivan    Date: August 9, 2018

William Sullivan, individually, as guarantor pursuant to Section 6 above

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Schedule 1

Acquired Assets

Computer Workstations

QTY	Description
5	NUC computers with Windows 10 Pro Licenses (NUC6i5SYK)
5	APC Battery backups (BE550G)
1	Dell Laptop (Latitude E7470)
1	Dell laptop docking station

Computer Network Equipment

QTY	Description
1	Cisco router (ASA 5506X)
1	Wireless access point - Ubiquiti (Wi-Fi - UBI-UAP-AC-PRO-E-US)
1	Network switch – Ubiquiti PoE (UBI-US-24-250W)
1	Backup Internet – Pepwave MAX BR1 LTE (Verizon IOT)

Desk Phones

QTY	Description
7	Polycom VVX410 handsets
21	DIDs (518.306.3400-3419, plus 518-762-3456)

Email Account

QTY	Description
12	Office 365 accounts - 7 Premium, 5 Essential (Includes the St Dominic’s Home email)

Domain

QTY	Description
1	GoDaddy Domain – teleconwireless.com
1	Managed website – teleconwireless.com on our Rackspace server

Miscellaneous Office Equipment

QTY	Description
5	Desks
9	Filing Cabinets
1	Stool
12	Chairs
1	Table
2	Registers
1	Battery Tester
1	Car Charger Tester
1	Refrigerator
1	Microwave

Inventory

QTY	Carrier	Description
5	N/A	SD Readers
107	N/A	Chargers
15	N/A	Blue Tooth
99	N/A	Cases
64	N/A	Otter Boxes
27	N/A	Life Proof Cases
34	N/A	Universal Pouches
83	N/A	Screen Savers
10	N/A	Charging pad
2	N/A	Stick Pad
1	N/A	Shutter Ball
4	N/A	Blue Tooth Speakers
18	N/A	Tablet Cases
10	N/A	Pop Sockets
2	N/A	Grip Holder
9	N/A	Ring Hook
3	N/A	Vent Mount
3	AT&T	A Unite Pro Wi-Fi Hotspot
1	AT&T	A LG C395 Xpression
1	AT&T	A Samsung Evergreen
1	AT&T	A Samsung Note 5
2	AT&T	A Samsung S5
1	AT&T	A iPhone 5s
1	AT&T	A iPhone 5c  16gb
1	AT&T	A iPhone 6+ 16gb
1	Boost	Boost Go Flip
3	Boost	Boost Stylo 3
6	Boost	Boost ZTE Prestige 2
3	Boost	Boost Moto E4
4	Boost	Boost LG Dynasty
4	Boost	Boost Xcharge
1	Boost	Boost Galaxy J3 Emerge
1	Boost	Boost Galaxy J7 Perx
3	Boost	Boost ZTE Blade Force
3	Boost	Boost Alcatel 1 Touch
7	Boost	Boost Temp X
2	Sprint	S Dura XTP
1	Sprint	S Xcharge
1	Sprint	S HTC U11
1	Sprint	S Phone Connect 3
3	Sprint	Tab Pizi 7
2	Sprint	Hotspot
1	VZW	V iPhone 6+  16gb
1	VZW	V iPhone 7 32gb
1	VZW	V iPhone 8 256gb
2	VZW	V Samsung S6
1	VZW	V Samsung S4 mini
1	VZW	V Galaxy J3
1	VZW	V Galaxy J7
1	VZW	V Moto E
1	VZW	V Moto
2	VZW	V Ellipis 7 Tablet

Accounts Receivable

Total Telecon Accounts Receivable $46,289.90 as of July 31, 2018, and detail below.

Customer List

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Schedule 2

Allocation of Purchase Price

Intangible Personal Property

$345,000.00

Customer Base

Domain Name & Email Accounts

Office Equipment

$5,000.00

Computer Workstations

Computer Network Equipment

Desk Phones

Miscellaneous Office Equipment

Accounts Receivable

$46,289.90

Inventory

$10,000.00

Total Purchase Price

$406,289.90

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SECURED PROMISSORY NOTE

$100,000.00	Reno, Nevada	July 31, 2018

FOR VALUE RECEIVED , the undersigned, TELECON WIRELESS RESOURCES, INC ., a New York corporation (“ Maker ”), hereby promises to pay to the order of KONATEL, INC ., a Nevada corporation (“ Payee ”), at its address at 6166 Carriage House Way, Reno, NV 89519, or at such other place as Payee may designate in writing, in the currency of the United States of America, the principal sum of ONE HUNDRED THOUSAND AND 00/100 DOLLARS ($100,000.00) , in lawful money of the United States of America, which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in accordance with the provisions set forth in this Promissory Note (“Note”).

