Exhibit 10.116
ESCROW AGREEMENT
 
This Escrow Agreement, dated as of February 26, 2008 (the “Closing Date”), among
XFone, Inc., a Nevada corporation (“Purchaser”) and Chris Chelette, Robert
Healea and Kevin Buxkemper, (collectively the “Sellers’ Representative”) for
each of the persons and entities listed on Exhibit A hereto who were selling
Shareholders of NTS Communications, Inc. (the “NTS Sellers”), and Trustmark
National Bank, as escrow agent (“Escrow Agent”).
 
This is the Escrow Agreement referred to in the Stock Purchase Agreement dated
August 22, 2007, as amended (the “Stock Purchase Agreement”), among Purchaser,
the Company and the NTS Sellers.  Capitalized terms used in this agreement
without definition shall have the respective meanings given to them in the Stock
Purchase Agreement.
 
In order to provide Purchaser security for obligations under Section 2.2(d) and
(e) of the Stock Agreement for working capital adjustments and rights of
indemnification that the Purchaser possesses under Article VII of the Stock
Purchase Agreement, the NTS Sellers and the Purchaser have agreed that the cash
and the XFone Common Stock (“XFone Common Stock”) as set forth in Exhibit “A”
for each of the NTS Sellers, which constitutes part of the Purchase Price under
the Stock Purchase Agreement, shall be deposited with the Escrow Agent by
Purchaser to be held and administered by Escrow Agent in accordance with the
terms and conditions herein set forth.
 
The parties, intending to be legally bound, hereby agree as follows:
 
1.            ESTABLISHMENT OF ESCROW
 
(a)            Deposit.  The Purchaser hereby deposits in escrow the amount of
cash and number of shares of XFone Common Stock set out opposite the names of
the NTS Sellers on Exhibit “A” attached to this Agreement (collectively, the
“Escrow Fund”).  The XFone Common Stock shall be registered in the name of the
Escrow Agent or its nominee.  For all purposes, the value of the XFone Common
Stock shall be valued at the value as set forth on Exhibit “A.”  For purposes of
clarity, such value shall be the average per share closing price on the American
Stock Exchange of XFone Common Stock for the ten (10) consecutive trading days
preceding the trading day immediately prior to the Closing Date.  As used
herein, the “Pro-Rata Share” refers to each NTS Seller’s percentage of the total
Escrow Fund as of the date hereof as set forth on Exhibit “A” hereto which shall
equal each such NTS Seller’s Allocable Shares as set forth in the Stock Purchase
Agreement.  For any NTS Seller that has had cash and XFone Common Stock
deposited into the Escrow Fund on it behalf, such NTS Seller’s Pro-Rata Share
shall be satisfied from the cash and XFone Common Stock in the same proportions
as the cash or XFone Common Stock originally deposited in the Escrow Fund on the
date hereof for such NTS Seller, all as set forth in Exhibit “A,” except that
such NTS Seller’s Pro-Rata Share of fees or other amounts due to the Escrow
Agent pursuant to Section 4(i) shall be satisfied in cash.
 
(b)            Escrow Fund.  Escrow Agent hereby acknowledges receipt of the
Escrow Fund as provided in Section 1(a).  The Escrow Fund (as increased by all
income, property andEarnings resulting therefrom) (“Escrow Fund”) shall be held
and administered by the Escrow Agent for the benefit of the NTS Sellers and
Purchaser on the terms set out herein.
 

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(c)            Investment of Escrow Funds.  Except as Purchaser and Sellers’
Representative may from time to time jointly instruct Escrow Agent in writing,
the cash portion of the Escrow Fund shall be invested from time to time, to the
extent possible, in a money market fund comprised of United States Treasury
bills having a remaining maturity of ninety (90) days or less and repurchase
obligations secured by such United States Treasury bills, with any remainder
being deposited and maintained in a money market deposit account with Escrow
Agent until disbursement of the entire Escrow Fund. Escrow Agent is authorized
to liquidate in accordance with its customary procedures any portion of the
Escrow Fund consisting of investments to provide for payments required to be
made under this Agreement.  Interest, dividends, earnings and gains on the
Escrow Fund are hereinafter referred to collectively as the “Earnings.”
 
