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Exhibit 10aa
 
EXECUTION COPY
 
 

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ASSET PURCHASE AGREEMENT

 
BY AND AMONG
 
Ampal Communication 2010 Ltd.
 
                                                      as Purchaser
 
AND
 
012 Smile.Communications Ltd.
 
                                                      as Seller
AND
 
Merhav Ampal Energy Ltd.
 
as Guarantor
 
Dated as of November 16, 2009
 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of November 16, 2009
(the "Effective Date"), is made by and among 012 Smile Communications Ltd., a
company incorporated in accordance with the laws of the State of Israel (the
“Seller”); Merhav Ampal Energy Ltd. on behalf of Ampal Communication 2010 Ltd.,
a company in formation in accordance with the laws of the State of Israel (the
"Purchaser"); and Merhav Ampal Energy Ltd., a company incorporated in accordance
with the laws of the State of Israel (the "Guarantor").  The Seller, the
Purchaser and the Guarantor are referred to herein collectively, as “Parties”,
and each of them, separately, as a “Party”.

RECITALS

A.
The Seller is engaged in the Business (as defined below).

B.
The Purchaser wishes to acquire from the Seller, and the Seller wishes to sell
to the Purchaser, the Business and the Acquired Assets (as defined below), and
the Purchaser wishes to assume and the Seller wishes to transfer the Assumed
Liabilities (as defined below), all on the terms and subject to the conditions
and the conditions precedents hereinafter set forth.

C.
The Parties wish to set forth herein all of the terms and conditions that shall
govern the sale and purchase of the Acquired Assets and the assumption of the
Assumed Liabilities.

D.
The Parties are aware that the prompt consummation of the transactions
contemplated hereby is of the essence.

 
NOW, THEREFORE, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, and intending to be legally bound hereby, the Parties agree as
follows:
 
1.
DEFINITIONS AND INTERPRETATION

 
1.1
Definitions. In this Agreement, the following terms shall have the following
meanings:

 
“Accounts Receivable” means all accounts receivable, notes receivable and other
current rights to payment of Seller.
 
    “Acquired Assets” shall mean all of Seller’s assets, properties, contracts,
licenses and permits and rights of every kind and description, tangible and
intangible, including any assets, properties and rights used in connection with
the Business as it exists (subject to Section 3.4) or shall exist on the
Closing, wherever situated, and excluding only the Excluded Assets.  Without
limiting the foregoing, the Acquired Assets shall include:
 
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(a)
the Seller's holdings in 012 Telecom Ltd., the subsidiary of Seller, and the
Seller's interest in 012 Global, including shareholder loans;

 
 
(b)
all machinery, equipment and other tangible personal property and fixed assets
used to conduct the Business;

 
 
(c)
all inventories of Seller related to the Business, including raw materials,
supplies, goods consigned to vendors or subcontractors, works in process,
finished goods and goods in transit;

 
 
(d)
all Accounts Receivable related to the Business;

 
 
(e)
all prepaid expenses related to the Business;

 
 
(f)
all rights and interests of Seller in and to the leases, subleases, licenses,
sublicenses, contracts, commitments, obligations or other agreements, whether
written or oral, or other similar agreements and rights thereunder, including
contracts for the purchase of supplies and services and the sale of products and
services, used to conduct the Business, and including the Leases and leasehold
improvements (“Contracts”);

 
 
(g)
the business records, plans, notebooks, specifications, advertising and
promotional materials and campaigns, studies, reports, equipment repair,
maintenance or service records, in each case as used by Seller for operating the
Business; provided that Seller shall be entitled to maintain (but, other than as
required by law, shall not use) one copy of any of such documents for the sole
purpose of either retention as required by any applicable Legal Requirement or
litigation or dispute of this Agreement;

 
 
(h)
all Intellectual Property Rights related to the conduct of the Business,
including all registrations (and applications for registration) of Intellectual
Property Rights (collectively, the “Business Intellectual Property Rights”);

 
 
(i)
all Government Authorizations and other permits or licenses related to the
Business, including the Licenses (except in such case where the license, permit
or authorization is replaced or exchanged for a newly issued License);

 
 
(j)
all lists and records pertaining to customer accounts (whether past or current),
suppliers, distributors, personnel and agents of the Business;

 
 
(k)
all claims, deposits, prepayments, warranties, guarantees, refunds, causes of
action, rights of recovery, rights of set-off and rights of recoupment of every
kind and nature, whether liquidated or unliquidated, fixed or contingent, that
relate to the Business (in each case except for Tax items that relate to periods
ending on or before the Cutoff Date), including any causes of action, claims and
rights which Seller may have under any insurance contracts or policies insuring
the Acquired Assets; and

 
 
(l)
the Positive Cash Amount (as defined in Section 3.4).

 
 
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"Affiliate" shall mean a person Controlling, Controlled by or under common
Control with a person, and if such person first stated above is a natural
person, a relative of such person.

"Antitrust Approval" shall be as defined in Section 5.1(ii).

"Assumed Liabilities" shall mean all of Seller's present or future liabilities
and obligations of every kind arising out of, relating to, in the nature of or
caused by the Business, including legal claims of third parties, regardless of
whether such liabilities arise or become known before or after the Effective
Date, excluding only the Retained Liabilities.  Without limiting the foregoing,
the Assumed Liabilities shall include all liabilities of any kind relating to
employees of the Seller or the Business other than those employees who are not
Assumed Employees (as set forth in Section 9.1). and shall include the
replacement of any guarantees given by Seller with respect to Acquired Assets.

"Bezeq" means Bezeq - The Israeli Telecommunication Corporation Ltd.

"Bezeq Transaction" means the acquisition of Bezeq shares from AP.SB.AR Holdings
Ltd. ("APSBAR") pursuant to that certain Share Purchase Agreement, dated October
25, 2009 by and between Seller and APSBAR.

“Business” shall mean all of the business of the Seller as conducted on the date
of this Agreement other than the Bezeq Transaction.  Such Business shall
include, without limitation, as defined below, the International Telephony
Business, the Land Line Business, the ISP Business and the Other Business.

"Business Day" shall mean any day on which banks are open for business in the
State of Israel.

“Closing” and “Closing Date” shall be as defined in Section 4.

“Consent” shall mean any regulatory consent, permit, approval, order,
authorization, registration, declaration, filing or exemption, to the extent
required under applicable law (but not as a matter of contract).

"Control" or "Controlled" or "Controlling" shall mean the ability, directly or
indirectly, to direct the activities of the relevant entity, including, without
limitation, the holding of (i) more than 50% of the issued share capital, or
(ii) such share capital as carries directly or indirectly, more than 50% of the
shareholder votes in a general meeting or the ability to appoint or elect more
than 50% of the directors or equivalent of such entity.

"Cut-off Date" shall mean December 31, 2009.

"Damages" shall mean any liabilities, claims, injuries, losses, damages,
settlements, judgments, awards, penalties, fines, costs or expenses (including,
without limitation, reasonable legal fees and expenses), whether or not arising
out of third party claims.

“Dollar” or “$” means U.S. Dollars.

"End Date" shall have the meaning ascribed thereto in Section 10.1(b).
 
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“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended.

"Excluded Assets" shall mean (a) the corporate seal, charter documents, minute
books, stock books, tax returns, books of account or other records having to do
with the corporate organization of Seller, (b) the rights that accrue or may
accrue to Seller under this Agreement, (c) the Retained Cash (as defined in
Section 3.4) and other derivative instruments (forward USD contracts) of the
Seller, (d) any additional cash, cash equivalents and marketable securities that
are obtained by Seller (or any Subsidiary thereof), including by way of existing
or future loans or equity investments from Affiliates or third parties, not
generated as part of the Business, (e) any tax assets (including without
limitation advance tax payments) relating to periods prior to the Cutoff Date,
(f) any assets related to the Bezeq Transaction, as set forth on Schedule 1.1
hereto (which may be amended by the Seller from time to time prior to the
Closing); and (g) certain components or possible components of the Excluded
Assets as are set forth in Schedule 1.1 hereto.

“Family Member” shall mean, in respect of a natural Person, (i) a spouse of such
Person; (ii) a descendant of such Person or of such Person’s spouse; (iii)  such
Person’s brother or sister, or (iv) a spouse of any of the Persons referred to
in clauses (ii) or (iii) above.

“Governmental Authorization” shall mean any permit, license, certificate,
franchise, permission, clearance, registration, approval, consent, qualification
or authorization issued, granted, given or otherwise made available by or under
the authority of any Governmental Entity or pursuant to any Legal Requirement.

“Governmental Entity” shall mean any government, governmental department,
ministry, cabinet, commission, board, bureau, agency, tribunal, regulatory
authority, instrumentality, judicial, legislative or administrative body or
entity, domestic or foreign, federal, national, state, regional, provincial or
local, having or exercising jurisdiction over the matter or matters in question.

"Initial End Date" shall have the meaning ascribed thereto in Section 10.1(b).

"Intellectual Property Rights” means all intellectual property and proprietary
rights throughout the world, including (i) all trademark rights, trade dress,
service marks and trade names; (ii) all copyrights and all other rights
associated therewith and the underlying works of authorship; (iii) all patents
and all proprietary rights associated therewith; (iv) all inventions, mask works
and mask work registrations, net lists, schematics, enhancements, designs,
improvements, know how, discoveries, improvements, designs, trade secrets,
computer software programs or applications (in both source code and object code
form), flow charts, diagrams, coding sheets, listings and annotations,
programmers' notes, information, work papers, work product; and (v) all
registrations of any of the foregoing, all applications therefor, all
documentation and all goodwill associated with any of the foregoing.  

“International Telephony Business” shall mean the businesses of outgoing and
incoming international telephony services, of hubbing services, and of
international calling card services and any other operations and activities
conducted by Seller, including other data and other related services, pursuant
to Seller’s  international services license dated June 2, 2004.

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“ISP Business” shall mean the businesses of the ADSL/cable/dial-up Internet and
access services, the value-added services and the WiFi services and any other
operations and activities, including all other related services, conducted by
Seller pursuant to its internet access license dated January 24, 2002.

"Knowledge" shall mean, with respect to any Entity, with respect to any fact,
circumstance, event or other matter in question, the actual knowledge of the
executive officers of the Entity after reasonable and diligent inquiry.