 

1.

Rate of Interest .  Except as otherwise provided herein, the principal amount outstanding under this Note from time to time (“Principal Amount”) shall bear no interest.

2.

Scheduled Payments . Installments of principal in the amount of $8,333.33 shall be paid commencing on the 1st day of September, 2018, and continuing on the 1st day of each month thereafter until the 1st day of August, 2019, at which time the entire remaining unpaid balance of principal, plus accrued Default Interest, if any, shall all be due and payable (“Maturity Date”).  

3.

Default Interest . Any sum payable under this Note, which is not paid within five (5) calendar days of when due, shall bear interest at the default rate of ten percent (10%) per annum from the date such payment is due until paid.

4.

Application of Payments .  All payments and prepayments hereunder shall be applied first to costs of collection, if any, then to accrued unpaid Default Interest, if any, and the balance to principal.  If any payment of principal or Default Interest on this Note shall become due on a day that is not a

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Business Day (as hereinafter defined), such payment shall be made on the next succeeding Business Day.  As used herein, the term “Business Day” shall mean any day other than a Saturday, Sunday or any other day on which banks in Reno, Nevada, are required or authorized to be closed

5.

Prepayment .  The Note is fully pre-payable without penalty.  If Maker exercises its right to prepay all or any portion this Note, or if Payee declares the entire indebtedness to be immediately due and payable prior to its due date, Maker agrees that in each such instance, in addition to payment of all principal, Maker shall pay to Payee all accrued Default Interest, if any.

6.

Representations and Warranties .  Maker represents and warrants that: (i) it is a duly formed and validly existing corporation, in good standing under the laws of the jurisdiction of its formation, (ii) it has the requisite power and authority to execute, deliver and carry out the terms and provisions of this Note and it has taken all necessary limited liability company action to authorize the execution, delivery, and performance of this Note, (iii) it has duly executed and delivered the Note, which constitutes the legal, valid, and binding agreement or obligation of Maker enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law), (iv) neither the execution, delivery, and performance by Maker of this Note nor compliance with the terms and provisions thereof, nor the consummation of the loan transactions contemplated therein (A) will, to the best of Maker’s knowledge, contravene any provision of any law, statute, rule, regulation, order, writ, injunction, or decree of any court or governmental instrumentality applicable to Maker or its properties and assets; (B) will conflict with or result in any breach of, any of the terms, covenants, conditions, or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any lien upon any of the

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property or assets of Maker pursuant to the terms of any promissory note, bond, debenture, indenture, mortgage, deed of trust, credit or loan agreement, security agreement, or any other material agreement or other instrument to which Maker is a party; or (C) will violate any provision of the certificate of formation, company agreement or regulations or other organizational document of Maker.

7.

Default .  Upon the happening or occurrence of any Event of Default as defined below, Payee may, at its option declare immediately due and payable the entire unpaid principal balance of, and all accrued and unpaid Default Interest, if any, on, this Note.  In such event, the entire unpaid principal balance of, and all accrued and unpaid Default Interest on, this Note shall become immediately due and payable, without further notice, demand or further corporate action by Maker.  Upon the happening or occurrence of any Event of Default, Payee may also exercise, pursue, enforce, and/or realize upon any available right or remedy provided at law or in equity.  The remedies provided for in this Note shall be cumulative and concurrent and may be pursued singularly, successively, or concurrently against Maker in the sole discretion of Payee.  As used in this Note, the term “Event of Default” shall mean the occurrence of any one or more of the following:

a.

Any indebtedness evidenced or governed by this Note is not paid within ten (10) calendar days of its due date.

b.

Maker or any other person obligated to pay any part of the indebtedness evidenced or governed by this Note: (1) fails to pay, or otherwise secure the extension for payment of, any of its respective debts, secured or unsecured, as such debts come due or admits in writing its inability to pay its debts or makes a general assignment for the benefit of creditors; or (2) commences any case, proceeding, or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution, or composition of it or its debts under any debtor relief

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laws; or (3) in any involuntary case, proceeding, or other action commenced against it which seeks to have an order for relief entered against it, as debtor, or seeks reorganization, arrangement, adjustment, liquidation, dissolution, or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization, or relief of debtors, and (i) fails to obtain a dismissal of such case or proceeding or (ii) converts the case from one chapter of the Federal Bankruptcy Code to another chapter, or (iii) is the subject of an order for relief; or (4) applies or consents to have a trustee, receiver, custodian, intervenor, liquidator, or other similar official appointed for or take possession of all or any part of its property or has any court take jurisdiction of its property which continues for a period of thirty (30) days; or (5) fails to have discharged within a period of thirty (30) days any attachment, sequestration, or similar writ levied upon any property of such person.

c.