(d)            Voting Rights of Shares in Escrow.  The NTS Sellers shall retain
all rights with respect to the XFone Common Stock commensurate with the
ownership of common stock, including, without limitation, the right to dividends
and the right to vote such shares.  All voting rights with respect to the XFone
Common Stock composing a part of the Escrow Fund may be exercised by the NTS
Seller who deposited such XFone Common Stock in escrow, and the Escrow Agent
shall from time to time execute and deliver to each NTS Seller such proxies,
consents, or other documents as may be necessary to enable such NTS Seller to
exercise such rights with respect to its XFone Common Stock.
 
(e)            Distributions on Escrow Fund.  All Earnings made on the cash
portion of the Escrow Fund shall be deemed to be that of the NTS Sellers, in
accordance with their respective Pro-Rata Share of the cash portion of the
Escrow Fund, for income tax purposes, but shall be received by the Escrow Agent
and constitute part of the Escrow Fund.
 
(f)            Taxes and Charges on Escrow Fund.  For those NTS Sellers who have
provided the Escrow Agent with a properly completed Internal Revenue Service W-9
Form indicating that no taxes are to be withheld, the Escrow Agreement by no
later than March 15 of each year shall pay to such NTS Seller an amount equal to
30% of such NTS Seller’s Pro-Rata share of the Earnings from the cash portion of
the Escrow Fund.  The NTS Sellers, with respect to their respective Pro-Rata
Share of the Escrow Fund, shall maintain the Escrow Fund free and clear of all
liens and encumbrances and shall, promptly upon request by the Escrow Agent, pay
and discharge all taxes, assessments, and governmental charges imposed on or
with respect to the Escrow Fund.
 
(g)            Acceptance of Escrow.  Escrow Agent hereby agrees to act as
escrow agent and to hold, safeguard, administer and disburse the Escrow Fund
pursuant to the terms and conditions hereof.
 
(h)            Notice of Claim.  Purchaser shall be entitled to recover under
this Escrow Agreement in respect of (i) any working capital adjustment as
provided in Section 2.2(d) of the Stock Purchase Agreement (“Working Capital
Adjustment”); or (ii) any Adverse Consequences (as provided in Article VII of
the Stock Purchase Agreement) and, during the Escrow Period,may give notice in
writing in the form attached hereto as Appendix A (“Pending Claims Notice”) to
the Escrow Agent and the Sellers’ Representative of any claim on which any
Working Capital Adjustment is asserted or Adverse Consequences may be based,
which Pending Claims Notice shall include a brief description of the nature of
the claim, the identity of the party by whom it is being asserted, and an
estimate of the amount of Adverse Consequences that may be sustained by
Purchaser (the “Estimated Adverse Consequences”).
 

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(i)            Sellers’ Representative Action.  The Sellers’ Representative
Committee shall act on the affirmative vote of a majority of the members of such
committee and the Escrow Agent shall be entitled to rely on any direction given
by any two members of the Sellers’ Representative Committee as the act of the
Sellers’ Representative under this Agreement.
 
2.            DISTRIBUTIONS FROM ESCROW FUND
 
(a)            Purchaser Request.  If Purchaser submits a notice and request to
the Sellers’ Representative and Escrow Agent in substantially the form attached
as Appendix B stating that (i) a Working Capital Adjustment has been determined
to be due to Purchaser by the NTS Sellers in accordance with Section 2.2(d) of
the Stock Purchase Agreement and the dollar amount due to Purchaser by virtue of
the Working Capital Adjustment; or (ii) Adverse Consequences (as defined in the
Stock Purchase Agreement) has been determined in accordance with Article VII of
the Stock Purchase Agreement and specifying the dollar amount of the Adverse
Consequences, then on the 30th Business Day following such notice, Escrow Agent
shall release as directed in said notice an amount from the Escrow Fund equal to
the amount of the Working Capital Adjustment or Adverse Consequences, as the
case may be, and applying such amount to each NTS Seller’s Pro-Rata share of the
Working Capital Adjustment or Adverse Consequences, as the case may be, unless
the Escrow Agent has received a Counter-Notice (as defined herein) from the
Sellers’ Representative that the requested release from the Escrow Fund is
disputed.
 
