TERM LOAN, GUARANTEE AND SECURITY AGREEMENT

DATED AS OF OCTOBER 6, 2011

AMONG

ICON AGENT, LLC,

AS AGENT FOR THE LENDERS SIGNATORY HERETO,

XFONE, INC (as a Guarantor),

XFONE USA, INC., NTS COMMUNICATIONS, INC., GULF COAST UTILITIES, INC., EXPETEL
COMMUNICATIONS, INC., NTS CONSTRUCTION COMPANY, GAREY M. WALLACE COMPANY, INC.,
MIDCOM OF ARIZONA, INC., COMMUNICATIONS BROKERS, INC., AND NTS MANAGEMENT
COMPANY, LLC
 
AS BORROWER

AND

THE OTHER CREDIT PARTIES SIGNATORY HERETO

CHAPMAN AND CUTLER LLP
330 Madison Avenue
New York, New York 10017

 
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Table of Contents

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INDEX OF EXHIBITS AND SCHEDULES

Schedule A                      -      Definitions
Schedule B                      -      Schedule of Term Loan Commitments and
Loan Principal Amortization
Schedule C                      -      Agent’s, Lender’s and Credit Parties’
Addresses for Notices
Schedule D                      -      Schedule of Documents

Disclosure
Schedule  (3.2)                                           -           Places of
Business; Corporate Names
Disclosure
Schedule  (3.5)                                           -           Material
Adverse Change
Disclosure
Schedule  (3.6)                                           -           FCC
Licenses
Disclosure
Schedule  (3.7)                                           -           Subsidiaries
Disclosure
Schedule  (3.8)                                           -           Government
Regulation
Disclosure
Schedule  (3.9)                                           -           Taxes
Disclosure
Schedule  (3.11)                                                      -           ERISA
Disclosure
Schedule  (3.13)                                                      -           Intellectual
Property
Disclosure
Schedule  (3.15)                                                      -           Environmental
Liabilities
Disclosure
Schedule  (3.16)                                                      -           Insurance
Disclosure
Schedule  (3.18)                                                      -           Other
Financings
Disclosure
Schedule  (3.26)                                                      -           Deposit
Accounts
Disclosure
Schedule  (6.1)                                             -     Actions to
Perfect Liens

Exhibit A                  -     Form of Perfection Certificate
Exhibit B                  -     Form of Term Note
Exhibit C                  -     Form of Secretarial Certificate
Exhibit D                  -     Form of Power of Attorney
Exhibit E                  -     Form of Compliance Certificate
Exhibit F                  -     Form of Closing Certificate
Exhibit G                  -     Form of Solvency Certificate
Exhibit H                  -     Form of Joinder Agreement
Exhibit I                  -     Form of Perfection Certificate Supplement
Exhibit J                  -     Form of Account Receivables Statement
Exhibit K                  -     Form of Opinion of Credit Parties’ Counsel
Exhibit L                  -     Form of Pledge Agreement

 
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This TERM LOAN, GUARANTEE AND SECURITY AGREEMENT is dated as of October 6, 2011,
and agreed to by and among XFONE, INC., a Nevada corporation (“Holdings”), XFONE
USA, INC., a Mississippi corporation, NTS COMMUNICATIONS, INC., a Texas
corporation, GULF COAST UTILITIES, INC., a Mississippi corporation, EXPETEL
COMMUNICATIONS, INC., a Mississippi corporation, NTS CONSTRUCTION COMPANY, a
Texas corporation, GAREY M. WALLACE COMPANY, INC., a Texas corporation, MIDCOM
OF ARIZONA, INC., an Arizona corporation, COMMUNICATIONS BROKERS, INC., a Texas
corporation, and NTS MANAGEMENT COMPANY, LLC, a Texas limited liability company
(collectively referred to herein as the “Borrower”), the other Credit Parties
signatory hereto, and ICON AGENT, LLC, a Delaware limited liability company, as
agent (in such capacity, “Agent”) for the lenders set forth on Schedule C
attached hereto (each herein referred to as a “Lender” and collectively, the
“Lenders”).

RECITALS

A.           The Credit Parties desire that Borrower obtain the Term Loan
described herein from the Lenders and the Lenders are willing to provide the
Term Loan all in accordance with and subject to the terms and conditions of this
Agreement.

B.           Capitalized terms used herein shall have the meanings assigned to
them in Schedule A and, for purposes of this Agreement and the other Loan
Documents, the rules of construction set forth in Schedule A shall govern.  All
schedules, attachments, addenda and exhibits hereto, or expressly identified to
this Agreement, are incorporated herein by reference, and taken together with
this Agreement, constitute but a single agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:

1.           AMOUNT AND TERMS OF CREDIT

1.1           Term Loan.

(a)          Term Loan Commitment.  Each Lender agrees, severally, but not
jointly, upon the terms and subject to the conditions of this Agreement, to
make, to the Borrower an advance (the “Term Loan”) on the Closing Date in the
principal amount equal to such Lender’s Term Loan Commitment.  Each Lender’s
Term Loan shall be evidenced by a promissory note (each a “Term Note”) duly
executed and delivered by the Borrower prior to the funding of the Term Loan in
the form attached hereto as Exhibit B, and be repayable in accordance with the
terms of, such Term Note and this Agreement.  Borrower shall repay the
outstanding principal and accrued interest of the Loan to the Agent for the pro
rata benefit of the Lenders (payable monthly in arrears) in 60 consecutive
monthly Installments as set forth on Schedule B, due and payable on the first
day of each calendar month beginning on the Commencement Date, together with a
payment of the interim interest for the Loan in accordance with Section 1.5(b)
and a payment of the entire balance of the Loan on the Maturity Date; provided,
however, that the first 12 monthly Installments due and payable hereunder shall
be payments of accrued interest only.  If an Installment is not paid in full
within 5 Business Days of the date payment of such Installment is due hereunder
or under the Term Note evidencing the same the Borrower shall pay to Agent, for
the pro rata benefit of the Lenders, a late fee in an amount equal to two and a
half percent (2.5%) of the amount of such Installment which late fee constitutes
liquidated damages for loss of a bargain and is not a penalty.  Once repaid, any
amount borrowed under the Term Loan Commitment of each Lender may not be
re-borrowed.  Subject to Section 1.2, all amounts owed hereunder with respect to
the Loan shall be paid in full no later than the Maturity Date.

1.2           Term and Prepayment.

(a)         Upon the Maturity Date of the Loan, Borrower shall pay to Agent for
the pro rata benefit of the Lenders (i) all outstanding principal and accrued
but unpaid interest on the Loan and (ii) all other non-contingent Obligations
relating to the Loan due to or incurred by the Agent or the Lenders.

(b)         After the Commencement Date, so long as no Default or Event of
Default has occurred hereunder, Borrower shall have the right upon five (5)
Business Days’ prior written notice to the Agent, to make on the due date of any
Installment payment a voluntary full prepayment of the Loan in an amount equal
to the aggregate outstanding amount of principal and accrued interest on the
Loan as of such date (a “Voluntary Prepayment”). If the Borrower elects to make
a Voluntary Prepayment pursuant to this Section 1.2(b), the following prepayment
fees shall apply: (i) 4% of the principal Loan amount being repaid if repaid
during the period commencing on May 1, 2013 and ending on the second anniversary
of the Commencement Date; (ii) 3% of the of the principal Loan amount being
repaid if repaid during the period commencing on the day immediately after
second anniversary of the Commencement Date and ending on the third anniversary
of the

 
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Commencement Date; and (iii) 2% of the of the principal Loan amount being repaid
if repaid during the period commencing on the day immediately after third
anniversary of the Commencement Date and ending on the fourth anniversary of the
Commencement Date.  No prepayment fee shall apply if the Voluntary Prepayment is
made during the period commencing on the day immediately after fourth
anniversary of the Commencement Date and ending on the Maturity Date.  The
Borrower may make a Voluntary Prepayment during the period commencing on the
Commencement Date and ending on the May 1, 2013 solely in the event of a Change
of Control, other than an Affiliated Change of Control, pursuant to clause (a)
of the definition of Change of Control; provided, that, such prepayment shall be
subject to a fee equal to 6% of the of the principal Loan amount being
repaid.  Notwithstanding anything to the contrary contained herein, in the event
that any prepayment is necessitated by Section 1.11 hereof, no prepayment fee
shall apply to such prepayment.

1.3           Use of Proceeds.
  Borrower shall use the proceeds of the Loan to payoff existing senior secured
indebtedness, for other general working capital and corporate purposes, and to
pay any fees associated with transactions contemplated under this Agreement and
the other Loan Documents.

1.4           Single Loan.
  The Loan and all of the other Obligations shall constitute one general
obligation of Borrower secured by all of the Collateral.

1.5           Interest.

(a)         Borrower shall pay interest to the Agent for the pro rata benefit of
the Lenders on the outstanding balance of the Loan at a fixed rate equal to
12.75% per annum.  All computations of interest on the Loan shall be made by
Lender on the basis of a three hundred and sixty (360) day year, in each case
for the actual number of days occurring in the period for which such interest is
payable.  In no event will the Agent charge interest at a rate that exceeds the
highest rate of interest permissible under any law that a court of competent
jurisdiction shall, in a final determination, deem applicable.

(b)         Interest shall be payable on the balance of the Loan (i) monthly in
arrears and due on the due date of each Installment as provided in Section
1.1(a), (ii) on the Maturity Date of the Loan, and (iii) if any interest accrues
or remains payable after the Maturity Date of the Loan, upon demand by the
Agent.  Notwithstanding anything to the contrary herein contained, interim
interest payments shall be due for interest accrued on the Loan from the date
the Loan was funded through and including the Commencement Date.  Such interim
interest payments shall be due and payable in advance on the Closing Date.

(c)         Effective upon the occurrence of any Event of Default and for so
long as any Event of Default shall be continuing, the interest rate applicable
to the Loan shall automatically be increased by two percentage points (2.0%)
(such increased rate, the “Default Rate”), and all outstanding Obligations,
including accrued but unpaid interest, shall accrue interest from the date of
such Event of Default at the Default Rate.  Unless an Event of Default shall
have occurred under 7.1(i) or (j), the Agent shall provide notice to the
Borrower of the imposition of the Default Rate, but any failure by Agent to
provide such notice shall not affect the obligations of Borrower to pay interest
on the Obligations at the Default Rate as of the Event of Default.

(d)         If any payment to the Agent or any Lender under this Agreement
becomes due and payable on a day other than a Business Day, such payment date
shall be extended to the next succeeding Business Day and interest thereon shall
be payable at the then applicable rate during such extension.

(e)         Notwithstanding anything to the contrary set forth in this Section
1.5, if a court of competent jurisdiction determines in a final order that the
rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the “Maximum Lawful Rate”), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by the Agent for the
pro rata benefit of the Lenders is equal to the total interest that would have
been received had the interest rate payable hereunder been (but for the
operation of this paragraph) the interest rate payable since the Closing Date as
otherwise provided in this Agreement.  In no event shall the total interest
received by the Agent pursuant to the terms hereof exceed the amount that the
Agent could lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful Rate.