Maker fails or refuses to observe, keep, and perform any of the covenants, agreements, and obligations contained in this Note beyond any applicable grace or cure period.

d.

Any representation or warranty in this Note proves to have been incorrect in any material respect as of the date made or deemed made; or any representation, written statement, certificate, request, or other document furnished pursuant to or under this Note proves to have been incorrect in any material respect as of the date made or deemed made.

e.

Any default or event of default occurs under any other instrument or agreement evidencing, guaranteeing, securing or otherwise relating to any other indebtedness of Maker, and such default or event of default continues beyond any applicable grace or cure period.

f.

Maker sells or transfers all or substantially all of its assets, liquidates, merges or consolidates with or into any other entity or ceases to exist as a corporation organized under the laws of the State of New York.

SECURED PROMISSORY NOTE

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8.

Security. This Note is secured by a Security Agreement of even date herewith for the benefit of Payee.

9.

Guaranty.  By his signature below, William Sullivan unconditionally and irrevocably guarantees to Payee and to Payee’s successors, endorsers, and assigns the full and prompt payment of all sums owed to Payee under this Note in accord with its terms, when due, by acceleration or otherwise, and any renewals, modifications, extensions or replacements of this Note, and the full, prompt and complete performance of all obligations of Maker as set forth in this Note and the Security Agreement.

10.

Waiver.  No delay or forbearance by act or omission on the part of Payee in the exercise of any power, option, right, or remedy under this Note, or in the collection of any money under this Note, shall operate as, or constitute, a waiver of such payee’s right to exercise any such power, right, option, or remedy or to collect any such money, nor render Payee liable for damages or to account for any such money not collected.  No single or partial exercise of, or failure to exercise, any power, right, option, or remedy provided to Payee under this Note shall preclude any other or further exercise of any such power, right, option, or remedy or the exercise of any other power, right, option, or remedy provided under this Note or at law or in equity.

11.

Payee’s Costs and Attorneys’ Fees.  Maker further agrees to pay upon demand any and all reasonable costs incurred by Payee from and after the date of this Note in connection with this Note, including, without limitation, all attorneys’ fees, expenses, and costs incurred to enforce or collect this Note, whether in connection with any proceedings or actions in bankruptcy court, probate court, or any other court, or whether or not any legal action or proceeding is commenced to prosecute or enforce any such claim, obligation, agreement, or right, or to enforce or collect this Note.

SECURED PROMISSORY NOTE

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12.

Governing Law .  THIS NOTE SHALL BE CONSTRUED IN ACCORD WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

13.

Joint and Several Liability.  Maker and any other parties liable for the payment of this Note, such as guarantors, endorsers, and sureties, are jointly and severally liable for the payment of this Note.

14.

Other Parties Liable.  All promises, waivers, agreements, and conditions applicable to Maker shall likewise be applicable to and binding upon any other parties primarily or secondarily liable for the payment of this Note, including all guarantors, endorsers, and sureties.

15.

Modifications.  Any modifications agreed to by Payee relating to the release of liability of any of the parties primarily or secondarily liable for the payment of this Note, or relating to the release, substitution, or subordination of all or part of the security for this Note, shall in no way constitute a release of liability with respect to the other parties or security not covered by such modification.  No modification, amendment, or additional agreement with respect to the indebtedness evidenced by this Note will be valid and enforceable unless made in writing and signed by both Maker and Payee.

16.

Waiver.  Maker and any and all endorsers and guarantors of this Note severally waive presentment for payment, notice of nonpayment, protest, demand, notice of protest, notice of intent to accelerate, notice of acceleration and dishonor, diligence in enforcement and indulgences of every kind and without further notice hereby agree to renewals, extensions, exchanges or releases of collateral, taking of additional collateral, indulgences or partial payments, either before or after maturity.

17.

Notices.  Any notice, request, consent, waiver or other communication required or permitted to be given to Maker by Payee shall be in writing and delivered (i) personally or by reputable overnight delivery service, (ii) by telecopy or facsimile transmission with receipt confirmed or (iii) by registered or certified mail, postage prepaid, to Maker at the address or telecopier number (as

SECURED PROMISSORY NOTE

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applicable) set forth under Maker’s signature on this Note, until Payee receives written notification from Maker at a new address or telecopier number for notices.  Any notices to Payee shall be given at the address set forth above, or at such other address as Payee may designate in writing.