“Land Line Business” shall mean the businesses of local telephony using VoB
access and local telephony using dedicated lines based on PRI services and any
other operations and activities conducted by Seller and its subsidiary pursuant
to the domestic fixed-line license, dated December 15, 2005, of 012 Telecom Ltd.

"Leases" shall mean all of Seller’s right, title and interest in each of that
certain Real Estate Lease Agreements  including the right to any security
deposits and other amounts and instruments deposited by or on behalf of Seller
thereunder.

“Legal Proceeding” shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
court or other Governmental Entity or any arbitrator or arbitration panel.

“Legal Requirement” shall mean any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, order, judgment, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity.

"Licenses" shall mean the following licenses granted by the MoC (as defined
below) to the Seller and/or its Affiliates, as amended from time to time:

 
(a)
International telephony license (general license)

 
(b)
VoB and DFL license (general specific license)

 
(c)
ISP license (specific license)

 
(d)
Endpoint Network Services

 
(e)
VoBoC experimental license

"MoC" shall mean the Israeli Ministry of Communications.

"NIS" means New Israeli Shekels.

“Other Businesses” shall mean the businesses related to end-point network
services (and any other operations and activities conducted by Seller pursuant
to the network end-point licence, dated December 30, 2007, of Seller), and the
VoBoC and WiFi experimental services of Seller and 012 Telecom Ltd.
 
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“Permitted Liens” means:  (A) statutory liens for taxes not yet due and payable;
(B) statutory liens to secure obligations to landlords, lessors or renters under
leases or rental agreements which obligations are not yet due; (C) deposits or
pledges made in connection with, or to secure payment of, workers’ compensation,
unemployment insurance or similar programs mandated by applicable law; (D)
statutory liens in favor of carriers, warehousemen, mechanics and materialmen,
to secure claims for labor, materials or supplies and other like liens incurred
in the ordinary course of business and not yet due; (E) liens in favor of
customs and revenue authorities arising as a matter of law to secure payments of
customs duties in connection with the importation of goods not yet due and
payable; (F) non-exclusive object code licenses of software by Seller in the
ordinary course of its business consistent with past practice; and (G) rights of
third parties that are inherent to assets being transferred (such as software
licenses, leased cars, contractual rights, etc.); provided, however, that
Permitted Liens shall not, for the avoidance of doubt, include liens created for
the benefit of financial institutions.

"Person" shall mean any individual, firm, corporation (including any nonprofit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organisation (including unincorporated
organisation), other entity or governmental authority.

“Purchaser Indemnitees” means any of Purchaser and its Representatives,
successors and assigns.

“Representatives” means officers, directors, employees, agents, attorneys,
accountants, advisors and representatives.

"Retained Liabilities" shall mean obligations and liabilities resulting from,
arising out of, relating to, in the nature of or caused by (a) any indebtedness
of Seller under its Series A Debentures; (b) any other borrowings of the Seller
from any third party financial institution or other financial lenders including
Affiliates (including from its direct or indirect parent company); (c) any
liabilities in connection with the Bezeq Transaction; (d) all liabilities for
Taxes for periods ending on or before the Cut-off Date; (e) Excluded Asset; (f)
certain employment and employee benefits-related claims, obligations and
liabilities for employees who are not Assumed Employees as set forth in Section
9 hereof, (g) fees, costs or expenses incurred by Seller in connection with the
preparation, negotiation, execution, delivery and performance of this Agreement
and the other transactions contemplated hereby; (h) other derivative instruments
(forward USD contracts) of the Seller; and (i) as set forth in Schedule 1.2
hereto.

“Security Interest” shall mean any mortgage, charge, lien, trust, encumbrance,
pledge, assignment, title retention, claim, right of first refusal, preemptive
right or any other encumbrance of whatever nature, kind or description.

“Seller Indemnitees” means any of Seller and its Representatives, successors and
assigns.

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"Subsidiary" shall mean a corporation, partnership, limited liability company,
or other entity of which an entity directly or indirectly owns or Controls (i) a
majority of the voting securities; or (ii) interests that are sufficient to
elect or appoint a majority of the Board of Directors or other comparable organ
of such Person.

"Tax" or “Taxes” shall mean federal, state, local or foreign net or gross
income, gross receipts, social security, national health insurance, capital
gains, license, payroll, employment, excise, severance, stamp, occupation,
premium, customs duties, capital stock, franchise, profits, withholding,
unemployment, disability, real property, personal property, sales, use, offer,
registration, value added, alternative or add-on minimum, estimated or other
tax, governmental fee or like assessment or charge of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.

“Tax Returns” shall mean all reports, returns, declarations, statements, claim
for refund, or information return or statement relating or other information
required to be supplied to a taxing authority in connection with Taxes,
including any schedule or attachment thereto, and including any amendments
thereof.

“U.S. GAAP” means generally accepted accounting principles in the United States
of America.

1.2              General Interpretation. The paragraph headings are for the sake
of convenience only and shall not affect the interpretation of this Agreement.
The recitals, schedules, appendices, annexes and exhibits hereto form an
integral part of this Agreement. The Parties agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, holding or rule of
construction providing that ambiguities in an agreement or other document shall
be construed against the Party drafting such agreement or document. The words
“include,” “includes” and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation."

2.
ACQUISITION OF ASSETS; ASSUMPTION OF LIABILITIES

2.1              Purchase of Assets. Subject to the terms and conditions of this
Agreement, at the Closing, the Seller shall, and the Seller shall cause its
Affiliates (to the extent necessary) to, sell, assign, transfer and convey to
the Purchaser, and the Purchaser shall purchase and acquire, assume and accept,
all right, title and interest of Seller or its Affiliates in and to all of the
Acquired Assets, free and clear from any Security Interests (for the avoidance
of doubt, including necessary consents from financial institutions), other than
Permitted Liens.

2.2.              Assumed Liabilities. Subject to the terms and conditions of
this Agreement, at the Closing, the Purchaser shall assume and agree to pay,
discharge or perform, as appropriate, the Assumed Liabilities and the Seller
shall have no other obligations in connection therewith.

2.3               Excluded Assets and Retained Liabilities. The Seller shall not
transfer, or be deemed to transfer, the Excluded Assets and the Purchaser shall
not assume, or be deemed to have assumed, the Retained Liabilities.

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2.4              Non-Transferable Assets.  To the extent that Seller’s rights to
any Acquired Assets may not be sold or assigned to the Purchaser without the
consent of another person that has not been obtained at or prior to Closing or
if such sale or assignment would constitute a violation of any contract
constituting or relating to an Acquired Asset, or a violation of any Legal
Requirement, this Agreement shall not constitute an agreement to sell or assign
the same, and such Acquired Asset shall remain in the Seller’s ownership and
shall not be sold, assigned, transferred, conveyed or delivered hereunder, nor
shall any liability constituting or relating to such Acquired Asset be assumed
by Purchaser. Any such Acquired Asset shall be referred to herein as a
“Non-Transferable Asset”.  In such event:
 
2.4.1           Both before and after the Closing Date, the parties shall
exercise their reasonable best efforts to obtain any consents so as to transfer
each such Non-Transferable Asset to Purchaser without modifying, amending or
burdening such Non-Transferable Asset in any material respect.

2.4.2            To the extent that on the Closing Date there is any
Non-Transferable Asset outstanding, the Seller shall, from and after the Closing
Date, use its reasonable commercial efforts to obtain any such required consents
as promptly as possible, with any expenses involved to be borne by the Party
handling the matter. If any such Consent shall not be obtained or if any
attempted assignment would be ineffective in whole or in part, Seller shall
cooperate with Purchaser in any reasonable and lawful arrangement designed to
provide the Purchaser the benefits and use of such asset for which the consent
was not obtained. Such arrangements may include, with the consent of Purchaser,
terminating the Non-Transferable Asset between the Seller and the relevant third
party and the entry into a new contract by Purchaser with such third party on
substantially the same terms or a subcontract of the Non-Transferable Asset to
Purchaser.  In particular, with regard to contracts which are Non-Transferable
Assets, Seller will, to the extent practicable and subject to applicable law:
(i) provide to the Purchaser all of the benefits of the applicable contract;
(ii) cooperate in any reasonable and lawful arrangement designed to provide such
benefits to the Purchaser; and (iii) enforce at the request of the Purchaser and
for the account of Purchaser, any rights of the Seller arising from any such
contract.  In addition, with regard to liabilities falling within the definition
of Assumed Liabilities that cannot be assigned or assumed, Purchaser shall
indemnify Seller for all such liabilities as set forth in Section 12 hereto.

2.4.3              In the event that Purchaser is provided all of the benefits
received by the Seller under any contract pursuant to the foregoing paragraph,
the Purchaser shall perform and discharge when due the obligations, and assume
the liabilities of the Seller under such contract to the extent arising out of
relating to the Business.

2.4.4              For the avoidance of doubt, the Non-Transferable Assets, if
any, shall not include any of the consents that are required closing conditions
set forth in Section 5.

2.5              Further Assurances.  From time to time after the Closing,
Seller shall execute and deliver such other instruments of transfer and
documents related thereto and take such other action as may be necessary or
reasonably requested by Purchaser in order to more effectively transfer to
Purchaser, and to place Purchaser in possession and control of, the Acquired
Assets.  Purchaser shall take such actions as may be necessary or reasonably
requested by Seller in order to assure Purchaser’s assumption of the Assumed
Liabilities.
 
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2.6              Effect of Absence of Consent. Other than the closing conditions
set forth in Section 5 (including without limitation Section 5.2) and without
derogating from Section 2.4 and Section 6.8, the absence of any consent,
approval or authorization of any third party for the transaction contemplated
hereby shall not constitute a condition precedent for Closing, a ground for
terminating or not consummating this Agreement or the transactions contemplated
hereby, or a breach of this Agreement, and the Purchaser fully accepts upon
itself all risks in connection with the absence of any such consent, approval or
authorization.

3.           CONSIDERATION AND PAYMENT

3.1.              Purchase Price. As consideration for the sale of the Acquired
Assets and the assumption of the Assumed Liabilities by Purchaser, at the
Closing, the Purchaser shall pay to the Seller, by wire transfer of immediately
available funds to an account designated in writing by Seller, NIS 1,200,000,000
(One Billion Two Hundred Million New Israeli Shekels) (the "Purchase Price").