1.6           Fees.
  Borrower agrees to pay to the Agent for the pro rata benefit of the Lenders
(i) a non-refundable closing fee of $75,000 due and payable on the Closing Date
(the “Closing Fee”), and (ii) all actual fees, costs and expenses of closing due
and owing and presented as of the Closing Date, including without limitation,
those relating to (a) the Agent’s due diligence review and evaluation of the
transaction, (b) the preparation, negotiation, execution and delivery of the
Loan Documents, (c) the closing of the transaction, (d) all appraisal, audit,
environmental, title work, travel, inspection, surveys, filing, search and
registration fees, (e) any loan, escrow, recording and transfer fees and taxes
(as applicable), and (f) Agent’s counsel fees and

 
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expenses relating to any of the foregoing other than Lender’s in-house counsel
fees.  The Earnest Money Deposit will be applied to the expenses enumerated in
subsection (ii) hereof.

1.7           Receipt of Payments.
  Borrower shall make each payment under this Agreement (not otherwise made
pursuant to Section 1.8) without set-off, counterclaim or deduction and free and
clear of all Taxes not later than 1:00 PM New York City time on the day when due
in lawful money of the United States of America in immediately available funds
to an account specified by the Agent in writing.  If Borrower shall be required
by law to deduct any Taxes from any payment to any Lender under any Loan
Document, then the amount payable to such Lender shall be increased so that,
after making all required deductions, Lender receives an amount equal to that
which it would have received had no such deductions been made; provided,
however, that Borrower shall not be required to increase any such amounts
payable to such Lender with respect to any Taxes (i) that are attributable to
such Lender’s failure to comply with the requirements of Section 8(b), so long
as (x) Borrower provides written notice to the Agent of the imposition of any
such Taxes as soon as Borrower is aware of the imposition of such Taxes, but in
no event less than 5 Business Days before the scheduled payment or withholding
of such Taxes and (y) such Lender, after receiving such notice from the Agent,
has not complied with the requirements of Section 8(b) before any such Taxes
accrue, (ii) that are United States withholding taxes imposed on amounts payable
to such Lender at the time such Lender becomes a party to this Agreement, except
to the extent that such Lender’s assignor (if any) was entitled, at the time of
assignment, to receive additional amounts from the Borrower with respect to such
Taxes pursuant to this Section or (iii) that are imposed as a result of an event
occurring after such Lender becomes a Lender other than (a) a change in any
relevant law or regulation or the introduction of any relevant law or regulation
or a change in interpretation, administration or application by any competent
authority of any relevant law, or (b) compliance with any regulation made by a
competent authority having jurisdiction over such Lender, so long as (x)
Borrower provides written notice to the Agent of the imposition of any such
Taxes as soon as Borrower is aware of the imposition of such Taxes, but in no
event less than 10 Business Days before the scheduled payment or withholding of
such Taxes and (y) such Lender, after receiving such notice the Agent, has not
cured any such event before any such Taxes accrue.

1.8           Application and Allocation of Payments.
  Borrower irrevocably agrees that the Agent shall have the continuing and
exclusive right to apply any and all payments against the then due and payable
Obligations in such order as the Agent may deem advisable.

1.9           Accounting.
  Lender is authorized to record on its books and records the date and amount of
the Loan and each payment of principal thereof and such recordation shall
constitute prima facie evidence of the accuracy of the information so
recorded.  Lender may provide Borrower on a monthly basis a statement and
accounting of such recordations but any failure on the part of the Lender to
keep any such recordation (or any errors therein) or to send a statement thereof
to Borrower shall not in any manner affect the obligation of Borrower to repay
any of the Obligations.  Except to the extent that Borrower shall, within
forty-five (45) days after such statement and accounting is sent, notify Lender
in writing of any objection Borrower may have thereto (stating with
particularity the basis for such objection), such statement and accounting shall
be deemed final, binding and conclusive upon Borrower, absent manifest error.

1.10           Indemnity.
  Borrower and each other Credit Party executing this Agreement jointly and
severally agree to indemnify and hold the Agent, each Lender and their
Affiliates, and their respective employees, attorneys and agents (each, an
“Indemnified Person”), harmless from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses of any kind or
nature whatsoever (including reasonable attorneys’ fees and disbursements and
other costs of investigation or defense, including those incurred upon any
appeal) that may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents or with respect to
the execution, delivery, enforcement, performance and administration of, or in
any other way arising out of or relating to, this Agreement and the other Loan
Documents or any other documents or transactions contemplated by or referred to
herein or therein and any actions or failures to act with respect to any of the
foregoing, including any and all product liabilities, Environmental Liabilities,
Taxes and reasonable legal costs and expenses arising out of or incurred in
connection with disputes between or among any parties to any of the Loan
Documents (collectively, “Indemnified Liabilities”), except to the extent that
any such Indemnified Liability is finally determined by a non-appealable court
order by a court of competent jurisdiction to have resulted solely from such
Indemnified Person’s gross negligence or willful misconduct. NO INDEMNIFIED
PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY CREDIT PARTY, ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER
OF ATTORNEY OR FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES THAT
MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR
TERMINATED UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

1.11           Involuntary Disposition Proceeds.
  Immediately upon receipt by any Grantor of any Involuntary Disposition
Proceeds with respect to any Collateral, Borrower shall prepay the Loan in an
aggregate amount equal to all such proceeds, but net of (1)

 
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the reasonable and customary transaction costs, fees and expenses properly
attributable to the involuntary disposition giving rise to such proceeds and
payable by any Grantor in connection therewith (in each case, paid to
non-Affiliates), (2) sales, use, or transfer taxes, (3) amounts payable to
holders of senior Liens (to the extent such Liens constitute Permitted
Encumbrances hereunder), if any, on the assets that are the subject of the
involuntary disposition giving rise to such proceeds, and (4) an appropriate
reserve for income taxes in accordance with GAAP in connection therewith;
provided, that the reversal of any such reserve shall be used for prepayment of
the Obligations.  Any Involuntary Disposition Proceeds applied to prepay the
Loan shall not be subject to the prepayment fees set forth in Section 1.2(b)
hereof.  Such prepayment shall be applied to the remaining Installments of the
Loan in the inverse order of their maturity. The balance of Involuntary
Disposition Proceeds remaining, if any, after the prepayment in full of the Loan
shall be retained by the applicable Grantor.  Notwithstanding the foregoing, if
Borrower delivers to the Lender a certificate, signed by Borrower’s chief
financial officer, stating that the applicable Grantor intends to reinvest or
deliver a purchase order with respect to all or any portion of such Involuntary
Disposition Proceeds to acquire or purchase comparable assets usable in the
business of the Grantor before the earlier of the Maturity Date and the 120th
day after any Grantor’s receipt thereof (the “Applicable Reinvestment Period”),
the applicable Grantor may reinvest such proceeds in the manner set forth in
such certificate; provided that (x) no Default is then in existence, and (y) the
applicable Grantor shall immediately deposit such proceeds on the first Business
Day immediately following any Grantor’s receipt thereof into a Cash Collateral
Account and such funds shall remain in such Cash Collateral Account until the
earliest of (i) the date the applicable Grantor makes written request for such
proceeds in connection with such acquisition and in accordance with this Section
1.11 and such certificate, at which time such proceeds shall be used for such
purpose provided that no Default or Event of Default has occurred and is
continuing at such time, (ii) the expiration of the Applicable Reinvestment
Period, at which time any such remaining proceeds (other than those with respect
to which a purchase order has been delivered) shall be applied to prepay the
Loan as provided above in this Section 1.11, and (iii) the Maturity Date, at
which time such proceeds shall be applied to all Obligations then due.

1.12           Joinder of New Subsidiaries as a Credit Party, Etc.
  As soon as reasonably possible (and in any event within 10 Business Days)
after the formation or the consummation of an acquisition of any new Subsidiary
of a Credit Party, Borrower shall cause such new Subsidiary to become a Credit
Party, a Guarantor (other than any such Subsidiary that is a Government Funded
SPE), and a Grantor (other than any such Subsidiary that is a Government Funded
SPE), as applicable, under this Agreement by having the following documents
delivered to Lender: (i) a Secretarial Certificate, a Power of Attorney and a
Joinder Agreement in the forms of Exhibits C, D and H attached hereto,
respectively, duly completed, executed and delivered by such new Subsidiary ,
(ii) documents with respect to such new Subsidiary (other than any such
Subsidiary that is a Government Funded SPE) of the types described under the
heading “Collateral Documents” on Schedule D attached hereto, (iii) an opinion
of counsel to such new Subsidiary, in form, substance and scope comparable to
the legal opinion Grantor’s counsel delivered to the Agent on the Closing Date
and (iv) an updated Disclosure Schedule (3.7).

2.           CONDITIONS PRECEDENT

2.1           Conditions to the Loan.
  No Lender shall be obligated to make a Term Loan unless the following
conditions have been satisfied in a manner satisfactory to the Agent in its sole
discretion, or waived in writing by the Agent:

(a)         Schedule of Documents. The documents set forth in the Schedule of
Documents (Schedule D) to be delivered on or before the Closing Date shall have
been duly executed and delivered by the appropriate parties;

(b)         Insurance. The Agent shall have received evidence satisfactory to it
that the insurance policies provided for in Section 3.16 are in full force and
effect, together with appropriate evidence showing loss payable or additional
insured clauses or endorsements in favor of Lender as required under such
Section;

(c)         Opinions of Counsel. The Agent shall have received an opinion of
counsel to the Credit Parties with respect to this Agreement, the Notes and the
other Loan Documents in form attached hereto as Exhibit K and otherwise in form
and substance satisfactory to the Agent;

(d)         Fees. Borrower has paid the Closing Fee to the Agent for the pro
rata benefit of the Lenders and shall have reimbursed the Agent for all fees,
costs and expenses of closing, in excess of the Earnest Money Deposit, due and
owing and presented as of the Closing Date, each in immediately available funds,
or, at the Borrower’s option, to authorize the Agent to deduct the Closing Fee
and such other fees, costs and expenses of closing from the amount of the Term
Loan made on the Closing Date; and

(e)         Equity Raise.  The Borrower shall have raised at least $4,500,000 in
equity capital pursuant to its Rights Offering filed with the SEC as of the
Closing Date.

(f)         Real Property Collateral.  With respect to the Lubbock Property, the
Agent shall have received, each in form and substance reasonably satisfactory to
the Agent, the following: (i) title insurance policies or marked-up
unconditional

 
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insurance binders (in each case, together with copies of all documents referred
to therein) issued by title insurance companies reasonably satisfactory to the
Agent, (ii) ALTA (or TLTA, if applicable) as-built surveys certified to the
Agent (in form and as to date that is sufficiently acceptable to the title
insurer issuing title insurance to the Agent for such title insurer to deliver
endorsements to such title insurance as reasonably requested by the Agent),
(iii) environmental assessments and reports, with reliance letters if necessary,
and (iv) evidence regarding recording and payment of fees, insurance premium and
taxes, in each case, that Lender may reasonably request, to create, register,
perfect, maintain, evidence the existence, substance, form or validity of or
enforce a valid Lien on such parcel of real property in favor of the Agent,
subject only to such Liens as the Agent may approve.

