[Free Translation from Hebrew]
 
 
Employment Agreement
 
 
Entered into and signed in Israel on June 30, 2010
 
Between:                      Xfone, Inc.
Company no. C23688-2000
11 Rabbi Akiva Str., Modi'in Ilit
(the “Company”)
of the First Part;
And:                      Guy Nissenson
ID no. 031877681
73 Kdoshey Hashoa Str., Herzliya Pituach
(the “Manager”)
of the Second Part;

 
Whereas
the Company is a public company incorporated in the state of Nevada, U.S., whose
shares are traded on NYSE Amex LLC and on the Tel Aviv Stock Exchange Ltd.; and

 
Whereas
the Company is a management and holding company, operating via subsidiaries
engaged in telecommunication, the main and most significant of whose activity as
aforesaid is outside of the borders of the State of Israel; and

 
Whereas
the Manager is a resident of Israel and a shareholder in the Company; the
Manager acts in the Company as a director, President and CEO since the day of
its founding; and

 
Whereas
in addition, the Manager provides to the Company, as an independent contractor,
consulting services, which are provided outside of the borders of the State of
Israel and constitute the main and most significant part of the Manager’s action
and activity in connection with the Company and its businesses, and this in
accordance with the consulting agreement that was entered into by and between
the parties on March 28, 2007, (said consulting agreement, including any
amendment that was and/or shall be made therein, shall be referred to
hereinafter as the “Consulting Agreement”); and

 
Whereas
the Parties wish to set forth in this Agreement the Manager’s terms of
employment by the Company in the office of the Company’s President and CEO, and
all as specified in this Agreement below;

 
 
Now, Therefore, it was stipulated and agreed between the Parties as follows:

 
1.  
General

 
1.1.  
The preamble to this Agreement constitutes an integral part hereof.

 
1.2.  
The section headings in this Agreement are for the convenience of reading and
purposes of reference only and shall not use for the interpretation of this
Agreement.

 
 
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2.  
The Manager’s Office

 
2.1.  
Pursuant to this Agreement, the Manager shall be employed by the Company in the
office of the Company’s President and CEO (the “Office”).

 
2.2.  
The Office shall include, inter alia, general responsibility and oversight on
the businesses and operations of the Company (including subsidiaries), strategic
planning, business development, mergers and acquisitions, capital raising and
investors relations during the Manager’s stay in the State of Israel.

 
2.3.  
The time that shall be dedicated to the performance of the Office pursuant to
this Agreement shall be determined by the Manager in consideration of the
Company’s interest and needs, as they shall be from time to time, and in any
case subject to the Manager’s undertakings vis-à-vis the Company pursuant to the
Consulting Agreement.

 
2.4.  
In the framework of the Office, the Manager shall be subject to the Company’s
Board of Directors (the “Board of Directors”) and act in accordance with the
instructions thereof, as they shall be from time to time.

 
2.5.  
The Manager shall perform any additional and/or alternative office for the
Company, as shall be imposed thereof by the Board of Directors, which falls
within his skills and qualifications, provided it shall not derogate from the
conditions of his work, status and salary.

 
2.6.  
Since the Office requires a special level of personal trust and the Company has
no ability to supervise the Manager’s work and rest hours in his Office, the
employment of the Manager by the Company pursuant to this Agreement shall not be
subject to the provisions of the Work and Rest Hours Law, 5711-1951, and
therefore the Manager shall not be entitled for the payment of compensation for
working overtime and/or on holidays and the salary (as defined below) includes
payment for vacation pay under the Annual Vacation Law, 5711-1951.

 
3.  
Manager’s Representations and Undertakings

 
3.1.  
The Manager represents that he has the qualifications, skills, know-how,
experience and ability to perform the Office pursuant to this Agreement and that
there is no legal or other impediment for his employment by the Company under
this Agreement. Without derogating from the generality of the provisions of this
section, the Manager represents that the engagement with the Company in this
Agreement and the undertakings to perform the Office pursuant to the provisions
of this Agreement constitute no breach of his undertaking vis-à-vis any third
parties whatsoever.