3.2              VAT. VAT shall be added to the Purchase Price, as applicable,
and shall be paid by Purchaser against an invoice issued by the Seller. The
parties will use commercially reasonable efforts to cooperate with each other to
obtain any available reduction or exemption from such VAT or other Taxes
(including, by way of example, assistance with regard to production of any
applicable resale certificate, resale purchase exemption certificate or other
certificate or document of exemption required or appropriate to reduce or
eliminate such VAT or other Taxes) or any available refund of such VAT or other
Taxes. For the avoidance of doubt, obtaining any such reduction or exemption
shall not be a condition to the Closing.

3.3              Tax Withholding. Purchaser shall be entitled to deduct and
withhold from any consideration payable or otherwise deliverable pursuant to
this Agreement to Seller such amounts as may be required to be deducted or
withheld therefrom under any applicable law, including the Israeli Tax
Ordinance, unless Purchaser received from Seller a certificate or ruling from
the ITA providing for an exemption or other reduction from such withholding or
deduction which can be relied upon by Purchaser and which is presented at least
seven days prior to the time that the applicable payment of consideration is due
to be made. To the extent such amounts are so deducted or withheld, such amounts
shall be treated for all purposes of this Agreement as having been delivered and
paid to Seller and Purchaser shall provide to Seller reasonably requested
documentation evidencing such deduction or withholding.

3.4              Cash Adjustments. Cash, cash equivalents and marketable
securities and derivative instruments (collectively, "Cash") of the Seller and
its Subsidiaries as of the Cut-off Date shall be retained by Seller as part of
the Excluded Assets (the "Retained Cash").  Any income or losses, including
Cash, of the Business after the Cut-off Date shall be for the account of the
Purchaser.  Without derogating from the foregoing, the Purchaser (i) understands
that outside of the operations in the ordinary course of the Business, the
Seller will continue to collect cash, cash equivalents and marketable securities
and derivative instruments for the purpose of consummating the Bezeq
Transaction, including, without limitation, through shareholder loans,
shareholder investments and financial loans, (ii) acknowledges that it has no
rights to any such assets (and has no liability for any liabilities related
thereto), and (iii) all such assets shall be part of the Excluded Assets.
 
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If during the period from the Cut-off Date until the Closing the Business
generates a positive Cash amount, then the Seller shall transfer such positive
amount to the Purchaser as part of the Acquired Assets ("Positive Cash
Amount").  If during the period from the Cut-off Date until the Closing the
Business generates a negative Cash amount and hence such amounts were financed
by the Seller during such period, the Purchaser will transfer such amount to the
Seller within 14 days after the Closing.  At Purchaser's request, if the
Acquired Assets include cash of less than NIS 10,000,000, the Seller will
provide Purchaser at Closing with a non-interest bearing loan of up to an amount
required to bring such cash to NIS 10,000,000 ("Seller Loan"), and such loan
shall be repaid by Purchaser to Seller within fourteen (14) days after Closing.
 
For the avoidance of doubt, this Section 3.4 shall not be deemed to derogate
from Seller's obligation under Section 6.1(xi).

4.
CLOSING

4.1               Closing. Unless earlier terminated pursuant to Section 10
hereof, the closing of the transactions contemplated hereby, including the
purchase and sale of the Acquired Assets and the payment of the Purchase Price
(the “Closing”), shall take place at the offices of Seller on December 31, 2009,
provided that the conditions set forth in Section 5 shall have been satisfied or
waived prior thereto, other than those conditions that are to be satisfed at the
Closing; provided, however, if such conditions have not been waived or satisfied
by December 31, 2009, the Closing shall take place on the fifth (5th) business
day immediately following the satisfaction or waiver (by the applicable party)
of the conditions set forth in Section 5, other than those conditions that by
their terms are to be satisfied at the Closing, or on such other date and at
such other time and place as is mutually agreed by the Parties (such date, the
“Closing Date”). For the avoidance of doubt, nothing in this Section 4.1 shall
derogate from section 10.1.

4.2.              Closing Deliveries. At the Closing, the following actions and
occurrences will take place, all of which shall be deemed to have occurred
simultaneously, and no action shall be deemed to have been completed and no
document or certificate shall be deemed to have been delivered, until all
actions are completed and all documents and certificates delivered:

 
4.2.1
The Seller deliver to the Purchaser the following:

(a)            Possession of the Acquired Assets (to the extent applicable).

(b)            Such duly executed bills of sale, endorsements, assignments and
other instruments of transfer and conveyance necessary to vest in the Purchaser
the rights, title and interests of the Seller in and to the Acquired Assets,
free and clear of all Security Interests other than Permitted Liens.

(c)            A certificate executed by the CEO or CFO of the Seller (without
personal liability therefor), or alternatively by another officer duly
authorized by the Seller's Board of Directors  confirming the satisfaction of
the conditions set forth in Section 5.1 and 5.2.

(d)            Seller's balance sheet for the Cut-off Date (a draft of which
shall be delivered at least five (5) business days prior to the Closing, but in
no event prior to January 15, 2010) (the "Cut-off Date Statement").
 
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4.2.2
The Purchaser shall deliver to the Seller the following:

(a)            The Purchase Price.

(b)            Such duly executed bills of sale, endorsements, assignments and
other instruments of transfer and conveyance necessary to vest in the Purchaser
the rights, title and interests of the Seller in and to the Acquired Assets,
free and clear of all Security Interests other than Permitted Liens.

(c)            Undertakings duly executed by Purchaser, in form and substance
reasonably satisfactory to the Seller, whereby Purchaser assumes and agrees to
discharge when due the Assumed Liabilities.
 
 

(d)            A certificate executed by an officer duly authorized by the
Purchaser's Board of Directors confirming the satisfaction of the conditions set
forth in Section 5.1.
 
5.
CONDITIONS PRECEDENT

5.1              Conditions to Obligations of Each Party. Each Party’s
obligation to consummate the transactions contemplated hereunder is subject to
the fulfilment, prior to or at the Closing, of each of the following conditions:

 
(i)
Approval of the MoC of the transactions contemplated hereby, either by the
transfer of the existing Licenses to the Purchaser or the grant of new licenses
that permit the Business to continue to be operated (the "MoC Approval") shall
have been duly obtained and shall be in full force and effect on the Closing
Date.

 
(ii)
Approval of the Israeli Antitrust Commissioner of the transactions contemplated
hereby (to the extent such approval is required) (the "Antitrust Approval")
shall have been duly obtained and shall be in full force and effect on the
Closing Date.

 
(iii)
Any other material Governmental Authorization necessary to effect the
transaction contemplated by this Agreement shall have been duly obtained and
shall be in full force and effect on the Closing Date.

 
(iv)
No temporary restraining order, preliminary or permanent injunction, judgment or
other order issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the
transactions contemplated hereby shall be in force.

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5.2              Additional Condition to Obligations of Purchaser. The
obligations of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of the
following condition, which may be waived exclusively in writing by Purchaser:
All of the consents listed on Schedule 5.2 (the "Required Consents") that are
required shall have been duly obtained and delivered to Purchaser (or shall have
been replaced in a manner that does not adversely affect Purchaser) and shall be
in full force and effect on the Closing Date.

6.
COVENANTS; OTHER AGREEMENTS

 
6.1
Ordinary Course.

 
(a)
From the date of this Agreement until the Closing Date (the “Interim Period”),
and subject to any limitations under the Israeli Antitrust Law, with respect to
the Business, other than (i) with the prior written consent of the Purchaser
(such consent not to be unreasonably withheld, conditioned or delayed) or (ii)
as expressly contemplated hereunder:

 (i) Seller shall conduct the Business in the usual, regular and ordinary course
and in substantially the same manner as the Business has been conducted prior to
the date of this Agreement;
 
(ii) Seller shall comply with all legal requirements and contractual liabilities
in all material respects applicable to the operation of the Business and pay all
applicable Taxes as and when due and payable;
 
      (iii) Seller shall use reasonable commercial efforts to keep available the
service of the Employees and to preserve intact its current business
organization and maintain its relations with all material suppliers, customers,
landlords, creditors, and other Persons having business relationships with
Seller, all in the ordinary course of business;
 
      (iv) Seller shall not make any sale, assignment, transfer, abandonment or
other conveyance of a material part of the Acquired Assets, except transactions
pursuant to the existing Contracts or transactions in the ordinary course of
business consistent with past practice to unaffiliated third Persons;

       (v) Seller shall not enter into any material new customer, supplier,
lease, reseller or distributor agreement other than in the ordinary course of
business consistent with past practice;
 
  (vi ) Seller shall not materially change the business practices of the
Business as presently conducted, in regard to customer credit terms, accounts
receivable and payable;
 
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      (vii) Seller shall not sell, lease, license, or otherwise dispose of or
grant any license to any material Business Intellectual Property Rights, other
than non-exclusive licenses or leases granted to customers in the ordinary
course of business;
 
 (viii) Seller shall not subject any of the Acquired Assets, or any part
thereof, to any Lien or suffer such to exist other than Permitted Liens and
other than such non-material Liens as may arise in the ordinary course of
business consistent with past practice or by operation of law;
 
                                           (ix) Seller shall not purchase, lease
or otherwise acquire any material asset for the Business outside the ordinary
course of business;
 
                                           (x) Seller shall not change the terms
of any employment agreements or compensation practices with senior employees of
the Business or  make across-the-board changes in employment agreements or
compensation practices or enter into any new (or amend any existing) employee
benefit plan, program or arrangement, except in accordance with pre-existing
contractual provisions;
 
                                            (xi) Seller shall not materially
change its policies and practices with respect to collection of accounts
receivable, payment of accounts payable or the grant of discounts or rebates;
 
                                           (xii) Seller shall not enter, modify
or amend in any material respect or terminate any contract that is material to
the Business or announce or commence any material offering or campaign to
customers if such action would have an adverse effect on the Business;
 
      (xiii) Seller shall not solicit or enter into any transaction to sell the
Business or a substantial part thereof, directly or indirebtly other than as
contemplated by this Agreement;

  (xiv) Seller shall not waive, cancel, compromise, settle or release any rights
or claims of material value, outside the ordinary course of business, that are
Acquired Assets;

   (xv) Seller, solely through its CEO, shall confer on a regular and reasonable
basis with Representatives of Purchaser to report on operational matters and the
general status of ongoing operations of the Business; and

      (xvi) Seller shall not agree or commit to take any of the actions
described above.