(g)         Representations and Warranties. Any representation or warranty by
any Credit Party contained herein or in any of the other Loan Documents shall be
untrue or incorrect as of such date (x) as stated as to representations and
warranties which contain materiality limitations, and (y) and in all material
respects as to all other representations and warranties; except to the extent
that any such representation or warranty is expressly stated to relate to a
specific earlier date, in which case, such representation and warranty shall be
true and correct as of such earlier date (x) as stated as to representations and
warranties which contain materiality limitations, and (y) and in all material
respects as to all other representations and warranties;

(h)         Material Adverse Effect.  No event or circumstance that has had or
reasonably could be expected to have a Material Adverse Effect has occurred.

(i)         Default.  Any Default would result after giving effect to the Term
Loan.

(j)Requirements of Law.  The Credit Parties and the Transactions shall be in
full compliance with all material Requirements of Law and shall have received
satisfactory evidence of such compliance reasonably requested by them.

(k)Consents.  All requisite Governmental Authorities and third parties shall
have approved or consented to the Transactions, and there shall be no
governmental or judicial action, actual or threatened, that has or would have,
singly or in the aggregate, a reasonable likelihood of restraining, preventing
or imposing burdensome conditions on the Transactions or the other transactions
contemplated hereby.

(l)Litigation.  There shall be no litigation, public or private, or
administrative proceedings, governmental investigation or other legal or
regulatory developments, actual or threatened, that, singly or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect, or could
materially and adversely affect the ability of the Credit Parties to fully and
timely perform their respective obligations under the Loan Documents or the
ability of the parties to consummate the financings contemplated hereby or the
other Transactions.

(m)         USA PATRIOT Act.  The Lenders and the Agent shall have timely
received the information required under Section 10.13 and background
investigations of the Guarantors and the Borrower’s management and the results
thereof shall be satisfactory to Agent in its sole discretion.

3.           REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS

To induce the Agent and the Lenders to enter into this Agreement and to induce
the Lenders to make the Loan, Borrower and each other Credit Party executing
this Agreement represent and warrant to the Agent and each Lender (each of which
representations and warranties shall survive the execution and delivery of this
Agreement), and promise to and agree with the Agent and each Lender until the
Termination Date as follows:

3.1           Corporate Existence; Compliance with Law.
  Each Credit Party:  (a) is, as of the Closing Date, and will continue to be
(i)  (A) a corporation, limited liability company or limited partnership, as
applicable, duly organized, and validly existing and (B) in good standing under
the laws of the jurisdiction of its incorporation or organization, (ii) duly
qualified to do business and in good standing in each other jurisdiction where
its ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to have a Material Adverse Effect, and (iii) in compliance with all
Requirements of Law and Contractual Obligations, except to the extent failure to
comply therewith could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and (b) has and will continue to
have (i) the requisite corporate power and authority and the legal right to
execute, deliver and perform its obligations under the Loan Documents, and to
own, pledge, mortgage or otherwise encumber and operate its properties, to lease
the property it operates under lease, and to conduct its business as now,
heretofore or proposed to be conducted, and (ii) except as could not,
individually, or in the aggregate, reasonably be expected to have a Material
Adverse Effect, all licenses,

 
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permits, franchises, rights, powers, consents or approvals from or by all
Persons or Governmental Authorities having jurisdiction over such Credit Party
that are necessary or appropriate for the conduct of its business.

3.2           Executive Offices; Corporate or Other Names.
  (a) Each Credit Party’s name as it appears in official filings in the state of
its incorporation or organization, (b) the type of entity of each Credit Party,
(c) the organizational identification number issued by each Credit Party’s state
of incorporation or organization or a statement that no such number has been
issued, (d) each Credit Party’s state of organization or incorporation, and (e)
the location of each Credit Party’s chief executive office and locations of
Collateral when not in use by a customer of any Credit Party are as set forth in
Disclosure Schedule (3.2) and, except as set forth in such Disclosure Schedule,
such locations have not changed during the preceding twelve months.  As of the
Closing Date, during the prior twenty-four (24) months, except as set forth in
Disclosure Schedule (3.2), no Credit Party has been known as or conducted
business in any other name (including trade names) which did not include
“Xfone,” “NTS,” “Gulf Coast Utilities,” “Garey M. Wallace,” “Expetel,”
“Communications Brokers,” “Midcom of Arizona” or “Pride Network” in such
name.  Each Credit Party has only one state of incorporation or organization.

3.3           Corporate Power; Authorization; Enforceable Obligations.
  The execution, delivery and performance by each Credit Party of the Loan
Documents to which it is a party, and the creation of all Liens provided for
herein and therein:  (a) are and will continue to be within such Credit Party’s
power and authority; (b) have been and will continue to be duly authorized by
all necessary or proper action; (c) are not and will not be in violation of any
Requirement of Law or Contractual Obligation of such Credit Party, except to the
extent such violation could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; (d) do not and will not result in
the creation or imposition of any Lien (other than Permitted Encumbrances) upon
any of the Collateral; and (e) do not and will not require the consent or
approval of any Governmental Authority or any other Person.  As of the Closing
Date, each Loan Document shall have been duly executed and delivered on behalf
of each Credit Party party thereto, and each such Loan Document upon such
execution and delivery shall be and will continue to be a legal, valid and
binding obligation of such Credit Party, enforceable against it in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency and other similar laws affecting creditors’ rights generally.

3.4           Financial Statements; Books and Records.

(a)         The annual and quarterly Financial Statements of the Credit Parties
delivered pursuant to Section 4.1 present fairly in all material respects the
financial condition of such Credit Parties as of the date of each such Financial
Statement in accordance with GAAP (subject to normal year-end adjustments and to
the absence of footnotes in the case of unaudited statements).

(b)         The Credit Parties shall keep proper Books and Records in which
proper entries, reflecting all consolidated and consolidating financial
transactions, will be made in accordance with GAAP and all Requirements of Law
in all material respects of all financial transactions and the assets and
business of each Credit Party on a basis consistent with the Financial
Statements.

(c)         The Projections most recently delivered by Borrower to Lender have
been prepared in good faith, with care and diligence and use assumptions that
are reasonable under the circumstances at the time such Projections were
prepared and as of the date delivered to Lender and all such assumptions are
disclosed in the Projections.

3.5           Material Adverse Change.
  Except as set forth in Disclosure Schedule (3.5), between December 31,
2010 and the Closing Date, no events with respect to any Credit Party have
occurred that alone or in the aggregate has had or could reasonably be expected
to have a Material Adverse Effect.  No Requirement of Law or Contractual
Obligation of any Credit Party has or has had or could reasonably be expected to
have a Material Adverse Effect.  No Credit Party is in default, and to such
Credit Party’s knowledge no third party is in default, under or with respect to
any of its Contractual Obligations, that alone or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect.

3.6           Government Authorizations.
  As of the Closing Date, Disclosure Schedule (3.6) accurately and completely
lists all Government Authorizations (identified by issuing authority, name of
the party holding the authorization, file number, and expiration date, if any)
granted, issued or assigned to any of the Credit Parties as of the date
hereof.  Except as set forth on Disclosure Schedule (3.6), the Credit Parties
hold all Government Authorizations that are necessary for the operation of the
business of the Credit Parties as now, heretofore or proposed to be conducted.
Each Government Authorization held by a Credit Party is in full force and effect
and no material default under such Government Authorization by any Credit Party
has occurred and is continuing.  As of the date hereof, except as limited by the
provisions of the Communications Act of 1934, as amended (the “Communications
Act”), and the rules and regulations of the issuing Governmental Authority and
as otherwise specified on the face of any Government Authorizations, none of the
Government Authorizations is subject to any restriction or condition that would
limit in any material respect the operation of the business of the Credit
Parties as it is now conducted.  Except as specified in the Government
Authorizations or Disclosure Schedule (3.6), (a) there is not, as of the date
hereof,

 
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pending or, to the knowledge of the Credit Parties, threatened any action by or
before the Governmental Authority to revoke, cancel, rescind or materially
modify any of the Government Authorizations (other than proceedings to amend FCC
rules of general applicability) or refusal to renew (if applicable) the
Government Authorizations, and (b) there is not now issued or outstanding,
pending or, to the knowledge of the Credit Parties, threatened by or before the
Governmental Authority any order to show cause, notice of violation, notice of
apparent liability, or notice of forfeiture or complaint against any Credit
Party with respect to any of the Government Authorizations that would have a
Material Adverse Effect.  Except as specified in Disclosure Schedule (3.6), none
of the Credit Parties’ Government Authorizations is the subject of a pending
license renewal application (if applicable) and the Credit Parties have no
reason to believe that any of the Credit Parties’ Government Authorizations will
be revoked or, if applicable, will not be renewed in the ordinary course. From
and after the Closing Date, the Credit Parties shall preserve, renew (if
applicable), and maintain in full force and effect all Government Authorizations
necessary to conduct the business of the Credit Parties as now, heretofore or
proposed to be conducted. Except as specified in Disclosure Schedule (3.6), each
Credit Party has timely and fully paid and will continue to pay in full its
contributions to the Universal Service Fund (“USF”) and any applicable
regulatory fees imposed by the FCC. Each Credit Party has timely filed and will
continue to file all reports and other filings required by the FCC, including,
but not limited to, Forms 499-A and 499-Q. Each Credit Party has obtained all
necessary authority under Section 214 of the Communications Act to provide
service as it is currently conducted or hereafter proposed to be conducted. The
Credit Parties shall promptly (and in any event within five (5) days after the
discovery thereof) give written notice to the Lender of  any proceedings
instituted or threatened against any Credit Party by or in any or before any
Governmental Authority (including, without limitation, the FCC and the FAA),
which, if adversely determined, could have a Material Adverse Effect.

All of the towers owned by the Credit Parties are obstruction-marked and lighted
to the extent required by, and in accordance with, the rules and regulations of
the FAA and appropriate notification to the FAA has been filed for each such
tower where required by the rules and policies of the FCC. Such towers,
including without limitation, the lighting system, shall be maintained in
accordance with customary industry practice, and to the Credit Parties’
knowledge are in good operating condition and repair (subject to normal wear and
tear).

Each Credit Party agrees to take any action which the Agent may reasonably
request in order to cause the Agent or any Lender to obtain and enjoy the full
rights and benefits granted to the Agent or Lender by this Agreement and the
other Loan Documents, including specifically, at the cost and expense of the
Credit Parties, the use of commercially reasonable efforts to assist in
obtaining approval of the FCC or other Governmental Authority for any action or
transaction contemplated by this Agreement or any Loan Document which is then
required by law, and specifically, without limitation, upon request following an
Event of Default, to prepare, sign and file (or cause to be filed) with the FCC
or such other Governmental Authority the assignor’s, transferor’s or controlling
person’s portion of any application or applications for consent to (i) the
assignment of any FCC License or transfer of control thereof, (ii) any sale or
sales of property constituting any Collateral by or on behalf of the Lender or
(iii) any assumption by the Lender or its designees of voting rights or
management rights in property constituting any Collateral effected in accordance
with the terms of this Agreement.

3.7           Subsidiaries.
  Except as set forth in Disclosure Schedule (3.7), as of the Closing Date
Borrower does not have any Subsidiaries.  One hundred percent (100%) of the
issued and outstanding Stock of Borrower (excluding all rights to purchase,
options, warrants or similar rights or agreements pursuant to which Borrower may
be required to issue, sell, repurchase or redeem any of its Stock) as of the
Closing Date is owned directly or indirectly by Holdings.