THIS NOTE AND THE SECURITY AGREEMENT REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES, AND THIS NOTE AND THE SECURITY AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

IN WITNESS WHEREOF , Maker and Guarantor have executed this Note as of the date and year first above written.

MAKER :

GUARANTOR:

TELECON WIRELESS RESOURCES, INC .

WILLIAM SULLIVAN

By:      /s/ William Sullivan

/s/William Sullivan

William Sullivan, President/CEO

William Sullivan, individually, as guarantor

SECURED PROMISSORY NOTE

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SECURITY AGREEMENT

THIS SECURITYAGREEMENT made effective this 31st day of July 2018, by and between TELECON WIRELESS RESOURCES, INC . a New York corporation with a place of business at 229A North Comrie Avenue, Johnstown, New York (the "Debtor") in favor of KONATEL, INC . a Nevada corporation, 13601 Preston, Rd. STE E816, Dallas TX 752240 (the "Secured Party").

For value received, the receipt of which is hereby acknowledged, including, without limitation, enabling the Debtor, to obtain credit or other financial accommodations from the Secured Party, the Debtor hereby agrees as follows:

Section 1.   Definitions .  All capitalized terms used herein or in any certificate, report or other document delivered pursuant hereto shall have the meanings assigned to them below (unless otherwise defined).  Except as otherwise defined, terms defined in the Uniform Commercial Code shall have the meanings set forth therein.

Accounts .  All rights of the Debtor to payment for goods sold or leased or for services rendered, all sums of money or other proceeds due or becoming due thereon, and the Debtor's rights pertaining to and interest in such goods; all other rights and claims to the payment of money, under contracts or otherwise; and all other property constituting "accounts" or "contract rights" as such terms are defined in the Uniform Commercial Code.

 

Encumbrance .  Any mortgage, pledge, security interest, lien or other charge or encumbrance of any kind or nature upon or with respect to any property.

Obligation(s) .  Any obligation(s) of the Debtor, to the Secured Party of every kind and description, whether direct or indirect, absolute or contingent, primary or secondary, joint or several, due or to become due, or now existing or hereafter arising or acquired and whether by way of loan, discount, letter of credit, lease, or otherwise, including, but not limited to that certain promissory note of even date herewith from the Debtor to the Secured Party in the face principal amount of ONE HUNDRED THOUSAND and 00/100 DOLLARS ($100,000.00) , (the “Note”).

Uniform Commercial Code .  The Uniform Commercial Code as in effect in the State of New York, except to the extent that the perfection of the security interest hereunder, or remedies hereunder, in respect to the Collateral are governed by the laws of a jurisdiction other than the State of New York.

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Section 2.   Grant .  To secure the payment and performance of the Obligations, the Debtor hereby assigns and pledges to the Secured Party all of its rights, title and interest in, and grants to the Secured Party a continuing security interest in the following property of the Debtor: all personal and fixture property of every kind and nature including without limitation, all furniture, fixtures, equipment, raw materials, inventory, other goods, licenses, Accounts, contract rights, rights to the payment of money, insurance refund claims and all other insurance claims and proceeds, tort claims, chattel papers, electronic chattel paper, documents, instruments, securities and other investment property, deposit accounts, rights to proceeds of letter of credit, letter-of-credit rights, supporting obligations of every nature, and general intangibles including, without limitation, all tax refund claims, license fees, patents, patent applications, trademarks, trademark applications, trade names, copyrights, copyright applications, rights to sue and recover for past infringement of patents, trademarks and copyrights, computer programs, computer software, engineering drawings, service marks, customer lists, goodwill, and all licenses, permits, agreements of any kind or nature pursuant to which (i) the Debtor operates or has authority to operate, (ii) the Debtor possesses, uses or has authority to possess or use property (whether tangible or intangible) of others, or (iii) others possess, use, or have authority to possess or use property (whether tangible or intangible) of the Debtor, and all recorded data of any kind or nature, regardless of the medium of recording, including, without limitation, all software, writings, plans, specifications, and schematics (collectively, the “Collateral”).  The Debtor further acknowledges and agrees that this description of the Collateral is intended to cover all assets of the Debtor.