(b)            If a counter-notice (“Counter-Notice”) is given with respect to a
request for distributions from the Escrow Fund, then the Escrow Agent shall make
a distribution from the Escrow Fund only in accordance with (i) joint written
instructions of Purchaser and the Sellers’ Representative or (ii) a final
non-appealable order of a court of competent jurisdiction or, in the case of a
Working Capital Adjustment, the binding determination of the Arbitrator pursuant
to Section 2.2(e) of the Stock Purchase Agreement.  Any court order or
arbitrator order shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to the Escrow Agent to the effect that the order
is final and non-appealable.  Escrow Agent shall act on such court or arbitrator
order and legal opinion without further question.
 
(c)            Notwithstanding anything to the contrary contained in this
Agreement, the Escrow Agent shall make distributions from the Escrow Fund in
accordance with the joint written instructions of Purchaser and the Sellers’
Representative.
 

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3.            DURATION AND TERMINATION OF ESCROW
 
(a)            On the second anniversary date of this Agreement (“Escrow
Period”), the Escrow Agent shall retain an amount of the then remaining Escrow
Fund (taken on a Pro-Rata Share from each NTS Seller’s portion of the Escrow
Fund) equal to the aggregate dollar value of the Estimated Adverse Consequences
for all outstanding Pending Claims Notices, if any, received during the Escrow
Period and the remainder of each NTS Seller’s portion of the Escrow Fund
(including all Earnings) shall be disbursed to each NTS Seller to the address as
provided in Exhibit “A” hereto.  After the resolution of all outstanding Pending
Claims Notices received during the Escrow Period, the Escrow Agent shall
promptly deliver the balance, if any, of the Escrow Fund (including all
Earnings) to each NTS Seller to the address provided in Exhibit “A”.
 
(b)            The Escrow Agreement shall terminate and be of no further force
or effect on the first to occur of (i) the close of business on the date on
which the Escrow Agent delivers to Purchaser and/or the NTS Sellers, as the case
may be, the entire Escrow Fund (and any Earnings thereon) in accordance with the
terms of this Agreement or (ii) December 31, 2020, at which time this Escrow
Fund shall terminate and any Escrow Fund remaining shall be interpled with the
registry or custody of any court of competent jurisdiction and thereupon the
Escrow Agent shall be discharged of all further duties under this Agreement.
 
4.            DUTIES OF ESCROW AGENT
 
(a)            Escrow Agent shall not be under any duty to give the Escrow Fund
held by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder except as
directed in this Agreement. Uninvested funds held hereunder shall not earn or
accrue interest.
 
(b)            Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against Escrow Agent, the others hereto shall jointly and severally indemnify
and hold harmless Escrow Agent (and any successor Escrow Agent) from and against
any and all losses, liabilities, claims, actions, damages and expenses,
including reasonable attorneys’ fees and disbursements, arising out of and in
connection with this Agreement.
 
(c)            Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so. Escrow
Agent may conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person has full power and
authority to instruct Escrow Agent on behalf of that party unless written notice
to the contrary is delivered to Escrow Agent.
 

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(d)            Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Agreement and shall not be liable for any
action taken or omitted by it in good faith in accordance with such advice.
 
(e)            Escrow Agent does not have any interest in the Escrow Fund
deposited hereunder but is serving as escrow holder only and having only
possession thereof. Any payments of income from this Escrow Fund shall be
subject to withholding regulations then in force with respect to United States
taxes. The parties hereto will provide Escrow Agent with appropriate Internal
Revenue Service Forms W-9 for tax identification number certification, or
non-resident alien certifications. Section 4(e) and Section 4(b) shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
 
(f)            Escrow Agent makes no representation as to the validity, value,
genuineness or the collectibility of any security or other document or
instrument held by or delivered to it.
 
(g)            Escrow Agent (and any successor Escrow Agent) may at any time
resign as such by delivering the Escrow Fund to any successor Escrow Agent
jointly designated by the other parties hereto in writing, or to any court of
competent jurisdiction, whereupon Escrow Agent shall be discharged of and from
any and all further obligations arising in connection with this Agreement. The
resignation of Escrow Agent will take effect on the earlier of (a) the
appointment of a successor (including a court of competent jurisdiction) or (b)
the day which is 30 days after the date of delivery of its written notice of
resignation to the other parties hereto. If at that time Escrow Agent has not
received a designation of a successor Escrow Agent, Escrow Agent’s sole
responsibility after that time shall be to retain and safeguard the Escrow Fund
until receipt of a designation of successor Escrow Agent or a joint written
disposition instruction by the other parties hereto or a final non-appealable
order of a court of competent jurisdiction.
 