3.8           Government Regulation; Margin Regulations.
  Except as disclosed in Disclosure Schedule (3.8), no Credit Party is subject
to or regulated under any Federal or state statute, rule or regulation that
restricts or limits such Person’s ability to incur Indebtedness, pledge its
assets, or to perform its obligations under the Loan Documents. The making of
the Loan, the application of the proceeds and repayment thereof, and the
consummation of the transactions contemplated by the Loan Documents do not and
will not violate any Requirement of Law.  No Credit Party is engaged, nor will
it engage, in the business of extending credit for the purpose of “purchasing”
or “carrying” any “margin security” as such terms are defined in Regulation U of
the Federal Reserve Board as now and hereafter in effect (such securities being
referred to herein as “Margin Stock”).  No Credit Party owns any Margin Stock,
and none of the proceeds of the Loan or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock or reducing or retiring any Indebtedness that was
originally incurred to purchase or carry any Margin Stock.  No Credit Party will
take or permit to be taken any action that might cause any Loan Document to
violate any regulation of the Federal Reserve Board.

3.9           Taxes; Charges.
  Except as disclosed in Disclosure Schedule (3.9) all tax returns, reports and
statements required by any Governmental Authority to be filed by Borrower or any
other Credit Party have, as of the Closing Date, been filed and will, until the
Termination Date, be filed with the appropriate Governmental Authority and no
tax Lien has been filed against any Credit Party or any Credit Party’s
property.  Disclosure Schedule (3.9) sets forth as of the Closing Date those
taxable years for which any Credit Party’s tax returns are currently being
audited by the IRS or any other applicable Governmental Authority and any
assessments or threatened assessments in connection with such audit, or
otherwise currently outstanding.  As of the

 
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Closing Date, no Credit Party has agreed or been requested to make any
adjustment under IRC Section 481(a), by reason of a change in accounting method
or otherwise, which could reasonably be expected to have a Material Adverse
Effect.

3.10           Payment of Obligations.
  Each Credit Party will pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all of its
material Charges and other obligations of whatever nature, except where the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of such Credit Party and none of the
Collateral is or could reasonably be expected to become subject to any Lien or
forfeiture or loss as a result of such contest.

3.11           ERISA.
  No ERISA Event has occurred or is reasonably expected to occur that, when
taken together with all other existing ERISA Events, could reasonably be
expected to have a Material Adverse Effect.  Except as disclosed in Disclosure
Schedule (3.11), the present value of all accumulated benefit obligations of the
Credit Parties under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date of
the most recent Financial Statements reflecting such amounts, exceed the fair
market value of the assets of such Plan when aggregated with the potential
Withdrawal Liability, and the present value of all accumulated benefit
obligations of all underfunded Plans (based on the assumptions used for purposes
of Statement of Financial Account Standards No. 87) did not, as of the date of
the most recent Financial Statements reflecting such amounts, exceed the fair
market value of the assets of such underfunded Plans when aggregated with the
potential Withdrawal Liability.  No Credit Party or ERISA Affiliate has incurred
or reasonably expects to incur any Withdrawal Liability.

3.12           Litigation.
  No Litigation is pending or, to the knowledge of any Credit Party, threatened
by or against any Credit Party or against any of Credit Party’s properties or
revenues (a) with respect to any of the Loan Documents, the Loan, the
Collateral, or any of the transactions contemplated hereby or thereby, or (b)
that could reasonably be expected to have a Material Adverse Effect.  Each
Credit Party shall notify the Agent promptly in writing upon learning of the
existence, threat or commencement of any such Litigation.

3.13           Intellectual Property.
  The Credit Parties own, or are licensed to use, all such Intellectual Property
necessary to conduct its business as currently conducted, or to permit the Agent
to sell, transfer, rent, or use the Collateral upon the occurrence and during
the continuation of an Event of Default, except for such Intellectual Property
the failure of which to so own or be so licensed could not reasonably be
expected to have a Material Adverse Effect.  As of the Closing Date, the Credit
Parties own or are licensed to use the Intellectual Property as set forth in
Disclosure Schedule (3.13).  Each Credit Party shall maintain the patenting and
registration of all Intellectual Property with the United States Patent and
Trademark Office, the United States Copyright Office, or other appropriate
Governmental Authority.

3.14           Full Disclosure.
  No information contained in any Loan Document, the Financial Statements or any
written statement furnished by or on behalf of any Credit Party under any Loan
Document, or to induce the Agent and the Lenders to execute the Loan Documents
(as such information has been amended, supplemented or superseded by any other
information later delivered to the same parties receiving such information,
provided that the delivery of such amended, supplemented or superseding
information shall not cure any Event of Default arising under Section 7.1(b)
other than with respect to this Section 3.14), contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not materially misleading in light of the
circumstances under which they were made.

3.15           Environmental Liabilities.
  Except as set forth in Disclosure Schedule (3.15), as of the Closing Date, (a)
no Credit Party is subject to any Environmental Liabilities or, to any Credit
Party’s knowledge, potential Environmental Liabilities, that could reasonably be
expected to have a Material Adverse Effect and  (b) no notice has been received
by any Credit Party identifying it as a “potentially responsible party” or
requesting information under CERCLA or analogous state statutes, and to the
knowledge of any Credit Party, there are no facts, circumstances or conditions
that may result in any Credit Party being identified as a “potentially
responsible party” under CERCLA or analogous state statutes, in each such case
if such circumstance could reasonably be expected to have a Material Adverse
Effect.  Each Credit Party: (i) shall comply in all material respects with all
applicable Environmental Laws and environmental permits and (ii) shall notify
the Agent in writing within seven (7) days if and when it becomes aware of any
Release, on, at, in, under, above, to, from or about any real property owned,
leased or occupied by a Credit Party if such Release could reasonably be
expected to have a Material Adverse Effect.  Without limiting the foregoing, if
a Default is continuing or if the Agent at any time has a reasonable basis to
believe that there exist violations of Environmental Laws by any Credit Party or
that there exist any Environmental Liabilities, in each case, that would have,
in the aggregate, a Material Adverse Effect, then each Credit Party shall,
promptly upon receipt of request from the Agent, cause the performance of, and
allow the Agent access to such real property for the purpose of conducting, such
environmental audits and assessments, including subsurface sampling of soil and
groundwater, and cause the preparation of such reports, in each case as the
Agent may from time to time reasonably request.  Such audits, assessments and
reports, to the extent not conducted by the Agent shall be conducted and
prepared by reputable environmental consulting firms reasonably acceptable to
the Agent and shall be in form and substance reasonably acceptable to the Agent.

 
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Insurance.
  As of the Closing Date, Disclosure Schedule (3.16) lists all insurance of any
nature maintained by Borrower with respect to the Collateral as well as all
liability insurance maintained by the Credit Parties, as well as a summary of
the terms of such insurance.

(a)         Coverage.  Without limiting any of the other obligations or
liabilities of the Credit Parties under this Agreement, the Credit Parties
shall, during the term of this Agreement, carry and maintain, at its own
expense, at least the minimum insurance coverage set forth in this Section 3.16.
All insurance carried pursuant to this Section 3.16 shall be placed with such
insurers having a minimum A.M. Best rating of A-:VIII (or as may be otherwise
reasonably acceptable to the Agent) and be in such form, with terms, conditions,
limits and deductibles as shall be reasonably acceptable to the Agent. The
insurance required to be carried and maintained by Credit Parties hereunder
shall, in all events, include the following:

 
(i)
All Risk Property Insurance.  The Credit Parties shall maintain, all risk
property insurance covering against physical loss or damage, including but not
limited to fire and extended coverage, collapse, flood, earth movement and
comprehensive boiler and machinery coverage (including electrical malfunction
and mechanical breakdown).  Coverage shall be written on a replacement cost
basis in an amount reasonably acceptable to Lender; and,

 
(ii)
Commercial General Liability Insurance.  The Credit Parties shall maintain
comprehensive general liability insurance written on an occurrence basis with a
limit of not less than $1,000,000. Such coverage shall include, but not be
limited to, premises/operations, broad form contractual liability,
products/completed operations, property damage and personal injury liability;
and,

 
(iii)
Excess/Umbrella Liability Insurance.  The Credit Parties shall maintain excess
and/or umbrella liability insurance written on an occurrence basis in an amount
not less than $15,000,000 providing coverage limits excess of the insurance
limits required under sections (a)(ii).  Such insurance shall follow the form of
the primary insurances and drop down in case of exhaustion of underlying limits
and/or aggregates.

(b)         Endorsements.  The Grantors shall cause all insurance policies
carried and maintained in accordance with this Section 3.16 to be endorsed as
follows:

 
(i)
The Agent, on behalf of the Lenders, shall be an additional insured and loss
payee with respect to property policy described in subsection (a)(i).  The
Agent, on behalf of the Lenders, shall be an additional insured with respect to
liability policies described in subsections (a)(ii) and, to the extent allowed
by law (iii). It shall be understood that any obligation imposed upon a Grantor,
including but not limited to the obligation to pay premiums, shall be the sole
obligation of such Grantor and not that of the Agent; and,

 
(ii)
With respect to property policy described in subsection (a)(i), the interests of
the Agent shall not be invalidated by any action or inaction of any Grantor or
any other person, and shall insure the Agent regardless of any breach or
violation by any Grantor or any other person, of any warranties, declarations or
conditions of such policies; and,

 
(iii)
The insurers thereunder shall waive all rights of subrogation against the Agent,
any right of setoff or counterclaim and any other right to deduction, whether by
attachment or otherwise; and,

 
(iv)
If such insurance is canceled for any reason whatsoever, including nonpayment of
premium, or any changes are initiated by any Grantor or the carrier which affect
the interests of the Agent, such cancellation or change shall not be effective
as to the Agent until 30 days (ten (10) days in the case of non-payment of
premium) after receipt by the Agent of written notice from such insurer.

(c)         Certifications.  On the Closing Date, and at each policy renewal,
but not less than annually, the Credit Party shall provide to the Agent a
certification from each insurer or by an authorized representative of each
insurer. Such certification shall identify the underwriters, the type of
insurance, the limits, deductibles, and term thereof and shall specifically list
the special provisions delineated in section (b) above for such insurance
required for this Section 3.16.

(d)         Insurance Report.  Concurrently with the furnishing of all
certificates referred to in this Section 3.16, the Credit Party shall furnish
the Agent with a statement from an independent insurance broker, acceptable to
the Agent, stating that (i) all premiums then due have been paid, (ii) in the
opinion of such broker, the insurance then maintained by the Credit Party is in
accordance with this Section 3.16, and (iii) such broker shall confirm to the
Agent that the endorsements in section (b), above, have been or shall soon be,
endorsed to each Credit Party’s relevant insurance policies.

 
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Borrower shall direct all present and future insurers under its policies of
insurance to pay all proceeds payable thereunder with respect to the Collateral
directly to Lender for application pursuant to Section 1.11.  If any insurance
proceeds are paid by check, draft or other instrument payable to Borrower and
the Agent jointly, the Agent may endorse Borrower’s name thereon and do such
other things as the Agent may deem advisable to reduce the same to cash.