Section 3.   Representations, Warranties and Covenants .  The Debtor makes the following representations and warranties, and agrees to the following covenants, each of which representations, warranties and covenants shall be continuing and in force so long as this Agreement is in effect:

3.1   Ownership of Collateral; Absence of Liens and Restrictions .  The Debtor is, and in the case of property acquired after the date hereof, will be, the sole legal and equitable owner of the Collateral, holding good and marketable title to the same free and clear of all Encumbrances except for the security interests granted hereunder or permitted hereby, and has good right and legal authority to assign, deliver, and create a security interest in the Collateral in the manner herein contemplated.  The Collateral is not subject to any restriction that would prohibit or restrict the assignment, delivery or creation of the security interests contemplated hereunder.

3.2   Priority Security Interest .  This Agreement, together with the filing of Uniform Commercial Code financing statements in the appropriate offices, will create a valid and continuing first lien on and perfected security interest in the Collateral (except for property located in the United States in which a security interest may not be perfected

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by filing under the Uniform Commercial Code.

3.3   Sales and Further Encumbrances .  The Debtor will not sell, grant, assign or transfer any interest in, or permit to exist any Encumbrance on, any of the Collateral other than in favor of the Secured Party or its affiliates except for (i) sales of inventory or grants of licenses and other rights in the ordinary course of the Debtor's business for cash or on open account and on terms of payment ordinarily extended to its customers; (ii) so long as no Event of Default hereunder has occurred and is continuing, dispositions of equipment that has become worn out or obsolete or that has been replaced by other equipment; or (iii) as otherwise permitted by the Secured Party in writing.  The Debtor shall defend its title to and the Secured Party's interest in the Collateral against all claims and take any action necessary to remove any Encumbrances other than those permitted hereunder and defend the right, title and interest of the Secured Party in and to any of the Debtor's rights in the Collateral.

3.4   Inspection; Verification of Accounts .  The Debtor will at all reasonable times allow the Secured Party to examine, inspect or make extracts from or copies of the Debtor's books and records, inspect the Collateral and arrange for verification of Accounts constituting Collateral directly with the Debtor's accountants, the account debtors or by other methods.

3.5   Accounts:  Collection and Delivery of Proceeds .  The Debtor will diligently collect all of its Accounts until the Secured Party exercises its rights to collect the Accounts pursuant to this Agreement.  The Debtor shall, at the request of the Secured Party, notify account debtors of the security interest of the Secured Party in any Account and that payment thereof is to be made directly to the Secured Party.   Upon written request of the Secured Party, any proceeds of Accounts or inventory received by the Debtor, whether in the form of cash, checks, notes or other instruments, shall be held in trust for the Secured Party and the Debtor shall deliver said proceeds daily to the Secured Party, without commingling, in the identical form received (properly endorsed or assigned where required to enable the Secured Party to collect same).

3.6   Equipment and Inventory:  Insurance .  The Debtor will keep the Collateral insured at all times by insurance in such form and amounts as may be satisfactory to the Secured Party, and in any event (without specific request by the Secured Party) will insure the Collateral against physical hazard insurance on an "all risks" basis, including fire, theft, and, in the case of motor vehicles, collision.  Such insurance shall be with insurance companies satisfactory to the Secured Party and shall be payable to the Secured Party as an additional insured and Loss payee and the Debtor, as their respective interests may appear.  Such insurance shall provide for not less than 30 days' notice of cancellation, change in form or non-renewal to the Secured Party, and

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shall insure the interest of the Secured Party regardless of any breach or violation by the Debtor or any other person of the warranties, declarations or covenants contained in such policies.  The Debtor shall insure the Collateral in amounts sufficient to prevent the application of any co-insurance provisions.  The Debtor shall evidence its compliance with the foregoing by delivering a certificate with respect to each policy concurrently with the execution hereof, annually thereafter, and from time to time upon the request of the Secured Party.

3.7   Equipment and Inventory:  Maintenance and Use, Payment of Taxes .  The Debtor will keep the Collateral in good order and repair, will not use the same in violation of law or any policy of insurance thereon, and will pay promptly when due all taxes and assessments on the Collateral or on its use or operation.

3.8   Name or Organizational Change .  The Debtor will not change its name, identity, organizational structure, chief executive office or place where its business records are kept, or move any tangible Collateral (other than securities), or merge into or consolidate with any other entity, unless the Debtor shall have given the Secured Party at least 30 days' prior written notice thereof and shall have delivered to the Secured Party such new Uniform Commercial Code financing statements or other documentation as may be necessary or required by the Secured Party to ensure the continued perfection and priority of the security interests granted by this Agreement.