(h)            In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the Escrow
Fund or in the event that Escrow Agent is in doubt as to what action it should
take hereunder, Escrow Agent shall be entitled to retain the Escrow Fund until
Escrow Agent shall have received (i) a final non-appealable order of a court of
competent jurisdiction or arbitrator directing delivery of the Escrow Fund or
(ii) a written agreement executed by the other parties hereto directing delivery
of the Escrow Fund, in which event Escrow Agent shall disburse the Escrow Fund
in accordance with such order or agreement. Any court or arbitrator order shall
be accompanied by a legal opinion by counsel for the presenting party
satisfactory to Escrow Agent to the effect that the order is final and
non-appealable. Escrow Agent shall act on such court order and legal opinion
without further question.
 
(i)            Purchaser and the NTS Sellers shall pay Escrow Agent compensation
(as payment in full) for the services to be rendered by Escrow Agent hereunder
in the amount of $1,500.00 at the time of execution of this Agreement and
$1,500.00 annually thereafter (the “Annual Fee”) and $25.00 per distribution to
each Seller, and agree to reimburse Escrow Agent for all reasonable expenses,
disbursements and advances incurred or made by Escrow Agent in performance of
its duties hereunder (including reasonable fees, expenses and disbursements
ofits counsel). Any such compensation and reimbursement to which Escrow Agent is
entitled shall be borne 50% by Purchaser, and 50% by the NTS Sellers with each
NTS Seller responsible for its Pro-Rata Share of such 50% which may be deducted
from each NTS Seller’s cash portion of its share of the Escrow Fund.
 

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(j)            No printed or other matter in any language (including, without
limitation, prospectuses, notices, reports and promotional material) that
mentions Escrow Agent’s name or the rights, powers, or duties of Escrow Agent
shall be issued by the other parties hereto or on such parties’ behalf unless
Escrow Agent shall first have given its specific written consent thereto.
 
5.            LIMITED RESPONSIBILITY
 
This Agreement expressly sets forth all the duties of Escrow Agent with respect
to any and all matters pertinent hereto. No implied duties or obligations shall
be read into this agreement against Escrow Agent. Escrow Agent shall not be
bound by the provisions of any agreement among the other parties hereto except
this Agreement.
 
6.            OWNERSHIP FOR TAX PURPOSES
 
Each NTS Seller will be treated as the owner of its respective portion of the
Escrow Fund, and each NTS Seller will report all income, if any, that is earned
on, or derived from, each NTS Seller’s portion of the Escrow Fund as their
income, in such proportions, in the taxable year or years in which such income
is properly includible and pay any taxes attributable thereto.
 
7.            NOTICES
 
All notices, consents, waivers and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt) provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
 
IF TO COMPANY OR SHAREHOLDER REPRESENTATIVE, TO:
 
Chris Chelette
Robert Healea
c/o Telephone Electronics Corporation
236 East Capitol Street
Jackson, MS  39201
Telephone:                                 (601) 354-9070
 Facsimile:                                 (601) 352-1394
Email:                       cchelette@communigroup.com and bhealea@tec.com
 
and
 

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Kevin Buxkemper
 
1414 Peoria Street
Slaton, TX  79364
Telephone:                                 _________________
Facsimile:                                    _________________
Email:                                          _________________

 
IF TO PURCHASER, TO:

 
XFone, Inc.
Britannia House
960 High Road
London, N129RY
United Kingdom
 
Attention:
Guy Nissenson

 
Telephone:
+44 208-446-9494

 
Facsimile:
+44 208-446-7010

 
Email:
guy@xfone.com

 
and
 
XFone, Inc.
c/o XFone USA, Inc.
2506 Lakeland Drive, Suite 100
Flowood, MS  39232
Attention:            Wade Spooner