3.16            Solvency.
  Both before and after giving effect to (a) any Loan, the issuance of the
guaranties of the Obligations and the pledge of assets as security therefor by
all of the Credit Party, (b) the disbursement of the proceeds of such Loan
pursuant to the instructions of the Borrower, and (c) the payment and accrual of
all transaction costs in connection with the foregoing, the Borrower and its
Subsidiaries taken as a whole are Solvent.

3.17            Other Financings.
  Except as disclosed in Disclosure Schedule (3.18) attached hereto, none of the
Credit Parties has outstanding as of the Closing Date any Indebtedness.

3.18           Conduct of Business.
  Each Credit Party (a) shall conduct its business substantially as now
conducted or as otherwise permitted hereunder, and (b) shall at all times
maintain, preserve and protect all of the Collateral and keep the same in good
repair, working order and condition and make, or cause to be made, all necessary
or appropriate repairs, replacements and improvements thereto consistent with
manufacturer specifications and industry practices.

3.19           Further Assurances.
  At any time and from time to time, upon the written request of the Agent and
at the sole expense of the Credit Party, the Credit Party shall promptly and
duly execute and deliver any and all such further instruments and documents and
take such further action as Agent may reasonably deem desirable (a) to obtain
the full benefits of this Agreement and the other Loan Documents, (b) to
protect, preserve and maintain the Agent’s rights in any Collateral, or (c) to
enable the Agent to exercise all or any of the rights and powers herein granted.

3.20           Collateral/Maintenance of Property.

(a)         Each Credit Party holds and will continue to hold good title to any
of its property constituting the Collateral and none of such property is or will
be subject to any Liens except Permitted Encumbrances.

(b)         Each Credit Party shall (i) maintain and preserve in all material
respects in good working order and condition the Collateral and all other of its
property necessary in the conduct of its business, and such Collateral shall be
maintained in accordance with all manufacturer’s suggested and recommended
maintenance procedures, including preventive maintenance, (ii) maintain and
preserve all material rights, permits, licenses, approvals and privileges
(including all Permits) necessary, used or useful, whether because of its
ownership, lease, sublease or other operation or occupation of property or other
conduct of its business, and shall make all necessary or appropriate filings
with, and give all required notices to, Governmental Authorities, and (iii)
maintain the Collateral in compliance with all statutes, laws, ordinances,
regulations, standards and directives (including environmental) by any
Governmental Authority.

(c)         The Collateral shall not be located in, in transit to or used by a
customer, in any state, nation or territory other than the 48 states comprising
the continental United States, except for (a) the Collateral located in Israel
with an aggregate value not exceeding $100,000 at any time and (b) certain
immaterial items customarily carried by an employee in the ordinary course of
business while traveling for business such as mobile phones, laptop computers
and basic office supplies.  When not in transit to, or in use by, a customer of
any Credit Party, the Collateral will primarily be located at the Chief
Executive Office or a Rental Office.

3.21           Anti-Terrorism and Anti-Money Laundering Compliance.

(a)         No Credit Party and, after making due inquiry, no Person who owns a
controlling interest in or otherwise controls a Credit Party, and no customer of
a Credit Party to the actual knowledge of such Credit Party after due inquiry,
is (i) listed on the Specially Designated Nationals and Blocked Persons List
(the “SDN List”) maintained by the Office of Foreign Assets Control (“OFAC”),
Department of the Treasury, and/or on any other similar list (“Other Lists” and,
collectively with the SDN List, the “Lists”) maintained by the OFAC pursuant to
any authorizing statute, Executive Order or regulation (collectively, “OFAC Laws
and Regulations”); or (ii) a Person (a “Designated Person”) either (A) included
within the term “designated national” as defined in the Cuban Assets Control
Regulations, 31 C.F.R. Part 515, or (B) designated under Sections 1(a), 1(b),
1(c) or 1(d) of Executive Order No. 13224, 66 Fed. Reg. 49079 (published
September 25, 2001) or similarly designated under any related enabling
legislation or any other similar Executive Orders (collectively, the “Executive
Orders”).  The OFAC Laws and Regulations and the Executive Orders are
collectively referred to in this Agreement as the “Anti-Terrorism Laws”.  Each
of the Credit Parties represents and warrants that it requires, and has taken
reasonable measures to ensure compliance with the requirement, that no Person
who owns any other direct interest in a Credit Party is or shall be listed on
any of the Lists or is or shall be a Designated Person.  This Section 3.22 shall
not apply to any Person to the extent that such Person’s interest in the
Borrower is through a U.S. Publicly-Traded Entity.  As used in this

 
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Agreement, “U.S. Publicly-Traded Entity” means a Person (other than an
individual) whose securities are listed on a national securities exchange, or
quoted on an automated quotation system, in the United States, or a wholly-owned
subsidiary of such a Person.

(b)         Each Credit Party represents and warrants to the Agent and each
Lender that it has taken reasonable measures appropriate to the circumstances
(and in any event as required by law), with respect to each holder of a direct
or indirect interest in such Credit Party, to assure that funds invested by such
holders in the Credit Parties are derived from legal sources (“Anti-Money
Laundering Measures”).  The Anti-Money Laundering Measures have been undertaken
in accordance with the Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq. (“BSA”), and
all applicable laws, regulations and government guidance on BSA compliance and
on the prevention and detection of money laundering violations under 18 U.S.C.
§§ 1956 and 1957 (collectively with the BSA, “Anti-Money Laundering Laws”).

(c)         Each Credit Party represents and warrants to the Agent and each
Lender, to its actual knowledge after making due inquiry, that none of such
Credit Party or any holder of a direct or indirect interest in such Credit Party
(i) is under investigation by any governmental authority for, or has been
charged with, or convicted of, money laundering under 18 U.S.C. §§ 1956 and
1957, drug trafficking, terrorist-related activities or other money laundering
predicate crimes, or any violation of the BSA, (ii) has been assessed civil
penalties under any Anti-Money Laundering Laws, or (iii) has had any of its
funds seized or forfeited in an action under any Anti-Money Laundering Laws.

(d)         Each Credit Party represents and warrants to the Agent and each
Lender that it has taken reasonable measures appropriate to the circumstances
(in any event as required by law), to ensure that such Credit Party is in
compliance with all current and future Anti-Money Laundering Laws and laws,
regulations and government guidance for the prevention of terrorism, terrorist
financing and drug trafficking.

3.22           Maintenance of Corporate Existence.
  Each Credit Party shall reserve and maintain (a) its legal existence and good
standing under the laws of the jurisdiction of its incorporation or organization
and (b) it rights (charter and statutory), privileges franchises and Permits
necessary or desirable in the conduct of its business, except, in the case of
this clause (b), where the failure to do so would not, in the aggregate, have a
Material Adverse Effect.

3.23           Compliance with Laws, Etc.
  Each Credit Party shall comply with all applicable Requirements of Law,
Contractual Obligations and Permits, except for such failures to comply that
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.

3.24           Landlord Agreements.
  Upon the request of the Agent, each Credit Party shall obtain a landlord or
mortgagee waiver, as applicable, from the lessor of each leased property or
mortgagee of any owned property with respect to each location where the
Collateral and/or Books and Records are stored or located, which agreement shall
be reasonably satisfactory in form and substance to the Agent.

3.25           Deposit Accounts; Cash Collateral Accounts.
  (a)  Each Grantor shall cause to be deposited directly all cash, checks,
notes, drafts or other similar items relating to or constituting proceeds of or
payments made in respect of any and all Collateral into one or more springing
blocked accounts in such Grantor’s or Lender’s name (collectively, the
“Controlled Accounts”) set forth in Disclosure Schedule (3.26) and subject to
the Control Agreements.

(b)           Upon the request of Lender, each Grantor shall forward to the
Agent, on a daily basis, evidence of the deposit of all items of payment
received by such Grantor into any Controlled Accounts and copies of all such
checks and other items, together with a statement showing the application of
those items relating to payments on accounts to outstanding accounts and a
collection report with regard thereto in form and substance satisfactory to
Lender.

3.26           Assets of Holding.
  Holdings represents and warrants that as of the Closing Date it has no assets,
and after the Closing Date will have no assets, other than its Ownership
Interests of its Subsidiaries which have been pledged to the Agent as Collateral
for the Obligations.  Except as expressly permitted by Sections 5.5 and 5.7,
Holdings hereby agrees it shall not accept or receive any other assets from any
other Credit Party.

3.27           After-acquired Property.
  Each Credit Party shall:

(a)Subject to this Section 3.28, with respect to any property acquired after the
Closing Date by any Credit Party that is intended to be subject to the Lien
created by any of the Loan Documents but is not so subject, promptly (and in any
event within 30 days after the acquisition thereof) (i) execute and deliver to
the Agent such other documents as the Agent shall deem necessary or advisable to
grant to the Agent for the benefit of the Lenders, a Lien on such property
subject to no Liens other than Permitted Liens, and (ii) take all actions
necessary to cause such Lien to be duly perfected to the extent required
hereunder in accordance with all applicable Requirements of Law, including the
filing of financing statements in

 
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such jurisdictions as may be reasonably requested by the Agent.  The Borrower
shall otherwise take such actions and execute and/or deliver to the Agent such
documents as the Agent shall require to confirm the validity, perfection and
priority of the Lien hereunder on such after-acquired properties.

(b)With respect to any Person that is or becomes a Subsidiary (including any
Foreign Subsidiary) after the Closing Date, promptly (and in any event within 30
days after such Person becomes a Subsidiary) (i) to the extent such
certificates, stock powers, intercompany notes and instruments of transfer have
been released, deliver to the Agent the original certificates, if any,
representing all of the Equity Interests of such Subsidiary, together with
undated stock powers or other appropriate instruments of transfer executed and
delivered in blank by a duly authorized officer of the holder(s) of such Equity
Interests, and all intercompany notes owing from such Subsidiary to any Credit
Party together with instruments of transfer executed and delivered in blank by a
duly authorized officer of such Credit Party and (ii) cause such new Subsidiary
(A) to execute a Joinder Agreement in the form of Exhibit H or such comparable
documentation to become a Grantor and Guarantor (or a Credit Party in the case
of any Government Funded SPE) under this Agreement, and (B) to take all actions
necessary or advisable in the opinion of the Agent to cause the Lien created
hereunder to be duly perfected to the extent required by such agreement in
accordance with all applicable Requirements of Law (including any applicable
foreign laws), including the execution by Borrower or the applicable Credit
Party of a Joinder Agreement in the form of Exhibit H or such comparable
documentation to the applicable Pledge Agreement and the filing of financing
statements (or foreign equivalents) in such jurisdictions as may be reasonably
requested by the Agent and to the extent such new Subsidiary owns Collateral
which is located in the United States and subject to motor vehicle registration
requirements, the noting or (having noted) of the Agent’s Lien on all
certificates of title of such Collateral (except where such notation is not
permitted under the laws of the applicable jurisdiction).  