3.9   Further Assurances .  Upon the written request of the Secured Party, and at the sole expense of the Debtor, the Debtor will promptly execute and deliver such further instruments and documents and take such further actions as the Secured Party may deem desirable to obtain the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, filing of any financing statement or amendment thereof under the Uniform Commercial Code, execution of assignments of general intangibles, transfer of Collateral (other than inventory, accounts and equipment) to the Secured Party's possession.  The Debtor authorizes the Secured Party, without notice, to file any such financing statement without the signature of the Debtor to the extent permitted by applicable law, and to file a copy of this Agreement in lieu of a financing statement.  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately delivered to the Secured Party, duly endorsed in a manner satisfactory to it.

Section 4.   Power of Attorney .  Debtor hereby grants to Secured Party a power of attorney, which shall be deemed coupled with an interest and shall be irrevocable, (a) to demand, sue for, and give an effectual discharge of any sum payable to Debtor for Collateral assigned to Secured Party; (b) to endorse in Secured Party’s favor any

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negotiable instrument drawn in Debtor’s favor in payment of the Collateral assigned to Secured Party; (c) to authorize and/or execute on behalf of Debtor any notes, chattel paper, UCC financing statements, amendments thereto and continuations thereof (or similar statements of notice, registration, amendment or continuation under the laws of any jurisdiction), or other record in connection with this Agreement or the Collateral as Secured Party may require for the purpose of protecting, maintaining or enforcing the Collateral or the security interest granted to Secured Party in the Collateral; (d) to adjust, make, pursue, settle and collect any insurance claim in connection with this Agreement; (e) to discharge taxes and encumbrances at any time levied or placed on the Collateral, or otherwise protect the Collateral, and to make repairs thereof; and (f) to perform any of Debtor’s obligations under this Security Agreement in Debtor’s name or otherwise.  The Debtor agrees to reimburse the Secured Party on demand for any and all expenditures made in connection with any of the foregoing powers exercised by Secured Party hereunder.  

Section 5 .   Secured Party's Rights with respect to Collateral .  In addition to its rights under the Uniform Commercial Code or other applicable law, the Secured Party may, at its option and at any time, whether or not the Obligations are due, without notice or demand on the Debtor, take the following actions with respect to the Collateral:

(a)

with respect to any Accounts (i) notify account debtors of the security interest of the Secured Party in such Accounts and that payment thereof is to be made directly to the Secured Party; (ii) demand, collect, and receipt for any amounts relating thereto, as the Secured Party may determine; (iii) commence and prosecute any actions in any court for the purposes of collecting any such Accounts and enforcing any other rights in respect thereof; (iv) defend, settle or compromise any action brought and, in connection therewith, give such discharges or releases as the Secured Party may deem appropriate; (v) in the event the Secured Party establishes a lock box with Debtor or following an event of default, the Secured Party may receive, open and dispose of mail addressed to the Debtor and endorse checks, notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or other instruments or documents evidencing payment, shipment or storage of the goods giving rise to such Accounts or securing or relating to such Accounts, on behalf of and in the name of the Debtor; and (vi) sell, assign, transfer, make any agreement in respect of, or otherwise deal with or exercise rights in respect of, any such Accounts or the goods or services which have given rise thereto, as fully and completely as though the Secured Party were the absolute owner thereof for all purposes; and

 

(b)  

with respect to any equipment and inventory (i) make, adjust and settle claims under any insurance policy related thereto and place and pay for

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appropriate insurance thereon; (ii) discharge taxes and other Encumbrances at any time levied or placed thereon; (iii) make repairs or provide maintenance with respect thereto; and (iv) pay any necessary filing fees and any taxes arising as a consequence of any such filing.  The Secured Party shall have no obligation to make any such expenditures nor shall the making thereof relieve the Debtor of its obligation to make such expenditures.

Except as otherwise provided herein, the Secured Party shall have no duty as to the collection or protection of the Collateral nor as to the preservation of any rights pertaining thereto, beyond the safe custody of any Collateral in its possession.