   (b)              Without derogating from the foregoing, nothing in this
Section 6.1 is intended to inhibit or otherwise restrict the Seller from
conducting its business during the Interim Period in the ordinary course of
business or from taking actions in furtherance of the Bezeq Transaction. Nothing
contained in this Agreement is intended to give Purchaser, directly or
indirectly, the right to control or direct the Company’s operations prior to the
Closing Date or vice versa. Prior to the Closing, each of the Parties shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its and its subsidiaries respective operations.

 
6.2
Public Announcements.

(a)              Neither Party nor any of its Affiliates shall issue any press
release or public announcement concerning this Agreement or the transactions
contemplated hereby without obtaining the prior written approval of the other
Party, which approval will not be unreasonably withheld or delayed, unless
disclosure is otherwise required by applicable law or by the applicable rules of
or listing agreement with any stock exchange on which the securities of a Party
or its Affiliates are traded securities, in which case the disclosing party
shall consult with the other party prior thereto..  The Purchaser shall not, and
shall cause its Affiliates not to, make public announcements concerning concrete
business plans with respect to the Business without Seller's prior written
approval.

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(b)              Nothing in Section 6.2(a) shall: (i) prevent the Parties from
providing any of their Affiliates or their shareholders, attorneys, accountants
or advisors any details or information regarding this Agreement, the transaction
contemplated hereby, the identity of the other Party and its direct and indirect
shareholders to the extent that such details or information are required for the
approval of this Agreement and the transaction contemplated herein; or (ii)
prevent the Purchaser from providing any lenders, institutions and other
entities which will provide loans/credit to the Purchaser for the purpose of the
consummation of the transactions provided in this Agreement (including by means
of issuance of bonds and/or prospectus), any details or information regarding
this Agreement and the transaction contemplated herein to the extent that such
details or information are required for the purpose of financing the
transactions contemplated hereby.

 
6.3
Filings and Consents.

(a)              The Purchaser shall, and shall cause its Affiliates to, and the
Seller shall, (i) file all applications legally required of such Person with the
Israeli Antitrust Commissioner in connection with obtaining the Antitrust
Approval, within 14 days of the date hereof, and (ii) provide all information
required by the Israeli Antitrust Commissioner in connection with such filings
in a timely manner.
 
(b)              The Purchaser shall, and shall cause its Affiliates to, (i)
file within 14 days of the date hereof all applications legally required of such
Person with (y) the MoC in connection with obtaining the MoC Approval, and (z)
any other governmental authority required by law to effect the transaction
contemplated hereby ((y) and (z), together with the Antitrust Approval,
collectively the "Regulatory Approvals”), and (ii) provide all information
required by the MoC or other Governmental Authority in connection with such
filings in a timely manner.  In the event the any such filings are to be made by
the Seller, it shall do the same, except that with respect to the MoC Approval
or other governmental approval as relevant, (i) Seller shall provide Purchaser
relevant information concerning Seller that is in Seller's possession, (ii)
Purchaser shall prepare such filings in full, (iii) Seller's sole responsibility
(other than with respect to information that it provides) shall be to deliver
such filings to the MoC or other relevant governmental authority, (iv) the
content of such filings with the MoC (other than with respect to information
concerning the Seller) shall remain the responsibility of Purchaser, and
Purchaser shall retain liability for the contents thereof.

(c)              Upon the terms and subject to the conditions set forth in this
Agreement, the Purchaser agrees to use best efforts to obtain the Regulatory
Approvals as soon as possible, to make such filings and notifications and
respond to any requests for additional information made by an authority in a
timely, complete and correct manner, and to comply with all applicable law and
all requirements applicable to it of the MoC or the Israeli Antitrust
Commissioner or other applicable agencies or regulatory authorities, as the case
may be, to effect the transactions contemplated by this Agreement. The Purchaser
undertakes not to, and shall exercise best efforts to cause any of its
controlling shareholders and its Affiliates not to, take any action that would
adversely affect its ability to effect the Closing in a timely manner or that
would reasonably be expected to materially delay, impede or prevent receipt of
any necessary Regulatory Approvals.

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(d)              Without limiting the generality of the foregoing, while the
Purchaser does not foresee the same, in order to facilitate the issuance of any
Regulatory Approval:
 
 
(i)
The Purchaser shall take such actions including with respect to its assets
(including without limitation the sale or other disposition of such assets or
the transfer of certain of its operations and activities to subsidiaries), as
and to the extent required to obtain such Approval.

 
(ii)
The Purchaser shall not object to any condition or stipulation (regardless of
whether such condition or stipulation is burdensome) from the MoC or the Israeli
Antitrust Commissioner or other relevant regulatory authority stipulated as a
condition to the MoC Approval or the Antitrust Approval or any other Regulatory
Approval as the case may be.

 
(iii)
The Purchaser shall take any other action required to facilitate the issuance of
any Regulatory Approval.

(e)              The Seller shall use reasonable efforts to assist and to
cooperate with the Purchaser in obtaining the approvals required under Section
6.3(a) and (b) above and shall use reasonable efforts to cause the conditions to
Closing set forth in Section 5 (to the extent that the approvals provided for in
Section 5 are required by law to be obtained by the Seller) to be satisfied as
promptly as practicable, it being understood that any action or omission to act
by the Seller taken in connection with effectuation of the Bezeq Transaction
shall not be deemed a breach by Seller of this Section 6.3(e) or grounds for any
failure of the Purchaser to satisfy its obligations hereunder.

(f)              The Purchaser shall provide the Seller with all material
correspondence (including e-mail correspondence) and material relevant
information with respect to Regulatory Approvals; provided that any trade
secrets or other confidential information shall be redacted from such updates
and shall be provided to a third party trustee for safekeeping.  The Purchaser
shall promptly notify the Seller of any material written communication
(including e-mail correspondence) made to or received by such party or its
Affiliates from the MoC or the Israeli Antitrust Commissioner or any other
regulatory body regarding any of the transactions contemplated hereby, and
permit the Seller to review in advance any proposed written communication
(including e-mail correspondence) to the MoC or the Israeli Antitrust
Commissioner and incorporate the Seller’s reasonable comments, not agree to
participate in any substantive meeting or discussion with or in the MoC or the
Israeli Antitrust Commissioner in respect of any filing, investigation or
inquiry concerning this Agreement or the transactions contemplated hereby
unless, to the extent reasonably practicable and lawful, it consults with the
Seller in advance and, to the extent permitted, gives the Seller the opportunity
to attend, and furnish the Seller with copies of all correspondence, filings and
written communications between them on one hand and the MoC or the Israeli
Antitrust Commissioner or its respective staff on the other hand, with respect
to this Agreement and the transactions contemplated hereby. This provision shall
apply to Seller, mutatis mutandis, in regard to the transaction contemplated
hereby.   

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(g)              Without derogating from the foregoing, the Purchaser shall use
its best efforts to cause the conditions to Closing set forth in Section 5.1
(Regulatory Approvals) to be satisfied and to comply with any and all of its
obligations and covenants hereunder as promptly as practicable.

6.4              "012 Smile" Name and Operations.  At the Closing of the
Agreement, in connection with the transfer of the Acquired Assets, (i) Seller
shall execute the assignment to Purchaser of the "012 Smile" trademarks and name
used by the Business and (ii) Seller shall procure that Internet Gold – Golden
Lines Ltd. shall execute the assignment to Purchaser of the "012 Smile" logo
used by the Business.  Immediately after the Closing, and not later than 60 days
thereafter, the Seller shall change its name from 012 Smile.Communications Ltd.
to another name which bears no similarity to its current name.

6.5              Wrong Pocket; Tax Accounting.  In the event that receivables
relating to the Business are received by the Seller after the Closing Date, it
shall forward such receivables to thePurchaser.  Any Assumed Liability addressed
to the Seller after the Closing shall be assumed by the Purchaser.  The
Purchaser and the Seller shall perform a reconciliation of claims on a monthly
basis and any net amounts due from one Party to the other shall be paid within 7
days of such reconciliation.  The Parties will also effect similar
reconciliations with respect to Tax payments, refunds and other items effected
by Seller prior to the Cut-off Date and Tax payments, refunds and other items
effected by Purchaser after the Cut-off Date.

6.6              Accounting Books and Records.  The Seller shall retain all of
the accounting books and records for purpose of reporting the transactions
contemplated hereby but shall cooperate with the Purchaser with respect to such
reporting.  The Seller shall also retain its accounting books and records for
periods prior to Closing but shall provide the Purchaser access and information
with respect thereto to the extent necessary for Purchaser's reasonable business
needs.

6.7              Notification of Certain Matters. During the Interim Period,
Seller shall promptly notify Purchaser, and Purchaser shall promptly notify
Seller, in writing of the discovery of any of the following: (i) any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a material inaccuracy in or
breach of any representation or warranty made by the relevant party in this
Agreement; (ii) any event, condition, fact or circumstance that occurs, arises
or exists after the date of this Agreement and that causes or constitutes, or
could reasonably be seen as likely to cause or constitute, a material inaccuracy
in or breach of any representation or warranty made by the relevant party in
this Agreement; (iii) any breach of any material covenant or obligation of the
relevant party; and (iv) any event, condition, fact or circumstance that would
make the timely satisfaction of any of the conditions set forth in Section 5
impossible,  unlikely or postponed.

6.8              Reasonable Efforts. During the Interim Period, the Seller shall
use its reasonable efforts to cause the conditions set forth in Section 5.2
(Required Consents) to be satisfied on a timely basis, and Purchaser shall
reasonably cooperate with Seller in connection therewith.

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6.9              Non–solicitation. Seller shall not, at all times from the
Closing Date until the first (1st) anniversary of the Closing Date, without the
prior written consent of Purchaser: encourage or solicit any officer or key
employee of Purchaser to leave their employment; provided, however, that this
provision shall not limit Seller's ability to make generalized solicitations of
employment. Seller acknowledges that the covenants of Seller in this Section 6.9
are reasonably necessary for the protection of Purchaser’s interests under this
Agreement and are not unduly restrictive upon Seller.