 
Telephone:
(601) 664-1108

 
Facsimile:
(601) 664-1190

 
Email:
wspooner@xfone.com

 
and
 
Watkins Ludlam Winter & Stennis, P.A.
633 North State Street (39202)
P. O. Box 427
Jackson, MS 39205-0427
Attention:              Gina M. Jacobs
 
Telephone:
601-949-4705

Facsimile:               601-949-4804
 
Email:
gjacobs@watkinsludlam.com

 
 
IF TO ESCROW AGENT:

 
Trustmark National Bank
248 East Capitol Street
Jackson, MS  39201
Attention: W. Sanders (“Sandy”) Carter, V.P.
 

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8.             JURISDICTION; SERVICE OF PROCESS
 
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of Hinds County, Mississippi, State of Mississippi or, if it has
or can acquire jurisdiction, in the United States District Court for the
Southern District of Mississippi, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
 
9.            COUNTERPARTS
 
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original and all of which, when taken together, will be
deemed to constitute one and the same.
 
10.            SECTION HEADINGS
 
The headings of sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation.
 
11.            WAIVER
 
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Except as set forth in this Agreement or the Stock Purchase
Agreement, neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out  of this
Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
 
12.            EXCLUSIVE AGREEMENT AND MODIFICATION
 
This Agreement supersedes all prior agreements among the parties with respect to
its subject matter and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the Purchaser, the
Principals and the Escrow Agent.
 

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13.            GOVERNING LAW
 
This Agreement shall be governed by the laws of the State of Mississippi,
without regard to conflicts of law principles.
 
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
 

 PURCHASER:      SELLERS’ REPRESENTATIVE:              XFone, Inc.              
   
/s/ Guy Nissenson
   
/s/ Chris Chelette
 
Guy Nissenson
   
Chris Chelette
 
President and CEO
   
 
 

 

 ESCROW AGENT:                  
/s/ W. Sanders "Sandy" Carter, Jr.
   
/s/ Robert Healea
 

W. Sanders "Sandy" Carter, Jr.
   
Robert Healea
 

First Vice President & Trust Officer
   
 
 

               
/s/ Kevin Buxkemper
 
 
   
Kevin Buxkemper
 
 
   
 
 

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APPENDIX A
 
PENDING CLAIM NOTICE
 
To:                       _______________________, or its successor (“Escrow
Agent”)
 _______________________ (“Sellers’ Representative”)
From:
XFone, Inc. (“Purchaser”)

 
Date:
_____________________

 
Please be advised that, pursuant to Section 1(h) of the Escrow Agreement dated
____________, 200___ by and among the undersigned, the Escrow Agent, and the
Sellers’ Representative, each of you are hereby notified that, Purchaser
believes that the Purchaser has or may suffer Adverse Consequences pursuant to
the provisions of Article VII of the Stock Purchase Agreement dated as of
_______________________ (“Stock Purchase Agreement”) by virtue of
 

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Purchaser estimates that the Adverse Consequences is $_____________ (“Estimated
Adverse Consequences”).
 
Signed this _____ day of _________________, 2008.
 

  XFone, Inc.          
 
By:
/s/        Name        Title           

                                                           

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APPENDIX B
 
PURCHASER DEPOSITION NOTICE REQUEST
 
To:
______________________, or its successor (“Escrow Agent”)

______________________ (“Sellers’ Representative”)
 
From:
XFone, Inc. (“Purchaser”)

 
Date:
_______________________

 
Re:
Escrow Agreement Dated ____________, 200__ Among the Above-referenced Parties
(“Escrow Agreement”)

 
Please be advised that pursuant to Section 2(a) of the Escrow Agreement you are
hereby notified that Adverse Consequences (as defined in the Stock Purchase
Agreement dated August 22, 2007) has been determined and you are hereby
instructed to deliver to XFone, Inc. each NTS Seller’s Pro-Rata Share thereof
from the Escrow Funds.
 
Check One:
 
____
This is the Adverse Consequences as determined for Pending Claims Notice dated.

 
____
This notice also constitutes a Pending Claims Notice and the Adverse
Consequences arises out of the following:

 
 

  Sincerely,           XFone, Inc.          
 
By:
/s/        Name        Title           

                                                           
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