Section 6.   Defaults .  An event of default ("Event of Default") shall exist hereunder if any of the following events or conditions occur:

(a)  

failure to pay any Obligation when due or perform any covenant, agreement or obligation contained herein or in any agreement, instrument or other document evidencing, securing or otherwise delivered in connection with the Obligations or default in the payment or performance of any obligation of Debtor  to others for borrowed money or in respect of any extension of credit or accommodation or under any lease which, in the reasonable opinion of the Secured Party will impair its security or increase its risk;

(b)  

failure of any representation or warranty, statement or information herein or in any documents or financial statements delivered or disclosed to the Secured Party in connection with this Agreement or the Obligations to be true and correct;

(c)  

loss, theft or substantial damage of or to the Collateral, or the issuance of an attachment or an injunction against the Debtor affecting any of the Collateral;

(d)  

default under any instrument constituting, or under any agreement (including without limitation any insurance policy) relating to, any Collateral;

(e)

dissolution, termination of existence, insolvency or business failure of the Debtor; appointment of a trustee, receiver, custodian, liquidator or other similar official for the Debtor or any such party or any substantial part of its property; assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against, the Debtor or any such party; or

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(f)  

change in the condition or affairs (financial or otherwise) of the Debtor or any indorser, guarantor or surety of or for any Obligation, or decline in the value of the Collateral, which, in the reasonable opinion of the Secured Party, will impair its security or increase its risk.

Section 7.   Secured Party's Rights and Remedies .

(a)  

So long as any Event of Default shall have occurred and is continuing:

(i)  

the Secured Party may, at its option, without notice or demand, cause all of the Obligations to become immediately due and payable and take immediate possession of the Collateral, and for that purpose the Secured Party may, so far as the Debtor can give authority therefore, enter upon any premises on which any of the Collateral is situated and remove the same therefrom or remain on such premises and in possession of such Collateral for purposes of conducting a sale or enforcing the rights of the Secured Party;

(ii)  

the Debtor will, upon demand, assemble the Collateral and make it available to the Secured Party at a place and time designated by the Secured Party that is reasonably convenient to both parties;

(iii)  

the Secured Party may collect and receive all income and proceeds in respect of the Collateral and exercise all rights of the Debtor and perform any of Debtor's obligations hereunder with respect thereto, all without liability except to account for property actually received (but the Secured Party shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing);

(iv)  

  all payments received by Debtor under or in connection with any of the Collateral after the occurrence of a default shall be held by Debtor in trust for Secured Party, shall be segregated from other funds of Debtor and shall forthwith upon receipt by Debtor be turned over to Secured Party, in the same form as received by Debtor (duly endorsed by Debtor to Secured Party, if required).  In the event Secured Party purchases any of the Collateral being sold, Secured Party shall pay for the Collateral by crediting an amount equal to the fair market value thereof against any outstanding Obligations of Debtor.

(v)  

the Secured Party may sell, lease or otherwise dispose of the

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Collateral at a public or private sale, with or without having the Collateral at the place of sale, and upon such terms and in such manner as the Secured Party may determine, and the Secured Party may purchase any Collateral at any such sale, subject to an applicable judicial order.  Unless the Collateral threatens to decline rapidly in value or is of the type customarily sold on a recognized market, the Secured Party shall send to the Debtor prior written notice (which, if given within five days of any sale, shall be deemed to be reasonable) of the time and place of any public sale of the Collateral or of the time after which any private sale or other disposition thereof is to be made. The Debtor agrees that upon any such sale the Collateral shall be held by the purchaser free from all claims or rights of every kind and nature, including any equity of redemption or similar rights, and all such equity of redemption and similar rights are hereby expressly waived and released by the Debtor.  In the event any consent, approval or authorization of any governmental agency is necessary to effectuate any such sale, the Debtor shall execute all applications or other instruments as may be required; and

(vi)  

in any jurisdiction where the enforcement of its rights hereunder is sought, the Secured Party shall have, in addition to all other rights and remedies provided for in its loan documentation, the rights and remedies of a secured party under the Uniform Commercial Code.

(b)  

Prior to any disposition of Collateral pursuant to this Agreement the Secured Party may, at its option, cause any of the Collateral to be repaired or reconditioned in such manner and to such extent as to make it saleable.

(c)  

The Secured Party is hereby granted a license or other right to use, without charge, the Debtor's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks and advertising matter, or any property of a similar nature, relating to the Collateral, in completing production of, advertising for sale and selling any Collateral; and the Debtor's rights under all licenses and all franchise agreements shall inure to the Secured Party's benefit.

(d)  

The Secured Party shall be entitled to retain and to apply the proceeds of any disposition of the Collateral, first, to its reasonable expenses of retaking, holding, protecting and maintaining, and preparing for disposition and disposing of, the Collateral, including attorneys' fees and other legal expenses incurred by it in connection therewith; and second, to the payment of the Obligations in such order of priority as the Secured Party shall determine.  Any surplus remaining after such application shall be paid to the Debtor or to whomever may be legally entitled thereto, provided that in no event shall the

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Debtor be credited with any part of the proceeds of the disposition of the Collateral until such proceeds shall have been received in cash by the Secured Party.  The Debtor shall remain liable for any deficiency.