6.10             Cooperation re Credit Agreements/Financing.  Seller shall
reasonably cooperate with Purchaser's requests for information that Purchaser
requires for purposes of obtaining financing for the transaction contemplated
hereby, including (in the event that the Closing does not occur upon a
quarter-end) providing required comparative historical financial data, subject
to customary indemnities, at Purchaser's expense and sole responsibility.

6.11             Coordination.  Purchaser shall coordinate all contacts with the
Seller or any of its employees or Representatives through the Chief Executive
Officer of the Seller or such other persons as the Seller may designate from
time to time.

6.12             Pro Forma Financial Statement. Within three (3) business days
of the date of this Agreement, the Seller shall provide the Purchaser with a pro
forma financial statement as of September 30, 2009 with respect to the Business,
which shall be treated as a representation under Section 7 hereof when it is
provided.

6.13             Senior Management. Within fourteen (14) days of the date of
this Agreement, the Seller shall provide the Purchaser with a chart showing the
principal components of the terms of employment of senior management.
 
7.
REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller hereby represents and warrants to the Purchaser that, subject to the
exceptions set forth in the disclosure schedule (the "Seller Disclosure
Schedule") delivered by Seller, on the date hereof:

7.1              Organization and Authority

 
(a)
The Seller duly and validly exists under the laws of Israel and, subject to the
conditions specified under Section 5, has all necessary company power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby.

 
(b)
The execution and delivery of this Agreement and all such other agreements
delivered pursuant hereto (collectively, the "Transaction Documents") by the
Seller, the performance by the Seller of its obligations hereunder and
thereunder and the consummation by the Seller of the transactions contemplated
hereby have been duly authorised by all requisite corporate action on the part
of the Seller and no further shareholder or other organ's approval is required.

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(c)
This Agreement has been duly executed and delivered by the Seller, and (assuming
due authorisation, execution and delivery by the Purchaser and subject to the
conditions set under Section 5) this Agreement constitutes a legal, valid and
binding obligation of the Seller enforceable against the Seller in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
the enforcement of creditors' rights in general or by general principles of
equity.

 
(d)
Except for 012 Telecom Ltd., an Israeli company, which is wholly owned by the
Seller, the Seller has no Subsidiaries. Other than the Subsidiary of the Seller,
neither the Company nor its Subsidiary owns any material Subsidiary.

 
7.2
No Conflict.

 
Other than Regulatory Approvals and without derogating from Section 2.4, the
execution, delivery and performance by Seller of this Agreement and the
Transaction Documents and the consummation by Seller of the transactions
contemplated hereby and thereby do not and will not violate or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit (any such event, a “Seller Conflict”)
under (i) the corporate documents of Seller, and (ii) any Legal Requirement or
any order of any court or other Governmental Entity by which Seller or any of
its material properties or assets is or are bound, other than in a manner that
would not have a material adverse effect on Purchaser.
 
             7.3              Litigation.  Except as set forth in the Financial
Statements (as defined below) or in Schedule 7.3, there are no actions, suits or
proceedings pending, or to the Seller's knowledge, threatened in writing
against, the Seller involving the Business or the Acquired Assets, which would
have a material adverse effect on Seller.  Neither the Business nor the Acquired
Assets is subject to any order, writ, judgment, award, injunction or decree of
any Governmental Entity or arbitrator, domestic or foreign, that materially
adversely affects the Business or the Acquired Assets.

 
7.4
Compliance with Laws; Governmental Authorizations.

 
 
 
(a)
To Seller's Knowledge, Seller has complied with and is in compliance with all
Legal Requirements (except where any such non-compliance shall not have a
material adverse effect on the Business) in all material respects.

 
 
(b)
To Seller's Knowledge the Seller holds all permits, licenses (including the
Licenses), certificates, registrations and other authorizations necessary to
conduct the Business as currently conducted (except where the absence of such
permits, licenses, certificates, registrations and othe authorizations would not
have a material adverse effect on the Business).  The Licenses are in the name
of Seller or its Subsdiary and Seller is not aware of any material procedures
that in Seller's opinion would be reasonably likely to cause the cancellation or
withdrawal of the Licenses, except as set forth in Schedule7.4(b).

 
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7.5
Financial Statements; Seller Public Filings.

(a)              The audited financial statements of the Seller for the period
ended December 31, 2008 and the unaudited and unreviewed financial statements
for the period ended September 30, 2009 (the "Financial Statements"), copies of
which are attached hereto as Schedule 7.5, are complete and accurate in all
material respects, fairly represent the financial position and results of
operations of the Seller as of the dates and for the periods indicated, and have
been prepared in conformity with US GAAP applied on a basis consistent with
prior years.

(b)              Seller's Form 20-F for the year ended December 31, 2008 was
prepared in accordance with the requirements of applicable law and does not
contain any material untrue statement of fact.

 
7.6
Absence of Certain Changes

     
Since September 30, 2009, the Business has not suffered any change, event or
condition that is materially adverse to (i) the Business (other than changes,
events or conditions occurring in the ordinary course of business), or (ii) the
transactions contemplated by this Agreement.
 
 
7.7
Employees.

 
 
(a)
Seller is in compliance in all material respects with applicable Legal
Requirements (including any national, industry or company collective agreement,
order or award) and agreements relating (i) to the employment of the Employees,
and (ii) to the proper withholding and remission to the proper tax authorities
or to the proper withholding or contribution and remission to the proper pension
or provident, life insurance, disability insurance, continuing education or
other similar funds of all sums required to be withheld, contributed or
remitted, legally or contractually.

 
 
(b)
Seller is not a member in any employers’ organization, and no claim or request
has been made of Seller by any employers’ organization.  Seller is not a party
to, or bound by, any collective bargaining agreement or arrangement or union
contract or extension order (excluding such extension orders that may apply to
all employers or employees in Israel in general) and no such collective
bargaining agreement is being negotiated by Seller.  No labor union or other
representative organization has otherwise been certified or recognized as the
collective bargaining representative of any employees of Seller or has applied
to represent such employees or, to Seller’s Knowledge, is attempting to
represent such employees.

 

             7.8              Tax.  As of the Closing, there shall be no Tax
liens on any Acquired Asset with respect to the period prior to the Cut-off
Date.
 
             7.9              Title to Assets.

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(a)
The Seller has (and will, at the Closing, have) good title to all of the
Acquired Assets, free and clear of all Security Interests other than Permitted
Liens. Seller does not own any real property.

 
 
(b)
The Acquired Assets, collectively, comprise all of the assets, rights and
services used by Seller for the operation of the Business as currently
conducted. All material machinery, equipment and other tangible assets included
in the Acquired Assets are in good and sufficient operating condition and in a
state of reasonable maintenance and repair for the continued conduct of the
Business on a basis consistent with past practice, ordinary wear and tear
excepted.

7.10           Brokers and Finders. As a result of the transaction contemplated
hereby, Purchaser shall not be required to pay any brokerage commission,
finders’ fees or similar consideration based on any arrangement or agreement
made by Seller.

7.11           Related Party Transactions.  Except as set forth in Seller's Form
20-F for the year ended December 31, 2008 and except for transactions in the
ordinary course of business at arm's length, to Seller’s Knowledge:  (a) no
Related Party has any direct or indirect interest in any Acquired Asset used in
or otherwise relating to the Business; (b) no Related Party is indebted to
Seller in connection with the Business; and (c) no Related Party has entered
into any material contract, transaction or business dealing related to the
Business..  For purposes of this Section 7.11 each of the following shall be
deemed to be a “Related Party”:  (i) each Person that, directly or indirectly,
has an equity interest in Seller; (ii) each individual who is an officer or
director of Seller; (iii) each Family Member of each of the individuals referred
to in clauses "(i)" and "(ii)" above.

7.12           Intellectual Property.   The Seller does not have material
Intellectual Property Rights except for trademarks and rights under third party
license agreements.  To the knowledge of the Seller, such Intellectual Property
Rights do not infringe, misappropriate or otherwise violate the Intellectual
Property Rights of a third party in a manner that would have a material adverse
effect on the Business.

7.13           Contracts. Each contract that is the subject of a Required
Consent is in full force and effect and is not subject to any material default
on the part of Seller, and to the knowledge of the Seller, no other party to
such contracts is in material default with respect thereto.

7.14           Selected Information.  The information set forth in part 1 of
Schedule 7.14 is true and accurate in all material respects.

7.15           Insurance. The Seller has insurance coverage for the Business at
a level that is reasonably adequate in view of the size and scope of the
Business.

7.16           Insolvency. The Seller is not insolvent or unable to pay its
debts as they fall due.  No order has been made, petition presented, resolution
passed or meeting convened for the winding up of the Seller. No receiver
(including an administrative receiver) liquidator, trustee, administrator,
custodian or similar official has been appointed in any jurisdiction in respect
of the whole or any part of the business or assets of the Seller and no step has
been taken for or with a view to the appointment of such a person.

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7.17  Disclosure.  Seller acknowledges and agrees that Purchaser does not make
and has not made any representations or warranties with respect to the
trasnsactions contemplated hereby other than those specifically set forth in
Section 8 hereof, including as to projections, forecasts or forward-looking
statements.  The Seller is aware of the significance of the transaction
contemplated hereby to the Purchaser and acknowledges that time is of the
essence in consummating the transaction contemplated hereby.

8.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser hereby represents and warrants to the Seller that on the date
hereof:

 
    8.1
Organization and Authority.

 
(a)
The Purchaser duly and validly exists under the laws of Israel and, subject to
the conditions specified under Section 6, has all necessary company power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby.

 
(b)
The execution and delivery of this Agreement and all such other agreements
delivered pursuant hereto (collectively, the "Transaction Documents") by the
Purchaser, the performance by the Purchaser of its obligations hereunder and
thereunder and the consummation by the Purchaser of the transactions
contemplated hereby have been duly authorised by all requisite corporate action
on the part of the Purchaser and no further shareholder or other organ's
approval is required.