 
3.2.  
The Manager undertakes to perform the Office with devotion and loyalty. Without
derogating from the generality of the provisions of this section, the Manager
shall be loyal to the Company and refrain from any act and/or omission that may
harm the Company and/or the Company’s subsidiaries and/or their reputation
and/or cause them damage in any way whatsoever.

 
3.3.  
The Manager undertakes to deliver to the Company any information in his
possession that may promote the Company’s affairs and/or be useful thereto,
immediately upon such information’s coming to his knowledge.

 
3.4.  
The Manager undertakes not to receive, whether in person or by another person on
his behalf, directly or indirectly, any payment or benefit whatsoever from
customers and/or suppliers of the Company and/or any other person with whom he
shall come into contact in the context of performance of the Office, unless he
received the approval of the Board of Directors therefor.

 
3.5.  
The Manager undertakes to notify the Company in writing, immediately and without
delay, of any matter or subject, with respect to which he has a personal
interest and which may create a conflict of interests with his work and/or his
Office in the Company, as well as of any transaction or matter of the Company
from which he and/or any person affiliated with him may gain any benefit
whatsoever. The aforesaid notice obligation shall not apply to matters specified
in public filings on behalf of the Company or the Manager.

 
3.6.  
The Manager undertakes to execute a letter of undertaking to maintain
confidentiality, non-competition, non-engagement in another occupation and
protection of intellectual property rights in the Company’s standard form.

 
 
 
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4.  
Compensation

 
In consideration for the performance of the Office and the other undertakings of
the Manager hereunder, the Manager’s salary shall be as follows:
 
4.1.  
U.S.$6,500  gross per month (the “Salary”). The Salary also includes payment for
annual vacation and convalescence pay.

 
4.2.  
The Company shall deduct from the Salary income tax, national insurance, health
tax, contributions to the Pension Plan (as this term is defined below),
contributions for an continuing education fund (as this term is defined below)
and any other deduction that it shall be required to pay by any law.

 
4.3.  
The Salary for each calendar month shall be paid to the Manager no later than on
the 9th day of the next calendar month.

 
4.4.  
Except for the Salary and the conditions and benefits that are explicitly
specified in this Agreement, the Manager shall not be entitled to any
compensation and/or additional payment under this Agreement for the performance
of the Office.

 
5.  
Pension Plan

 
5.1.  
Subject to the legal limitations resulting from the Manager’s status in the
Company (if and to the extent any exist or shall exist), the Company shall make
monthly contributions to a managers insurance policy or pension fund (the
“Pension Plan”), at the Manager’s choice, in the sum equal to 5% of the Salary
for provident contributions and in the sum equal to 8.333% of the Salary on
account of severance pay. The Company shall also make a contribution in the sum
equal to 2.5% of the Salary for loss of ability to work. The Company shall
deduct 5% of the Manager’s Salary for providence payments and remit this sum to
the Pension Plan.

 
5.2.  
The Pension Plan shall be owned by the Company, whereas the Manager shall be the
beneficiary thereunder.

 
5.3.  
If the employment relations between the Manager and the Company are terminated
in the circumstances set forth in Section 10.5 below, the Manager shall receive
the sums accrued to his credit in the Pension Plan on account of the Manager’s
provident provisions only, whereas the Company’s contributions accrued for
providence payments (principal + yield) and the Company’s contributions accrued
for severance pay (principal + yield) shall be returned to the Company.

 
5.4.  
At end of the Manager’s employment in the Company, except for the circumstances
set forth in Section 10.5 below (in which case the provisions of Section 5.3
shall apply), the Company, the Company shall release for the Manager’s benefit
the monies accrued to his credit in the Pension Plan for providence payments.

 
6.  
Continuing Education Fund

 
6.1.  
The Company shall make monthly contributions to a continuing education fund (the
“Education Fund”) in the sum equal to 7.5% of the Salary and shall also deduct
from the Salary the sum equal to 2.5% of the Salary and remit this sum to the
Education Fund.

 
6.2.  
The Company’s contributions to the Education Fund shall be up to the cap
recognized by the income tax authorities in Israel.