Section 8.   Waivers .  The Debtor waives presentment, demand, notice, protest, notice of acceptance of this Agreement, notice of any loans made, credit or other extensions granted, collateral received or delivered or any other action taken in reliance hereon and all other demands and notices of any description, except for such demands and notices as are expressly required to be provided to the Debtor under this Agreement or any other document evidencing the Obligations.  With respect to both the Obligations and the Collateral, the Debtor assents to any extension or postponement of the time of payment or any other forgiveness or indulgence, to any substitution, exchange or release of Collateral, to the addition or release of any party or person primarily or secondarily liable, to the acceptance of partial payment thereon and the settlement, compromise or adjustment of any thereof, all in such manner and at such time or times as the Secured Party may deem advisable.  The Secured Party may exercise its rights with respect to the Collateral without resorting, or regard, to other collateral or sources of reimbursement for Obligations.  The Secured Party shall not be deemed to have waived any of its rights with respect to the Obligations or the Collateral unless such waiver is in writing and signed by the Secured Party.  No delay or omission on the part of the Secured Party in exercising any right shall operate as a waiver of such right or any other right.  A waiver on any one occasion shall not bar or waive the exercise of any right on any future occasion.  All rights and remedies of the Secured Party in the Obligations or the Collateral, whether evidenced hereby or by any other instrument or papers, are cumulative and not exclusive of any remedies provided by law or any other agreement, and may be exercised separately or concurrently.

Section 9.   Expenses .  The Debtor shall, on demand, pay or reimburse the Secured Party for all reasonable expenses (including attorneys' fees of outside counsel or allocated costs of in-house counsel) incurred or paid by the Secured Party in connection with the preparation, negotiation, closing, administration or enforcement, of this Agreement, or its on-site periodic examinations of the Collateral, and for any other amounts permitted to be expended by the Secured Party hereunder, including without limitation such expenses as are incurred to preserve the value of the Collateral and the validity, perfection, priority and value of any security interest created hereby, the collection, sale or other disposition of any of the Collateral or the exercise by the Secured Party of any of the rights conferred upon it hereunder.  The obligation to pay any such amount shall be an additional Obligation secured hereby and each such amount shall bear interest from the time of demand at a rate of interest equal to the Default Rate of Interest, as that term is described in any debt instrument between the Debtor and the Secured Party.

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Section 10.   Notices .      Any demand upon or notice to the Debtor hereunder shall be effective when delivered by hand or sent by electronic facsimile transmission, receipt acknowledged, or delivered to an overnight courier, in each case addressed to the Debtor at the address shown above or as it appears on the books and records of the Secured Party or at such other address as the Debtor may advise the Secured Party in writing.  Demands or notices addressed to any other address at which the Secured Party customarily communicates with the Debtor also shall be effective.  Any notice by the Debtor to the Secured Party shall be given as aforesaid, addressed to the Secured Party at the address shown above or such other address as the Secured Party may advise the Debtor in writing.

Section 11.   Successors and Assigns .  This Agreement shall be binding upon the Debtor, its successors and assigns, and shall inure to the benefit of and be enforceable by the Secured Party and its successors and assigns.  Without limiting the generality of the foregoing sentence, the Secured Party may assign or otherwise transfer any agreement or any note held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein, to any other person or entity, and such other person or entity shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to the Secured Party herein.

Section 12.   General .  This Agreement may not be amended or modified except by a writing signed by the Debtor and the Secured Party, nor may the Debtor assign any of its rights hereunder.  This Agreement and the terms, covenants and conditions hereof shall be construed in accordance with, and governed by, the laws of the State of New York (without giving effect to any conflicts of law provisions contained therein).  

Section 13.   Section Headings .  Section headings are for convenience of reference only and are not a part of this Agreement.

Section 14.   WAIVER OF JURY TRIAL .   THE DEBTOR AND THE SECURED PARTY HEREBY WAIVE TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH OR, ARISING OUT OF: (A) THIS SECURITY AGREEMENT OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED IN CONNECTION WITH THE OBLIGATIONS; OR (B) THE VALIDITY, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as an instrument under seal.

DEBTOR :

TELECON WIRELESS RESOURCES, INC.

By:      /s/William Sullivan

William Sullivan, President,

Duly authorized

SECURED PARTY :

KONATEL, INC .

By:      /s/Charles Schneider, Jr.

Charles Schneider, Jr., CEO,

Duly authorized

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