 
(c)
This Agreement has been duly executed and delivered by the Purchaser, and
(assuming due authorisation, execution and delivery by the Seller and subject to
the conditions set under Section 6) this Agreement constitutes a legal, valid
and binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting the enforcement of creditors' rights in general or by general
principles of equity.

 
(d)
The ultimate control of the Purchaser is held by an Israeli citizen and resident
in the manner required to receive the International Telephony License as set
forth in detail in Schedule 8.1(d).

 
(e)
The Purchaser is an entity being formed under the laws of the State of Israel
for the purpose of holding an international long-distance telephony license.

 
 

 
8.2              Consent and Approvals; No Conflict. Other than Regulatory
Approvals, the execution, delivery and performance by Purchaser of this
Agreement and the Transaction Documents and the consummation by Purchaser of the
transactions contemplated hereby and thereby do not and will not violate or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit (any such event, a
“Purchaser Conflict”) under (i) the Corporate Documents of Purchaser, (ii) any
Legal Requirement or any order of any court or other Governmental Entity by
which Purchaser or any of its material properties or assets is or are bound,
other than in a manner that would not have a material adverse effect on
Purchaser's ability to consummate the transaction contemplated hereby.

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 8.3              Litigation.  There is no judgment, decree or order against the
Purchaser that prevents, enjoins, or materially alters or delays the purchase of
the Acquired Assets or the assumption of the Assumed Liabilities by the
Purchaser under this Agreement and the consummation of the transactions
contemplated herein.

 
8.4
Financial Capability

The Purchaser has access to, and at the Closing shall have, sufficient funds or
commitments to pay in cash any and all amounts necessary to consummate the
payments and transactions contemplated hereby, including the purchase of the
Acquired Assets, and the Purchaser acknowledges that any failure to obtain the
financing necessary to consummate the transaction contemplated hereby shall not
constitute a defence or condition precedent to its obligations hereunder. The
Purchaser will provide the Seller with copies of all credit agreements,
financing commitments and other arrangements with banks and other entities
providing financing to the Purchaser for purposes of funding its obligations
hereunder (collectively "Credit Agreements"), or a letter from the lending bank
confirming the terms of such Credit Agreements, shortly after such documents are
made available to the Purchaser and such copies shall be complete and accurate;
provided, however, that the Purchaser may redact trade secrets and other
confidential commercial information which shall be provided to a third party
trustee for safekeeping. The Purchaser undertakes to take all actions necessary
to fulfill all of its obligations set forth in such Credit Agreements in a
prompt and timely manner.

8.5              The MoC Approval and Antitrust Approval. The Purchaser has
examined the Business of the Purchaser and the Acquired Assets and the Assumed
Liabilities (including the Licenses as set forth in Section 8.6 below), and has
taken into consideration the Purchaser's and its Affiliates' operations, and has
conferred with counsel and it is not aware of any reason, and to the best of its
knowledge, there is no reason for the denial or material delay of the
Purchaser's application to obtain the MoC Approval and the Antitrust Approval
and any other Regulatory Approval (to the extent such approval is required) with
respect to the transactions contemplated hereby.

8.6              Licences and Related Regulations. The Purchaser and its
Affiliates and Representatives have had adequate opportunity to review the
Licences and related regulations, and have received all information (legal,
financial and otherwise) required by them concerning the Licences and related
regulations and all of the terms and conditions thereto.

8.7           Brokers and Finders. As a result of the transaction contemplated
hereby, Seller shall not be required to pay any brokerage commission, finders’
fees or similar consideration based on any arrangement or agreement made by
Purchaser.

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8.8              Acknowledgement. Without derogating from the representations of
Seller herein, the Purchaser acknowledges that it has voluntarily decided to
enter into this Agreement, to consummate the transactions contemplated herein
and hereby confirms that (i) it is familiar with the Business and the industry
sectors in which it operates, (ii) it has had adequate opportunity to select and
consult with its financial, tax, accounting and legal advisors regarding the
terms, conditions, rights and obligations set forth in this Agreement, and (iii)
it received all information (legal, financial and otherwise) concerning the
business and financial condition of the Seller that it requested. The Purchaser
is aware of the significance of the transactions contemplated hereby to the
Seller and acknowledges that time is of the essence in consummating the
transaction contemplated hereby.

8.9              Disclosure. Purchaser acknowledges and agrees that Seller does
not make and has not made any representations or warranties with respect to the
trasnsactions contemplated hereby other than those specifically set forth in
Section 7 hereof, including as to projections, forecasts or forward-looking
statements. Without derogating from Seller's representations under Section 7
hereof or from Seller's indemnification under Section 11 hereof, the Purchaser
agrees that the Acquired Assets, Assumed Liabilities and the Business are
purchased and assumed by the Purchaser at the condition of the Acquired Assets,
Assumed Liabilities and the Business on the Closing Date, whether or not any
fact, act or circumstance of any nature whatsoever relating to the company is
known, disclosed or discussed, and regardless of any investigation, inquiry or
disclosure that was or could have been made, and whether or not any fact or
circumstance is different than expected by the purchaser, subject only to the
representations made by the Seller in section 7.

Without derogating from Section 7, any materials and presentations made
available to the Purchaser or its affiliates or representatives, do not,
directly, or indirectly, and shall not be deemed to, directly or indirectly,
contain representations or warranties of the Seller, or any of its respective
Affiliates or Representatives.
 
8A.
REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR

The Guarantor hereby represents and warrants to the Seller that on the date
hereof:

 
8A.1
Organization and Authority.

 
(a)
The Guarantor duly and validly exists under the laws of Israel and, subject to
the conditions specified under Section 5, has all necessary company power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby.

 
(b)
The execution and delivery the Transaction Documents by the Guarantor, the
performance by the Guarantor of its obligations hereunder and thereunder and the
consummation by the Guarantor of the transactions contemplated hereby have been
duly authorised by all requisite corporate action on the part of the Guarantor
and no further shareholder or other organ's approval is required.

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(c)
This Agreement has been duly executed and delivered by the Guarantor, and
(assuming due authorisation, execution and delivery by the Seller and subject to
the conditions set under Section 5) this Agreement constitutes a legal, valid
and binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting the enforcement of creditors' rights in general or by general
principles of equity.

9.
EMPLOYEE MATTERS

9.1              Promptly following the date hereof, Purchaser shall make an
offer of continued employment (‘haavara beretzef’ in Hebrew), effective as of
the Closing Date, to each of the Seller Employees that Purchaser desires to
retain (other than to those employees set forth in Schedule 9.1 who shall
continue to be employed by the Seller), in the form to be agreed between the
Parties (such form and any ancillary document thereto shall be hereinafter
referred to as the “EmployeeNotice”). The Employees who receive such Employee
Notice (and do not lawfully object thereto or, at the request of either Party,
countersign such Notice) are hereinafter referred to as “Assumed Employees.” The
Seller shall use its reasonable commercial efforts to assist the Purchaser in
retaining such Assumed Employees.

9.2              At Closing, Seller shall (a) consent to the transfer of each of
the Assumed Employees to Purchaser and each such employee shall become an
employee of Purchaser, and (ii) transfer and assign to Purchaser, for the
benefit of the Assumed Employees, all education funds (keren hishtalmut),
managers’ insurance policies (bituach menahalim) and/or pension funds, severance
pay funds  and any other funds, that have been reserved or contributed by Seller
(whether required by applicable law, custom or agreement) with respect to any of
such Employees (the “Seller Existing Funds”) and all of Sellers’ rights with
regard thereto, and subject to the following sentence, the Seller shall not have
any obligation to complete any such Funds. It is hereby acknowledged and agreed
that to the extent that any of the Seller Existing Funds at Closing are not
sufficient to cover all such funds to which any Assumed Employee who has chosen
not to continue his employment with the Purchaser is entitled through the
Closing Date (by applicable law or agreement), Seller shall, without any
consideration or adjustment of the Purchase Price, transfer cash equal to the
balance required to complete any such funds to the Seller Existing Funds.  Prior
to the Closing, Purchaser shall make (and Seller shall cooperate with Purchaser
to the extent required) the appropriate filings with the ITA for the transfer of
the Seller Existing Funds from Seller to Purchaser and Seller shall submit all
required documents to the Assumed Employees’ funds and insurance
policies.  Promptly following its receipt of all requisite approvals from the
ITA, and after the Closing, Seller will transfer to Purchaser all its rights and
interests in and to the Seller Existing Funds.

9.3           The employment agreements of the Assumed Employees and their Funds
shall be assigned from Seller to Purchaser, and the Assumed Employees shall
transfer to Purchaser, as applicable, with continuity of rights, and whilst
taking their employment with Seller in account for purposes of the calculation
of their rights and entitlements.

9.4           Notwithstanding any non-compete obligations of any Assumed
Employee to Seller, or any Affiliates thereof, all Assumed Employees shall be
permitted, on and after the Closing Date, to engage in the Business only on
behalf of Purchaser and its Affiliates.

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9.5              Purchaser shall assume all obligations and liabilities
(including any and all prior notice payments and other employment and severance
and termination benefits as is required by applicable Law, custom or agreement,
as well as liability with respect to any accrued but unpaid vacation pay or
benefits, any withholding or employment Taxes, any other mandatory payments to
social security or otherwise) concerning the Assumed Employees, whereas Seller
shall retain all such liabilities concerning any other employees and will be
liable for all severance expenses of Assumed Employees who resign and are
entitled to receive such severance due to the transaction..

10.
TERMINATION

10.1              Right of Parties to Terminate. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, at any
time prior to the Closing:

 
(a)
by mutual written consent of the Parties;

 
(b)
by either Party, by written notice to the other Party, if the Closing has not
occurred on or prior to the close of business on February 15, 2010 (the “Initial
End Date"); provided, however, that either Party may extend the Initial End Date
until February 22, 2010, and provided further that the Seller, in its sole
discretion, may extend the Initial End Date by up to four one-month periods,
until not later than June 22, 2010 (the "End Date") by written notice to the
Purchaser to be issued not later than February 22, 2010 and each subsequent
one-month anniversary thereof; provided, further, that if a Party is in breach
and such breach prevented the closing from occurring shall not be permitted to
terminate the Agreement pursuant to this section 10.1(b).