 
6.3.  
At the end of the Manager’s employment in the Company, except for the
circumstances set forth in Section 10.5 below, the Manager shall receive the
sums accrued to his credit in the Education Fund. If the Manager is terminated
in the circumstances set forth in Section 10.5 below, the Manager shall receive
the sums accrued in the Education Fund for the Manager’s provisions only,
whereas the sums accrued in the Education Fund for the Company’s
contributions  (principal + yield) shall be returned to the Company.

 
7.  
Company’s Car

 
7.1.  
The Company shall put at the Manager’s disposal a car that suits the needs of
his work (Group 7) and bear all of the expenses involved in the use of the car
(licensing, insurance, fuel, repairs and so forth) (hereinafter: the “Car”).

 
 
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7.2.  
The Manager shall ensure the suitable maintenance of the Car and use the Car
carefully, reasonably and all in accordance with the Company’s instructions and
regulations, as they shall be applicable and updated from time to time.

 
7.3.  
Income tax for the value of the use of the Car shall apply to the Company, such
that the income tax for the value of the use of the Car shall be paid by the
Manager and deducted from his Salary and the Company shall gross-up this sum in
full.

 
7.4.  
The Manager shall be personally liable for the payment of co-payment in the
event of an accident or theft of the Car as well as for the payment of any
traffic or parking or other tickets imposed on and/or due to the Car, and all
pursuant to the Company’s regulations, as they shall be applicable and updated
from time to time. If the Manager does not pay the co-insurance and/or tickets
as aforesaid, the Company may pay the sum of the co-insurance and/or tickets and
the Manager hereby gives the Company an irreversible instruction to deduct these
sums from any sum due to the Manager from the Company.

 
8.  
Sick Pay

 
8.1.  
The Manager shall be entitled for the payment of sick pay pursuant to the
provisions of the Sick Pay Law, 5736-1976.

 
9.  
Related Terms

 
9.1.  
The Manager shall receive for his use a cellular phone and the Company shall
bear the payment of the cellular phone bill. The income tax for the value of the
use of the cellular phone shall apply to the Company such that the income tax
for the value of the use of the cellular phone shall be paid by the Manager and
deducted from his Salary and the Company shall gross-up this sum in full.

 
9.2.  
The Manager shall be reimbursed for reasonable expenses that he shall incur for
the performance of and during the Office, and this against submittal of the
invoices for the aforesaid expenses to the Company.

 
9.3.  
The Manager shall be entitled to undergo “medical survey” examinations, once a
year, at the Company’s expense.

 
10.  
Employment Period and Termination of the Agreement

 
10.1.  
The initial employment period under this Agreement is from April 1, 2010, to
March 31, 2015, (the “Initial Employment Period”). The term of this Agreement
shall be extended automatically for additional periods of 3 years each (the
“Additional Employment Periods”)

 
10.2.  
Notwithstanding the provisions of Section 10.1, each of the parties shall be
entitled to terminate the automatic extension as aforesaid and thereby to
terminate the employment relations and the term of this Agreement, for any
reason whatsoever, and this by giving a written notice delivered to the other
party at least 6 months prior to: (a) the expiration of the Initial Employment
Period, or (b) the expiration of any of the Additional Employment Periods.

 
Notwithstanding the aforesaid provisions in this Section 10.2, as long as the
Manager controls, directly and/or indirectly, including with others and/or
pursuant to a proxy, 15% or more of the voting rights attached to the Company’s
ordinary shares, then, if the Company elects to exercise its right as aforesaid
in this Section 10.2, it shall be required to give the Manager an advance notice
of at least 12 months.
 
10.3.  
Notwithstanding all of the aforesaid, the Manager shall be entitled to terminate
this Agreement and thereby to terminate the employment relation, for any reason
whatsoever and at any time, including during the Initial Employment Period, and
this by giving a written notice that shall be delivered to the Company at least
8 months prior to the date of the aforesaid termination

 
10.4.  
Both in the case of termination and in the case of resignation, the Company may,
at its sole discretion, waive the Manager’s actual work during the
advanced-notice period, in whole or in part, and it may also terminate the
employment relations immediately, provided that it shall pay the Manager the
payment in lieu of advance notice, in the sum equal to the Salary in addition to
the value of all of the social and related benefits set forth in this Agreement,
which would have been due to the Manager had he worked during the advance-notice
period.