(c)         If at any time after the Closing Date, a Credit Party (other than
any Government Funded SPE) shall acquire any fee or leasehold interest in any
real property, such Credit Party shall deliver to the Agent, simultaneously with
the closing of such acquisition, each in form and substance reasonably
satisfactory to the Agent, the following: (i) a Mortgage conveying to the Agent
a valid and enforceable first priority Lien on such real property, (ii) a title
insurance policy or marked-up unconditional insurance binder (in each case,
together with copies of all documents referred to therein) issued by a title
insurance company reasonably satisfactory to the Agent, (iii) an ALTA (or TLTA,
if applicable) as-built survey certified to the Lender (in form and as to date
that is sufficiently acceptable to the title insurer issuing title insurance to
the Agent for such title insurer to deliver endorsements to such title insurance
as reasonably requested by the Agent), (iv) an environmental assessment and
report, with reliance letter if necessary, (v) evidence regarding recording and
payment of fees, insurance premium and taxes, in each case, that the Agent may
reasonably request, to create, register, perfect, maintain, evidence the
existence, substance, form or validity of or enforce a valid Lien on such parcel
of real property in favor of the Agent, subject only to such Liens as the Agent
may approve, and (vi) an opinion of counsel in such state in which the acquired
real property is located in form and substance and from counsel reasonably
satisfactory to the Agent.

4.           FINANCIAL MATTERS; REPORTS

4.1           Reports and Notices.
  Until the Termination Date, the Credit Parties shall furnish to the Agent and
each Lender:.

(a)         Quarterly Reports.  Within forty-five (45) days after the last day
of each of the first three (3) Fiscal Quarters of each Fiscal Year of the Credit
Parties, the balance sheets of the Credit Parties on a consolidated basis as at
the end of such Fiscal Quarters and as of the end of the preceding Fiscal Year,
and the related statements of operations and the related statements of cash
flows of the Credit Parties on a consolidated basis for such Fiscal Quarters and
for the elapsed portion of the Fiscal Year ended with the last day of such
Fiscal Quarters, which shall set forth in comparative form such figures as at
the end of and for such Fiscal Quarters and appropriate prior period and shall
be certified by the Chief Financial Officer of the Borrower to have been
prepared in accordance with GAAP and to present fairly in all material respects
the financial position of the Credit Parties on a consolidated basis as at the
end of such period and the results of operations for such period, and for the
elapsed portion of the Fiscal Year ended with the last day of such period,
subject only to normal year-end and audit adjustments and the absence of
footnotes.

(b)         Annual Reports.  Within ninety (90) days after the end of each
Fiscal Year of the Credit Parties, the audited consolidated balance sheet of the
Credit Parties as of the end of such Fiscal Year and the related audited
consolidated statements of operations for such Fiscal Year and for the previous
Fiscal Year, the related audited consolidated statements of cash flow and
stockholders’ equity for such Fiscal Year and for the previous Fiscal Year,
which shall be accompanied by an opinion, without a going concern or similar
qualification or an exception as to scope, prepared by Baker Tilly Virchow
Krause, LLP or such other independent certified public accountant of recognized
national standing reasonably acceptable to the Agent, together with a statement
of such accountants that in connection with their audit, nothing came to their
attention that caused them to believe that the Borrower or any other Credit
Party was not in compliance with the Financial Covenants set forth in Section
4.2 below insofar as they relate to accounting matters.

 
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Financial Officer’s Certificate.  At the time the financial statements are
furnished pursuant to Sections 4.1(a) and 4.1(b), a Compliance Certificate in
the form attached as Exhibit E executed by a Responsible Officer of the Borrower
as to the financial performance of the Credit Parties.

(c)         Annual Projections.  Within sixty (60) days after the commencement
of each Fiscal Year of the Credit Parties, the Projections, which will be
prepared by Borrower in good faith, with care and diligence, and using
assumptions that are reasonable under the circumstances at the time such
Projections are delivered to the Agent and disclosed therein when delivered.

(d)         Credit Parties Accounts.  Within fifteen (15) days after the end of
each month, an Account Receivables Statement in the form attached hereto as
Exhibit J or as otherwise mutually agreed upon by the Borrower and the Agent.

(e)         Perfection Certificate Supplement.  At the time the financial
statements are furnished pursuant to Section 4.1(b), the Borrower shall provide
to the Agent a Perfection Certificate Supplement in the form attached hereto as
Exhibit I or as otherwise mutually agreed upon by the Borrower and the Agent
executed by a Responsible Officer of the Borrower.

4.2           Financial Covenants.
  (a) Fixed Charge Coverage Ratio.  At any time Liquidity is less than
$3,000,000 as of the last day of any Fiscal Quarter (or $3,500,000 as of the
last day of the Fiscal Quarter ending December 31, 2011), the Credit Parties
shall not permit the Fixed Charge Coverage Ratio for the trailing four Fiscal
Quarter period most recently ended to be less than 1.15 to 1.00.

(b)           Senior Leverage Ratio.  As of the end of each Fiscal Quarter, the
Credit Parties shall not permit the Senior Leverage Ratio to exceed 1.50 to
1.00:

4.3           [Intentionally Omitted].

4.4           Other Reports and Information.
  The Grantors shall advise the Agent in reasonable detail promptly after
becoming aware of:  (a) any Lien, other than Permitted Encumbrances, attaching
to or asserted against any of the Collateral or any occurrence causing a
material loss or decline in value of any Collateral and the estimated (or
actual, if available) amount of such loss or decline; (b) any material change in
the composition of the Collateral; and (c) the occurrence of any Default or
other event that has had or could reasonably be expected to have a Material
Adverse Effect.  The Grantors shall, upon request of the Agent, furnish to the
Agent such other reports and information in connection with the affairs,
business, financial condition, operations, prospects or management of Borrower
or any other Grantor or the Collateral as the Agent may reasonably request, all
in reasonable detail.

5.           NEGATIVE COVENANTS

Borrower and each Credit Party executing this Agreement covenants and agrees
(for itself and each other Credit Party) that, without the Agent’s prior written
consent, from the Closing Date until the Termination Date, neither Borrower nor
any other Credit Party shall, directly or indirectly, by operation of law or
otherwise:

5.1           Indebtedness.
  Cancel any debt owing to it or create, incur, assume or permit to exist any
Indebtedness, except:  (a) the Obligations, (b) Indebtedness existing as of the
Closing Date set forth in Disclosure Schedule (3.18), (c) by endorsement of
instruments or items of payment for deposit to the general account of such
Credit Party, (d) for Guaranteed Indebtedness incurred for the benefit of
Borrower if the primary obligation is permitted by this Agreement, (e)
Indebtedness incurred by any Government Funded SPE that is recourse only to the
assets of such Government Funded SPE and not recourse to any assets or
properties of any other Credit Party and is incurred as a result of such
Government Funded SPE’s participation in programs administered by the U.S.
Department of Agriculture’s Rural Utilities Service (“RUS”), (f) additional
Indebtedness (including Purchase Money Indebtedness) incurred after the Closing
Date in an aggregate outstanding amount for all such Credit Parties combined not
exceeding $3,000,000, (g) the Indebtedness evidenced by the Burlingame Note in a
principal amount not to exceed $3,500,000 at any time outstanding and the
Indebtedness evidenced by the Unsecured Bonds in a principal amount not to
exceed ILS 75,726,517 at any time outstanding and (h) the Indebtedness owing to
Reach Broadband in an amount not to exceed $750,000 at any time outstanding
incurred in connection with the acquisition of Capital Assets from Reach
Broadband as permitted by Section 5.3.

5.2           Liens.
  Incur, maintain or otherwise suffer to exist any Lien upon or with respect to
any of its property, whether now owned or hereafter acquired, or assign any
right to receive income or profits, except for Permitted Encumbrances.

 
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Investments; Fundamental Changes.
  Merge with, consolidate with, acquire all or substantially all of the assets
or Stock of, or otherwise combine with or make any investment in or, except as
provided in Section 5.7 below, loan or advance to, any Person; provided,
however, (i) any Borrower may form or acquire any direct or indirect Subsidiary
after the Closing Date so long as within 10 business days after such formation
or acquisition, such Subsidiary becomes a co-Borrower or Guarantor hereunder (or
a Credit Party in the case of a Government Funded SPE), as applicable, and,
except in the case of a Subsidiary that is a Government Funded SPE, grants to
the Agent a Lien in all of its rights, title and interests in, to and under its
Collateral to secure the Obligations, all pursuant to written documentation in
form and substance reasonably satisfactory to the Agent in accordance with
Section 1.12; provided, further, that no Credit Party shall transfer any assets
or property to a new Subsidiary until all requirements of Section 1.12 have been
met for such new Subsidiary and (ii) the Grantors may acquire the Capital Assets
of Reach Broadband for a purchase price not to exceed $750,000.

5.3           Asset Sales.
  Sell, transfer, issue, convey, assign or otherwise dispose any of its assets
or properties (including its accounts or any shares of its Stock) or engage in
any sale-leaseback, synthetic lease or similar transaction, (an “Asset Sale”);
provided, however, that:

(i)           any Grantor may transfer any of its Collateral to any other
Grantor provided such Collateral remains subject to the Liens of the Agent under
this Agreement to secure the Obligations (it being understood and agreed that no
Grantor may transfer any of its assets, properties, Loan proceeds or Collateral
to any Government Funded SPE except as provided in clauses (iv) and (v) of this
Section 5.4);

 (ii)           any Grantor may rent or lease Collateral, or sell inventory or
obsolete or unnecessary equipment, in each case, in the ordinary course of
business;

(iii)           any Grantor may make Permitted Dispositions; provided that all
such Permitted Dispositions shall not exceed $500,000.00 in the aggregate in any
Fiscal Year;

(iv)           absent a Default (both before and, on a pro forma basis, after
giving effect to any proposed payments made pursuant to clauses (x) and (y)
below), the Grantors shall be permitted to transfer (x) at any time during any
Fiscal Month, an amount not to exceed $300,000 in the aggregate during such
Fiscal Month; provided, however, that the aggregate amount of such transfers
from the Closing Date through the Termination Date shall not exceed $4,750,000
(the Credit Parties hereby acknowledge that the Grantors have committed to make
transfers pursuant to the certain NTS Funding Certification Letter dated March
24, 2010 from NTS Communications, Inc. to Pride Network, Inc. in an aggregate
amount up to $6,000,000 and have already, prior to the Closing Date, made
transfers in an aggregate amount equal to $1,250,000) and (y) cash within five
Business Days prior to each RUS Payment Date to a Government Funded SPE in an
amount equal to the greater of (a) the aggregate cash actually received by any
such Grantor in respect of sales or services to such Government Funded SPE’s
customers during the most recently ended Fiscal Month, net of all amounts owing
to any Grantor under the related Government Funded SPE Servicing Agreement in
respect of such Fiscal Month and (b) an amount equal to the regularly scheduled
principal and accrued interest due on such RUS Payment Date to the RUS under the
related Government Funded Loan Agreement;

(v)           if a Default has occurred and is continuing (or would result after
giving effect to any proposed payment described in clause (iv) immediately
above), the Grantors shall be permitted to transfer cash within five Business
Days prior to each RUS Payment Date to a Government Funded SPE in an amount
equal to the aggregate cash actually received by any such Grantor in respect of
sales or services to such Government Funded SPE’s customers during the most
recently ended Fiscal Month, net of all amounts owing to any Grantor under the
related Government Funded SPE Servicing Agreement in respect of such Fiscal
Month;

(vi)           Xfone, Inc. may issue shares of its Stock in a public offering or
private placement to raise equity provided that the net cash proceeds of any
such sale or issuance are immediately upon receipt by any Credit Party paid to
the Agent to be applied to the payment of the Loan if a Default has occurred and
is continuing; and

(vii)           Xfone, Inc. may issue Stock options to its employees in
connection with a customary stock option plan on substantially similar terms as
in effect on the Closing Date or as may otherwise be approved by a majority of
the public shareholders of Xfone, Inc.