 
(c)
without derogating from the provisions of Section 11.5, by either Party, if the
other Party has materially breached any covenant or agreement contained in this
Agreement; provided, however, that the non-breaching Party may not terminate
this Agreement pursuant to this Section 10.1(c) unless such breach would cause
any of the conditions specified in Section 5 not to be satisfied and any such
breach has not been cured within fifteen (15) Business Days after written notice
by the non-breaching Party to the breaching Party informing the breaching Party
of such breach, it being understood and agreed that no cure period shall be
required for a breach which by its nature cannot be cured; provided further,
that the terminating Party may not terminate this Agreement pursuant to this
Section 10.1(c) if it is then in material breach of the terms of this Agreement.

 
               10.2              Procedure upon Termination. In the event the
Purchaser or the Seller, or both, as the case may be, elect to terminate this
Agreement pursuant to Section 10.1, written notice thereof shall be given to the
other Party, and following compliance with Section 10.3 below, this Agreement
shall terminate without further action of the Parties.

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                10.3              Effect of Termination. In the event of
termination of this Agreement as provided in Section 10.1, this Agreement shall
forthwith become void and all further obligations and liabilities of each party
to the other party under this Agreement shall terminate; provided, however, that
(a) neither party shall be relieved of any obligation or liability arising from
any prior willful and material breach of any representation, warranty, covenant
or agreement in this Agreement that occurred prior to the date of termination;
and (b) the parties shall, in all events, remain bound by and continue to be
subject to Sections 7.2 (Announcements), Section 10.2 (Procedure upon
Termination), this Section 10.3 (Effect of Termination), and Section 15 shall
survive any such termination and shall be enforceable hereunder.

10.4              Undertaking to Consummate. The Parties acknowledge and agree
that, except as otherwise provided herein, their obligation to consummate the
transactions contemplated hereby constitutes an unconditional obligation to
procure performance and consummation of the transaction. It is hereby clarified,
that nothing in this Section 10 shall be deemed in any way as preventing the
Seller from seeking specific performance of this Agreement.

11.
SELLER'S INDEMNIFICATION

11.1              The representations and warranties made by Seller (i) in
Section 7 (other than the Fundamental Representations (as defined below)) or in
any other Transaction Document shall survive the Closing and shall expire
eighteen (18) months following the Closing Date and (ii) in Sections 7.1, 7.5,
and 6.12 (collectively, the “Fundamental Representations”) shall survive the
Closing and shall expire twenty-four (24) months following the Closing Date (as
applicable, the “Termination Date”); provided, however, that if, at any time
prior to the applicable Termination Date, any Purchaser Indemnitee delivers to
Seller a written notice alleging a breach of any of the representations and
warranties made by it (and setting forth in reasonable detail the basis for its
belief that such an incompleteness, inaccuracy or breach may exist) and
asserting a claim for recovery under this Section 11, then the claim asserted in
such notice shall survive the Termination Date.

11.2              The Seller shall defend, indemnify, and hold the Purchaser and
its affiliates and their respective employees, directors, officers, shareholders
and agents (the “Purchaser Indemnitees”) harmless from and against, and
reimburse the Purchaser Indemnitees with respect to, any Damages incurred by the
Purchaser Indemnitees by reason of or arising out of or in connection with (i)
any breach or inaccuracy  of representation made by the Seller as set forth in
Section 7 or in any other Transaction Document, (ii) any failure to comply with
or breach of any covenant or obligation of Seller hereunder or in any other
Transaction Document; or (iii) any claims against Purchaser with respect to any
of the Excluded Assets or the Retained Liabilities, regardless of when or with
respect to which period incurred.

11.3              Notwithstanding any other provision in this Section 11 but
solely with respect to clauses 11.2 (i) and (ii) above, the Purchaser
Indemnitees shall be entitled to indemnification only if the aggregate
indemnifiable amounts exceed 25,000,000 (Twenty Five Million) New Israeli
Shekels (the “Threshold Amount”) whereupon indemnification may be sought by the
Purchaser Indemnitees from the first NIS.

11.4              Notwithstanding any other provisions of this Section 11
(including Section 11.3), with respect to the matters addressed in part I of
Schedule 11,4, the compensation provisions set forth in Schedule 11.4 will
apply.  For the avoidance of doubt, if a matter would give rise to a right of
indemnification by Purchaser under Section 11 and a right of compensation under
Schedule 11.4, only the compensation provisions of Schedule 11.4 will apply.

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11.5              The Indemnification set forth in this Section 11 shall be the
Purchaser's sole and exclusive remedy for the Damages for any breach of
representation.  For the avoidance of doubt, breach of a representation by
Seller under Section 7 shall not be grounds for termination or delay of
consummation of this Agreement.

12.
PURCHASER'S INDEMNITY

12.1              The representations and warranties made by Purchaser (i) in
Section 8 (other than the Fundamental Representations (as defined below)) or in
any other Transaction Document shall survive the Closing and shall expire
eighteen (18) months following the Closing Date and (ii) in Sections 8.1 and
8A.1 (collectively, the “Fundamental Representations”) shall survive the Closing
and shall expire twenty-four (24) months following the Closing Date (as
applicable, the “Termination Date”); provided, however, that if, at any time
prior to the applicable Termination Date, any Seller Indemnitee delivers to
Purchaser a written notice alleging a breach of any of the representations and
warranties made by it (and setting forth in reasonable detail the basis for its
belief that such an incompleteness, inaccuracy or breach may exist) and
asserting a claim for recovery under this Section 12, then the claim asserted in
such notice shall survive the Termination Date.

12.2              Without derogating from any other provision herein, including
Section 12.3, in the event the Closing occurs, the Purchaser will indemnify,
defend and hold harmless the Seller, its Affiliates and each of their respective
shareholders, directors, officers, employees, agents, successors and permitted
assigns (collectively, the “Seller Indemnitees”) from and against (i) any breach
or inaccuracy of representation made by the Purchaser or Guarantor as set forth
in Section 8 or Section 8A or in any other Transaction Document, (ii) any
failure to comply with or breach of any covenant or obligation of Purchaser
hereunder or in any other Transaction Document; or (iii) any claims against
Seller with respect to any of the Acquired Assets or the Assumed Liabilities,
regardless of when or with respect to which period incurred.

12.3              Notwithstanding any other provision in this Section 12 but
solely with respect to clauses 12.2 (i) and (ii) above, the Seller Indemnitees
shall be entitled to indemnification only if the aggregate indemnifiable amounts
exceed the Threshold Amount whereupon indemnification may be sought by the
Purchaser Indemnitees from the first NIS.  For the avoidance of doubt, any
default on the Seller Loan shall not be deemed to be subject to the Threshold
Amount.

12.4              The Indemnification set forth in this Section 12 shall be the
Seller's sole and exclusive remedy for the Damages for any breach of
representation.  For the avoidance of doubt, breach of a representation by
Purchaser or Guarantor under Section 8 or 8A shall not be grounds for
termination or delay of consummation of this Agreement.

13.
INDEMNIFICATION PROCEDURE; EXCLUSIVE REMEDY

 
13.1
If a Party seeks indemnity under Section 11 or Section 12 (the "Indemnified
Party"), it will give written notice (a “Claim Notice”) to the other party (the
“Indemnifying Party”).  The Claim Notice must contain (i) a description and, if
known, estimated amount (the “Claimed Amount”) of any Damages incurred or
reasonably expected to be incurred by the Indemnified Party, (ii) a reasonable
explanation of the basis for the Claim Notice to the extent of facts then known
by the Indemnified Party, and (iii) a demand for payment of those Damages.

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13.2
Response to Notice of Claim.  Within 30 days after delivery of a Claim Notice,
the Indemnifying Party will deliver to the Indemnified Party a written response
(the “Response”) in which the Indemnifying Party will either:

 
(a)
agree that the Indemnified Party is entitled to receive all of the Claimed
Amount, and, within five business days of the Indemnified Party’s receipt of the
Response, the Indemnifying Party will pay the Claimed Amount to the Indemnified
Party in accordance with a payment and distribution method reasonably acceptable
to the Indemnified Party;

 
(b)
agree that the Indemnified Party is entitled to receive part, but not all, of
the Claimed Amount (such portion, the “Agreed Portion”), and, within five
Business Days of the Indemnified Party’s receipt of the Response, the
Indemnifying Party will pay the Agreed Portion of the Claimed Amount to the
Indemnified Party in accordance with a payment and distribution method
reasonably acceptable to the Indemnified Party; or

 
(c)
dispute that the Indemnified Party is entitled to receive any of the Claimed
Amount.

 
13.3
If no Response is delivered by the Indemnifying Party to the Indemnified Party
within such 30-day period, the Indemnifying Party is deemed to have agreed that
an amount equal to the entire Claimed Amount will be payable to the Indemnified
Party within five business days after the expiration of such 30-day period in
accordance with a payment and distribution method reasonably acceptable to the
Indemnified Party.

 
13.4
Contested Claims.  In the event that the Indemnifying Party disputes the Claimed
Amount (or the portion of the Claimed Amount not comprising the Agreed Portion),
such dispute will be governed by, and subject to the terms of, [Section 15.10]
hereof.

 
13.5
Third Party Claims.

 
(a)
In the event that the Indemnified Party receives notice or otherwise learns of
the assertion of any claim with respect to which the Indemnifying Party may be
obligated to provide indemnification under Section 11 or 12 (a “Third Party
Claim”), the Indemnified Party will provide a Claim Notice to the Indemnifying
Party as soon as practicable but in no event later than five business days
thereafter.  Such Claim Notice will be accompanied by reasonable supporting
documentation submitted by such third party (to the extent then in the
possession of the Indemnified Party) and will describe in reasonable detail the
facts constituting the basis for such suit or proceeding and the amount of the
claimed damages (in each event to the extent known or reasonably ascertainable
by the Indemnified Party); provided, however, that no delay or deficiency on the
part of the Indemnified Party in so notifying the Indemnifying Party will
relieve the Indemnifying Party of any liability or obligation hereunder except
if such delay or deficiency materially prejudices the defense of such claim or
otherwise materially and adversely affects the rights of the Indemnifying Party
with respect thereto, and then in each such case only to the extent of such
material prejudice.  Within 20 days after delivery of such notification, the
Indemnifying Party may, upon written notice to the Indemnified Party, assume
control of the defense of such suit or proceeding with counsel reasonably
satisfactory to the Indemnified Party, strictly at its own cost and expense;
provided, however, that the Indemnifying Party may not assume control of the
defense of a suit or proceeding (A) involving criminal liability or (B) to the
extent the suit or proceeding seeks an injunction or equitable relief against
the Indemnified Party.  If the Indemnifying Party does not so assume control of
such defense, the Indemnified Party will control such defense.