 
 
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10.5.  
Notwithstanding all of the aforesaid in this Section 10, in such circumstances,
where under the Israeli law an employee may be denied the payment of severance
and/or advanced notice pay, in whole or in part, as well as in the case of a
fundamental breach of the provisions hereof, the Company may terminate this
Agreement immediately without being under the obligation to pay the Manager a
payment in lieu of advance notice, severance pay or any other payment.

 
10.6.  
If the Manager is terminated, in the circumstances described in section 10.5
above, or resigns from his employment in the Company, the Company shall release
the monies accrued to the Manager’s credit on account of severance pay in the
Pension Plan (principal + yield) and pay the Manager the difference (if any)
between the sum of the pay due to the Manager pursuant to the provisions of the
Severance Pay Law, 5723-1963, and the sum accrued to the Manager’s credit on
account of severance pay in the Pension Plan (principal + yield).

 
10.7.  
The Manager undertakes that during the advanced-notice period he shall pass his
Office in an orderly fashion to his substitute or to any other person as
instructed by the Company, and he shall hand-over to the Company all of the
documents, information, equipment and materials that shall have come to his
possession and/or prepared by him in connection with his work in the Company and
he shall keep in his possession no copy of these documents. The Manager shall
have no lien in no document, asset, equipment or information that shall have
come into his possession during the period of or due to his work in the Company.

 
11.  
Non-Application of Previous Representations and Undertakings; The Consulting
Agreement and its Status

 
11.1.  
Any representation or undertaking made in connection with the Office prior to
the entering into this Agreement (if any), whether orally or in writing, which
are not specifically reflected in this Agreement, shall not supplement to,
derogate from or modify the undertakings and rights set forth in or resulting
from this Agreement.

 
11.2.  
The provisions of this Agreement shall not derogate from and/or modify the
Consulting Agreement. Without derogating from the generality of the aforesaid,
it is hereby clarified that the provisions of Section 4.4 above do not derogate
from the Manager’s rights to receive from the Company consulting fees, bonuses,
reimbursement of expenses, options and any other payments and/or benefits
pursuant to the Consulting Agreement and/or the decisions of the Board of
Directors.

 
11.3.  
The Manager represents and acknowledges that the consulting services that he
provides to the Company in the framework of the Consulting Agreement are
provided by him as an independent contractor and that no employment relations
exist between him and the Company pursuant to the Consulting Agreement.

 
12.  
Miscellaneous

 
12.1.  
This Agreement was approved by the Company’s Board of Directors, in accordance
with the recommendations of the Company’s Audit Committee and Compensation
Committee.

 
12.2.  
The terms of the engagement as aforesaid in this Agreement are personal.

 
12.3.  
The Manager’s terms of employment in the Office shall be as set forth in this
Agreement only and the agreements, arrangements and customs presently or in the
future applying in the relations between the Company and its other managers
shall not apply, unless and insofar as it is explicitly so provided in this
Agreement.

 
12.4.  
Any modification and/or abrogation of any of the provisions of this Agreement
shall be made only by a written document, which shall be signed by both Parties.

 
 
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12.5.  
The Company may assign its rights and undertakings under this Agreement,
including its rights in the Manager’s work products, provided that the Manager’s
rights under this Agreement are not prejudiced.

 
12.6.  
This Agreement shall be governed by the laws of the State of Israel only. The
exclusive jurisdiction with respect to this Agreement (including its existence,
breach and interpretation) shall lie with the competent courts and/or labor
tribunals in the Tel-Aviv-Jaffa district, Israel.

 
12.7.  
Any notices under this Agreement shall be in writing and delivered personally or
sent by fax or mail according to the addresses indicated in the preamble hereto,
and shall be deemed as delivered to the addressee 3 business days after the
delivery per mail, 24 hours after the personal delivery or 24 hours after the
fax transmission, provided that the notice is accompanied by a telephone notice
of the fax transmission and that the fax transmission shall have a receipt
confirmation from the fax machine.

 
12.8.  
The addresses of the Parties for the purpose of this Agreement are as specified
in the preamble hereto.

 
In witness whereof, the parties have hereunto set their hands:
 
_____________________________                                          ____________________________
The
Company                                                                                     The
Manager
 
 
 
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