5.4           Restricted Payments.
  Make or permit any Restricted Payment.

5.5           Changes in Nature of Business.
  Make any changes in any of its business objectives, purposes, or operations
that could reasonably be expected to adversely affect repayment of the
Obligations or could reasonably be expected to have a Material Adverse Effect,
or engage in any business other than that presently engaged in or proposed to be
engaged in the Projections delivered to Lender on the Closing Date.

 
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5.6           Transactions with Affiliates.
  Enter into any lending, borrowing or other commercial transaction with any of
its employees, directors, Affiliates or any other Credit Party (including
upstreaming and downstreaming of cash and intercompany advances and payments by
a Credit Party on behalf of another Credit Party) other than (a) loans or
advances to employees in the ordinary course of business in an aggregate
outstanding amount not exceeding $50,000, (b) payroll and other administrative
expenses incurred in connection with the Israel Office, (c) loans to Holdings by
the other Credit Parties to permit Holdings to make payments of regularly
scheduled principal and interest on Indebtedness permitted by Section 5.1(g) in
respect of the Unsecured Bonds and the Burlingame Note, in each case, so long as
no Default or Event of Default exists at the time such loan is to be made and no
Default shall result after making any such loan to Holdings or (d) any Borrower
may make intercompany transfers to any other Borrower.

5.7           Third-Party Restrictions on Indebtedness, Liens, Investments or
Restricted Payments.
  Incur or otherwise suffer to exist or become effective or remain liable on or
responsible for any Contractual Obligation limiting the ability of (a) any
Subsidiary of Borrower to make Restricted Payments to, or investments in, or
repay Indebtedness or otherwise sell property to, any Credit Party or (b) any
Credit Party (other than any Government Funded SPE) to incur or suffer to exist
any Lien upon any property of any Credit Party, whether now owned or hereafter
acquired, securing any of its Obligations (including any “equal and ratable”
clause and any similar Contractual Obligation requiring, when a Lien is granted
on any property, another Lien to be granted on such property or any other
property), except, for each of clauses (a) and (b) above, (x) pursuant to the
Loan Documents and (y) limitations on Liens (other than those securing any
Obligation) on any property whose acquisition, repair, improvement or
construction is financed by Purchase Money Indebtedness in reliance upon Section
5.1(b) or (f) set forth in the Contractual Obligations governing such
Indebtedness with respect thereto.

5.8           Modification of Organizational Documents.
  Amend, waive, or otherwise modify its charter or by-laws or other
Organizational Documents.

5.9           Accounting Changes; Fiscal Year.
   Change its (a) accounting treatment or reporting practices, except as
required by GAAP or any Requirement of Law or (b) its Fiscal Year or its method
for determining Fiscal Quarters.

5.10           Changes to Name, Locations, Etc.
  (a) Change (i) its name, chief executive office, corporate offices from those
set forth on Disclosure Schedule (3.2), (ii) its warehouses or other Collateral
locations, or location of its records concerning the Collateral from those
locations set forth on Disclosure Schedule (3.2), (iii) the type of legal entity
that it is, (iv) its organization identification number, if any, issued by its
state of incorporation or organization or (v) its state of incorporation or
organization from that set forth on Disclosure Schedule (3.2) or (b) acquire,
lease or use any real estate after the Closing Date without such Person, in each
instance, giving 30 days’ prior written notice thereof to the Agent and taking
all actions deemed necessary or appropriate by the Agent to continuously protect
and perfect the Agent’s Liens upon the Collateral.

5.11           Bank Accounts.
  Establish any depository or other bank account of any kind with any financial
institution (other than the accounts set forth on Disclosure Schedule (3.26))
(i) without notifying the Agent within three Business Days of the establishment
of any such bank account and provided that such Credit Party has implemented
agreements with such bank or financial institution and the Agent acceptable to
the Agent within five Business Days of the establishment of such bank account,
and (ii) after the occurrence and continuance of a Default, without the Agent’s
prior written consent, and then only after such Credit Party has implemented
agreements with such bank or financial institution and the Agent acceptable to
the Agent.

5.12           Margin Regulations.
  No Credit Party shall use all or any portion of the proceeds of any credit
extended hereunder to purchase or carry Margin Stock in contravention of
Regulation U of the Federal Reserve Board.

5.13           Compliance with ERISA.
  No ERISA Affiliate shall cause or suffer to exist (a) any event that could
result in the imposition of a Lien with respect to any Title IV Plan or
Multiemployer Plan or (b) any other ERISA Event, that would, in the aggregate,
reasonably be expected to result in liabilities in excess of $50,000.  No Credit
Party shall cause or suffer to exist any event that could result in the
imposition of a Lien with respect to any Plan.

5.14           Hazardous Materials.
  No Credit Party shall cause or suffer to exist any Release of any Hazardous
Material at, to or from any real property owned, leased, subleased or otherwise
operated or occupied by any Credit Party that would violate any Environmental
Law, form the basis for any Environmental Liabilities or otherwise adversely
affect the value or marketability of any real property (whether or not owned by
any Credit Party), other than such violations, Environmental Liabilities and
effects that would not, in the aggregate, have a Material Adverse Effect.

5.15           Amendments to Certain Documents.
  Make or permit any amendments or modifications to any document, instrument or
any other agreement related to any Government Funded SPE Loan Agreement, any
Government Funded SPE Servicing Agreement, the Unsecured Bonds, the

 
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Burlingame Securities Purchase Agreement and the Burlingame Note, in each case
without the prior written consent of the Agent, which consent shall not be
unreasonably withheld.

6.           SECURITY INTEREST

6.1           Grant of Security Interest.

(a)         As collateral security for the prompt and complete payment and
performance of the Obligations, each Borrower and any other Credit Party (other
than any Government Funded SPE) executing this Agreement hereby grants to the
Agent, for the benefit of the Lenders, a security interest in and Lien upon all
of its property and assets, whether real or personal, tangible or intangible,
and whether now owned or hereafter acquired, or in which it now has or at any
time in the future may acquire any right, title, or interest, including all of
the following property in which it now has or at any time in the future may
acquire any right, title or interest:

(i)           all accounts;
 
(ii)           all deposit accounts;
 
(iii)           all other bank accounts and all funds on deposit therein; all
money, cash and cash equivalents;
 
(iv)           all investment property;
 
(v)           all Stock (other than the publicly traded shares of Stock issued
by Xfone, Inc.);
 
(vi)           all goods (including inventory, equipment and fixtures);
 
(vii)           all chattel paper, documents and instruments;
 
(viii)           all Books and Records;
 
(ix)           all general intangibles (including all Intellectual Property,
contract rights, choses in action, payment intangibles and software);
 
(x)           all letter-of-credit rights;
 
(xi)           all commercial tort claims;
 
(xii)           all FCC Licenses, including, without limitation, the right to
receive monies, proceeds, or other consideration in connection with the sale,
assignment, transfer, or other disposition of any FCC Licenses, the proceeds
from the sale of any FCC Licenses or any goodwill or other intangible rights or
benefits associated therewith, including without limitation all right of each
Grantor to (A) transfer, assign or otherwise dispose of its rights, title and
interests, if any, under or in respect of such FCC Licenses, (B) exercise any
rights, demands and remedies against the lessor, licensor or other parties
thereto, and (C) all rights of such Grantor to receive proceeds of any
insurance, indemnities, warranties, guaranties or claims for damages in
connection therewith; provided, however that such security interest does not
include at any time any FCC License to the extent (but only to the extent) that
at such time the Agent may not validly possess a security interest directly in
the FCC License pursuant to applicable federal law, including the Communications
Act of 1934, as amended, and the rules, regulations and policies promulgated
thereunder, as in effect at such time, but such security interest does include
at all times all proceeds of the FCC Licenses, and the right to receive all
monies, consideration, economic value and proceeds (the “Economic Value of the
FCC Licenses”) derived from or in connection with the sale, assignment,
transfer, or other disposition of the FCC Licenses (The right to receive the
Economic Value of the FCC Licenses shall be deemed a lien held by the Lenders
that attaches upon execution of this Agreement.);
 
(xiii)           all supporting obligations; and
 
(xiv)           to the extent not otherwise included, all Proceeds, tort claims,
insurance claims and other rights to payment not otherwise included in the
foregoing and products of all and any of the foregoing and all accessions to,
substitutions and replacements for, and rents and profits of, each of the
foregoing (all of the foregoing, collectively, the “Collateral”).
 

 
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Each Borrower, the Agent, each Lender and each other Grantor agrees that this
Agreement creates, and is intended to create, valid and continuing Liens upon
the Collateral in favor of the Agent for the benefit of the Lenders.  Each
Grantor represents, warrants and promises to the Agent and each Lender that: (i)
such Grantor has rights in and the power to transfer each item of the Collateral
upon which it purports to grant a Lien pursuant to this Agreement, free and
clear of any and all Liens or claims of others, other than Permitted
Encumbrances; (ii) the security interests granted pursuant to this Agreement,
upon completion of the filings and other actions listed on Disclosure Schedule
(6.1) (which, in the case of all filings and other documents referred to in said
Schedule, have been delivered to the Agent in duly executed form) and the filing
of UCC-3 financing statements with respect to the Collateral, will constitute
valid perfected security interests in all of the Collateral in favor of the
Agent, for the benefit of the Lenders, as security for the prompt and complete
payment and performance of the Obligations, enforceable in accordance with the
terms hereof against any and all creditors of and purchasers from any Grantor
and such security interests are prior to all other Liens on the Collateral in
existence on the date hereof except for Permitted Encumbrances that have
priority by operation of law; and (iii) no effective security agreement,
mortgage, deed of trust, financing statement, equivalent security or Lien
instrument or continuation statement covering all or any part of the Collateral
is or will be on file or of record in any public office, except those relating
to Permitted Encumbrances.  Each Grantor promises to defend the right, title and
interest of the Agent in and to the Collateral against the claims and demands of
all Persons.

6.2           Agent’s Rights.
  Each Grantor, with respect to each property where any Collateral is located
that is owned, leased or controlled by any Grantor, during normal business hours
and upon reasonable advance notice shall (unless an Event of Default shall have
occurred and be continuing, in which event no notice shall be required and the
Agent shall have access at any and all times):  (i) provide access to such
property to the Agent and any of its officers, employees and agents, as
frequently as the Agent determines to be appropriate, (ii) permit the Agent to
inspect, review, evaluate and make physical verifications and appraisals of the
Collateral in any manner and through any medium that the Agent considers
advisable, and each Grantor agrees to render to the Agent, at such Grantor’s
cost and expense, such clerical and other assistance as may be reasonably
requested with regard thereto, and (iii) permit the Agent to inspect, audit and
make extracts and copies (or take originals if reasonably necessary) from all of
such Grantor’s Books and Records.