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(b)
The party not controlling such defense (the “Non-controlling Party”) may
participate therein at its own expense.  The party controlling such defense (the
“Controlling Party”) will keep the Non-controlling Party reasonably advised of
the status of such suit or proceeding and the defense thereof and will consider
in good faith recommendations made by the Non-controlling Party with respect
thereto.  The Non-controlling Party will furnish the Controlling Party with such
information as it may have with respect to such suit or proceeding (including
copies of any summons, complaint or other pleading which may have been served on
such party and any written claim, demand, invoice, billing or other document
evidencing or asserting the same) and will otherwise cooperate with and, at the
request of the Controlling Party, assist the Controlling Party in the defense of
such suit or proceeding.

 
(c)
The Indemnifying Party will not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnified Party, which will not be unreasonably withheld,
delayed or conditioned; provided, however, that the consent of the Indemnified
Party will not be required if the Indemnifying Party agrees in writing to pay
any amounts payable pursuant to such settlement or judgment and such settlement
or judgment includes a full, complete and unconditional release of the
Indemnified Party from further Liability with respect to such claim.  The
Indemnified Party will not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnifying Party, which will not be unreasonably withheld,
delayed or conditioned.

 
(d)
Notwithstanding anything else herein, in the event that Seller is sued for the
breach of the Bezeq Transaction, the Seller shall be entitled to defend such
claim independently without derogating from its rights as an Indemnified Party
hereunder.

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13.6              The representations, warranties, covenants and obligations of
Purchaser and Seller, and the rights and remedies that may be exercised by
Purchaser or Seller, as the case may be, shall not be limited or otherwise
affected by or as a result of either (i) any waiver of Closing conditions by any
of them, or (ii) any information furnished to, or any investigation made by or
knowledge of, any of them.

14.
[RESERVED]

15.
MISCELLANEOUS

 
15.1
Parties in Interest; Assignment.

This Agreement is binding upon and is solely for the benefit of the Parties and
their respective successors, legal representatives and permitted assigns. No
Party may assign this Agreement or any portion thereof without the written
consent of the other Party. Any attempted assignment not in compliance with the
terms of this Agreement is null and void.

 
15.2
Notices.

All notices or other communications hereunder shall be in writing and shall be
given in person, by registered mail (registered international air mail if mailed
internationally), by an overnight courier service which obtains a receipt to
evidence delivery, or by facsimile transmission (provided that written
confirmation of receipt is provided) with a copy by mail, addressed as set forth
below:

       If to the Seller:
012 Smile.Communications Ltd.
25 Hasivim Street
Petach Tikva
Facsimile: +972-72-200-2090
Attn.:  Chief Executive Officer
 
       With a copy to (which shall not constitute notice):
 
Fischer Behar Chen Well Orion & Co.
3 Daniel Frisch St.
Tel Aviv  64731,  Israel
Facsimile:  +972-3-609-1116
Attn:  Avraham Well, Adv.
 
       If to the Purchaser or the Guarantor:
 
Abba Eban 10
Ackerstein Tower "C"
Herzlia Pituach 46733
Facsimile:  +972-9-952-6001
Attn:  Yoram Firon, VP
 
       With a copy to (which shall not constitute notice):
 
 
 
Goldfarb Levy Eran Meiri Tsafrir & Co.
2 Weizmann Street
Tel  Aviv  64239
Attention:  Yehuda M. Levy, Adv.
Erez Altit, Adv.
Ido G. Zemach, Adv.
Facsimile:  +972-3-608-9909
 

 
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or such other address as any Party may designate to the other in accordance with
the aforesaid procedure. All communications delivered in person or by courier
service shall be deemed to have been given upon delivery, those given by
facsimile transmission shall be deemed given on the Business Day following
transmission with confirmed answer back, and all notices and other
communications sent by registered mail (or air mail if the posting is
international) shall be deemed given five (5) Business Days after posting.

 
15.3
Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the Parties and their respective successors and permitted
assigns.

 
15.4
Delays or Omissions; Waiver.

The rights of a Party may be waived by such Party only in writing and,
specifically, the conduct of any one of the Parties shall not be deemed a waiver
of any of its rights pursuant to this Agreement and/or a waiver or consent on
its part as to any breach or failure to meet any of the terms of this Agreement
or an amendment hereto. A waiver by a Party in respect of a breach by the other
Party of its obligations shall not be construed as a justification or excuse for
a further breach of its obligations.

No delay or omission to exercise any right, power, or remedy accruing to any
Party upon any breach or default by the other under this Agreement shall impair
any such right or remedy nor shall it be construed to be a waiver of any such
breach or default, or any acquiescence therein or in any similar breach or
default thereafter occurring.

 
15.5
Amendment.  This Agreement may be amended or modified only by a written document
signed by all the Parties.

 
15.6
Entire Agreement. This Agreement (together with the recitals, schedules,
appendices, annexes and exhibits hereto) contains the entire understanding of
the Parties with respect to its subject matter and all prior negotiations,
discussions, agreements, commitments and understandings between them with
respect thereto not expressly contained herein shall be null and void in their
entirety, effective immediately with no further action required.

 
15.7
Severability. If a provision of this Agreement is or becomes illegal, invalid or
unenforceable in any jurisdiction, that shall not affect the validity or
enforceability in that jurisdiction of any other provision hereof or the
validity or enforceability in other jurisdictions of that or any other provision
hereof.  Where provisions of any applicable law resulting in such illegality,
invalidity or unenforceability may be waived, they are hereby waived by each
Party to the full extent permitted so that this Agreement shall be deemed valid
and binding agreements, in each case enforceable in accordance with its terms.

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15.8
Counterparts; Facsimile Signatures. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. A signed Agreement
received by a Party via facsimile will be deemed an original, and binding upon
the party who signed it.

 
15.9
Governing Law; Jurisdiction. The Agreement shall be governed by and construed in
accordance with the laws of the State of Israel, without giving effect to the
principles thereof relating to conflict of laws.

 
15.10
Venue.  Each party hereby irrevocably submits to the exclusive jurisdiction of
the Central District Court for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents) and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding.  Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. in the Central District Court
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents) and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.

 
15.11
No Third-Party Beneficiaries. Except as expressly set forth in sections 11-13,
nothing in this Agreement shall create or confer upon any Person, other than the
Parties or their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities.

 
 
15.12
Taxes.Except as expressly set forth herein, each Party shall bear any Taxes
applicable to it in connection with this Agreement.  Any amount stated herein,
including, without limitation, with regard to the Purchase Price, and including
any payments for the Business, Acquired Assets and Assumed Liabilities, will be
exclusive of any VAT, but solely if a valid VAT invoice is provided.  The amount
of any such VAT will be borne by the Purchaser in addition to any payment due
under this Agreement at the time of payment against a proper tax invoice.  In
the event that any such VAT is imposed upon or imposed against the Seller, the
Seller will promptly notify the Purchaser of the VAT amount on a valid VAT
invoice.

 
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15.13
Expenses. Except as otherwise expressly provided herein, whether or not the
transactions contemplated hereby are consummated, all fees and expenses incurred
in connection with this Agreement, including all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties incurred
by a party in connection with the negotiation, preparation, effectuation,
execution, delivery or performance of this Agreement, shall be the obligation of
the respective party incurring such fees and expenses.

 
15.14
Execution by Purchaser.  Immediately upon its formation, the Purchaser shall
execute this Agreement and shall be treated as a Party for all purposes as if it
had executed this Agreement on the date hereof.

 
15.15
Guarantee.  The Guarantor hereby irrevocably guarantees each and every
representation, warranty, covenant, agreement and obligation of the Purchaser
and the full and timely performance of its obligations under the provisions of
this Agreement and the Transaction Documents.  This is a guarantee of payment
and performance, and the Guarantor acknowledges and agrees that this guarantee
is full and unconditional, and no relase or extinguishments of the Purchaser's
obligations or liabilities (other than in accordance with the terms of this
Agreement), whether by decree of bankruptcy or otherwise, will affect the
continuing validity and enforceability of this guarantee.  The Guarantor hereby
waives, for the benefit of the Seller, (a) any right to require the Seller as a
condition of payment or performance of the Guarantor to proceed against the
Purchaser or pursue any other remedies whatsoever and (b) to the fullest extent
permitted by law, any defenses or benefits that may be derived or afforded by
law that limit the liability of or exonerate guarantors or sureties, including
under the Israeli Law of Guarantees 1967 (but for the avoidance of doubt,
Guarantor does not waive any defenses that would otherwise be available to
Purchaser).  The Guarantor shall have joint and several liability with the
Purchaser for all of Purchaser's obligations under this Agreement, and Seller
shall be entitled to take all steps to realize its rights under this Agreement
and the Transaction Documents, in whole or in part, to the extent permissible by
law and independently from any other right or proceeding vis-à-vis the
Purchaser, from the Guarantor.

 
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SIGNATURE PAGE - ASSET PURCHASE AGREEMENT
 
IN WITNESS WHEREOF, the Seller and the Purchaser have executed this Agreement as
of the date first written above.

By: /s/ Shaul Elovitch
       /s/ Stella Handler

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012 Smile.Communications Ltd.
 
By:  Shaul Elovitch
Title:  Chairman of the Board of Directors
 
By:  Stella Handler
Title:  Chief Executive Officer
 
 
 
 
By: /s/ Irit Eluz
       /s/ Yoram Firon

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Merhav Ampal Energy Ltd.
on behalf of Ampal Communication (2010) Ltd. (in formation)
 
By:   Yoram Firon               Irit Eluz
Title:  Directors
 
By: /s/ Irit Eluz
       /s/ Yoram Firon

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Merhav Ampal Energy Ltd. as Guarantor
 
By:   Yoram Firon               Irit Eluz
Title:  Directors

 
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