6.3           Agent's Appointment as Attorney-in-fact.
  On the Closing Date, each Grantor shall execute and deliver a Power of
Attorney in the form attached as Exhibit D. The power of attorney granted
pursuant to the Power of Attorney and all powers granted under any Loan Document
are powers coupled with an interest and shall be irrevocable until the
Termination Date.  The powers conferred on Agent under each Power of Attorney
are solely to protect Agent's interests in the Collateral and shall not impose
any duty upon it to exercise any such powers. Agent agrees not to exercise any
power or authority granted under the Power of Attorney unless an Event of
Default has occurred and is continuing.  Each Grantor also hereby (i) authorizes
Agent to file any financing statements, continuation statements or amendments
thereto that (x) cover the Collateral, and (y) contain any other information
required by Part 5 of Article 9 of the Code for the sufficiency or filing office
acceptance of any financing statement, continuation statement or amendment and
(ii) ratifies its authorization for Agent to have filed any such financial
statements, if filed prior to the date hereof.  Each Grantor acknowledges that
it is not authorized to file any financing statement or amendment or termination
statement with respect to any such financing statement without the prior written
consent of Agent and agrees that it will not do so without the prior written
consent of Agent, subject to such Grantor's rights under Section 9-509(d)(2) of
the Code.

6.4           Grant of License to Use Intellectual Property Collateral.
  Solely for the purpose of enabling the Agent to exercise rights and remedies
under Section 7.2 hereof (including, without limiting the terms of Section 7.2
hereof, in order to take possession of, hold, preserve, process, assemble,
prepare for sale, market for sale, sell or otherwise dispose of Collateral) upon
the occurrence and during the continuation of an Event of Default, each Grantor
hereby grants to the Agent an irrevocable, non-exclusive license (exercisable
upon the occurrence and during the continuance of an Event of Default without
payment of royalty or other compensation to such Grantor) to use, transfer,
license or sublicense any Intellectual Property relating to any of the
Collateral now owned, licensed to, or hereafter acquired by such Grantor, and
wherever the same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout thereof, and
represents, promises and agrees that any such license or sublicense is not and
will not be in conflict with the contractual or commercial rights of any third
Person; provided, that such license will terminate on the Termination Date.  For
the avoidance of doubt, such license shall be the only rights granted to Lender
under this Agreement in any Intellectual Property.

6.5Duties of Agent.  
  Agent’s sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession shall be to deal with it in the
same manner as Agent deals with similar property for its own account.  The
powers conferred on Agent hereunder are solely to protect Agent’s interest in
the Collateral and shall not impose any duty upon Agent to exercise any such
powers.  Agent shall be accountable only for amounts that it receives as a
result of the exercise of such powers, and neither it nor any of its Related
Persons shall be responsible to any Grantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.  In addition, Agent
shall not be liable or responsible for any loss or damage to any Collateral, or
for any

 
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diminution in the value thereof, by reason of the act or omission of any
warehousemen, carrier, forwarding agency, consignee or other bailee if such
Person has been selected by Agent in good faith.

7.           EVENTS OF DEFAULT: RIGHTS AND REMEDIES

7.1           Events of Default.
  The occurrence of any one or more of the following events (regardless of the
reason therefor) shall constitute an “Event of Default” hereunder which shall be
deemed to be continuing until waived in writing by the Agent in accordance with
Section 9.3 or cured in accordance with the terms and conditions of this
Agreement:

(a)         Borrower shall fail to pay the full amount of any Installment or any
part thereof in respect of the Loan when due and payable or declared due and
payable in accordance with the terms hereof; or the Borrower shall fail to pay
any other Obligations within three Business Days after such interest or any
other Obligation becomes due and payable in accordance with the terms hereof or
any other Loan Document; or

(b)         any representation or warranty in this Agreement or any other Loan
Document, or in any written statement pursuant hereto or thereto, or in any
report, financial statement or certificate made or delivered to the Agent by the
Borrower or any other Credit Party shall be untrue or incorrect in any material
respect as of the date when made or deemed made, regardless of whether such
breach involves a representation or warranty with respect to a Credit Party that
has not signed this Agreement; or

(c)         Borrower or any other Credit Party shall fail or neglect to perform,
keep or observe any of the covenants, promises, agreements, requirements, or
other terms or provisions contained in clause (i)(A) of Section 3.1(a), Section
3.16, Section 3.21, Section 3.22, Section 4.2, each subsection of Section 5, and
each subsection of Section 6 of this Agreement; or

(d)         Borrower or any other Credit Party shall fail or neglect to perform,
keep or observe any of the covenants, promises, agreements, requirements, or
other terms or provisions contained in Section 3.28 of this Agreement, and such
failure or neglect shall continue unremedied for a period of 3 Business Days; or

(e)         Borrower or any other Credit Party shall fail or neglect to perform,
keep or observe any of the covenants, promises, agreements, requirements, or
other terms or provisions contained in Section 4.1 of this Agreement, and such
failure or neglect shall continue unremedied for a period of 10 Business Days;
or

(f)         Borrower or any other Credit Party shall fail or neglect to perform,
keep or observe any of the covenants, promises, agreements, requirements, or
other terms or provisions contained in this Agreement or any of the other Loan
Documents (other than as specified in paragraphs (a) through (d) above), and
such failure or neglect shall continue unremedied for a period of 30 days; or

(g)         an event of default shall occur under any Contractual Obligation of
the Borrower or any other Credit Party (other than this Agreement and the other
Loan Documents), and such event of default (i) involves the failure to make any
payment (whether or not such payment is blocked pursuant to the terms of an
intercreditor agreement or otherwise), whether of principal, interest or
otherwise, and whether due by scheduled maturity, required prepayment,
acceleration, demand or otherwise, in respect of any Indebtedness (other than
the Obligations) of such Person in an aggregate original principal amount
exceeding $500,000, or (ii) causes (or permits any holder of such Indebtedness
or a trustee to cause) such Indebtedness, or a portion thereof, in an aggregate
original principal amount exceeding $500,000 to become due prior to its stated
maturity or prior to its regularly scheduled date of payment; or

(h)         there shall be commenced against the Borrower or any other Credit
Party any Litigation seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its assets
that results in the entry of an order for any such relief that remains unstayed,
undismissed or unbonded for sixty (60) consecutive days; or Borrower or any
other Credit Party shall have concealed, removed or permitted to be concealed or
removed, any part of its property with intent to hinder, delay or defraud any of
its creditors or made or suffered a transfer of any of its property or the
incurring of an obligation that may be fraudulent under any bankruptcy,
fraudulent transfer or other similar law; or

(i)         a case or proceeding shall have been commenced involuntarily against
Borrower or any other Credit Party in a court having competent jurisdiction
seeking a decree or order: (i) under the United States Bankruptcy Code or any
other applicable Federal, state or foreign bankruptcy or other similar law, and
seeking either (x) the appointment of a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) for such Person or of
any substantial part of its properties, or (y) the reorganization or winding up
or liquidation of the affairs of any such Person, and such case or proceeding
shall remain undismissed, unstayed or unbonded for sixty (60) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding; or (ii) invalidating or denying any Person’s right, power,
or

 
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competence to enter into or perform any of its obligations under any Loan
Document or invalidating or denying the validity or enforceability of this
Agreement or any other Loan Document or any action taken hereunder or
thereunder; or

(j)         Borrower or any other Credit Party shall (i) commence any case,
proceeding or other action under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
conservatorship or relief of debtors, seeking to have an order for relief
entered with respect to it or seeking appointment of a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for it or
any substantial part of its properties, (ii) make a general assignment for the
benefit of creditors, (iii) consent to or take any action in furtherance of, or,
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in paragraph (i) of this Section 7.1 or clauses (i) and (ii) of this
paragraph (i), or (iv) shall admit in writing its inability to, or shall be
generally unable to, pay its debts as such debts become due; or

(k)         a final judgment or judgments for the payment of money in excess of
$100,000 in the aggregate shall be rendered against Borrower or any other Credit
Party, unless the same shall be (i) fully covered by insurance and the issuer(s)
of the applicable policies have not disclaimed coverage, or (ii) vacated,
stayed, bonded, paid or discharged within a period of thirty (30) days from the
date of such judgment; or

(l)         any material provision of any Loan Document shall for any reason
cease to be valid, binding and enforceable in accordance with its terms, or any
Lien granted, or intended by the Loan Documents to be granted, to the Agent
shall cease to be a valid and perfected Lien having the first priority (or a
lesser priority if expressly permitted in the Loan Documents) in any of the
Collateral with a fair market value greater than $25,000 (or any Credit Party
shall so assert any of the foregoing); or

(m)         a Change of Control shall have occurred with respect to any Credit
Party; or

(n)         an ERISA Event shall have occurred that, when taken together with
all other ERISA Events that have occurred and are then continuing, could
reasonably be expected to have Material Adverse Effect; or

(n)         a Material Adverse Effect shall have occurred; or

(o)         an event of default shall occur under any other Loan Document.

7.2           Remedies.

(a)         If any Event of Default shall have occurred and be continuing, the
Agent may, take any one or more of the following actions: (i) by notice to
Borrower declare all or any portion of the Obligations to be forthwith due and
payable, whereupon such Obligations shall become and be due and payable; or (ii)
exercise any rights and remedies provided to the Agent under the Loan Documents
or at law or equity, including all remedies provided under the Code; provided,
that upon the occurrence of any Event of Default specified in clause (i) of
either Sections 7.1(i) or (j), the Obligations shall become immediately due and
payable (and any obligation of Lender to make the Loan, if not previously
terminated, shall immediately be terminated) without declaration, notice or
demand by the Agent.

(b)         Without limiting the generality of the foregoing, each Grantor
expressly agrees that upon the occurrence and during the continuance of any
Event of Default, the Agent may collect, receive, assemble, appropriate and
realize upon the Collateral, or any part thereof, and may forthwith sell, lease,
assign, give an option or options to purchase or otherwise dispose of and
deliver said Collateral (or contract to do so), or any part thereof, in one or
more parcels at public or private sale or sales, at any exchange at such prices
as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk.  The Agent shall have the right upon any such
public sale, to the extent permitted by law, to purchase for the benefit of
Lender the whole or any part of said Collateral so sold, free of any right of
equity of redemption, which right each Grantor hereby releases.  Such sales may
be adjourned, or continued from time to time with or without notice.  The Agent
shall have the right to conduct such sales on any Grantor’s premises or
elsewhere and shall have the right to use any Grantor’s premises without rent or
other charge for such sales or other action with respect to the Collateral for
such time as the Agent deems necessary or advisable.

(c)         Upon the occurrence and during the continuance of an Event of
Default and at the Agent’s request, Borrower and each other Grantor further
agrees, to assemble the Collateral and make it available to the Agent at places
that the Agent shall reasonably select, whether at its premises or
elsewhere.   During the continuance of an Event of Default, until the Agent is
able to effect a sale, lease, or other disposition of the Collateral, the Agent
shall have the right to complete, assemble, use or operate the Collateral or any
part thereof, to the extent that Lender deems appropriate, for the purpose of
preserving such Collateral or its value or for any other purpose. The Agent
shall have no obligation to any Grantor to maintain or preserve the rights of
any Grantor as against third parties with respect to any Collateral while such
Collateral is in the possession of the

 
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Agent.  During the continuance of an Event of Default, the Agent may, if it so
elects, seek the appointment of a receiver or keeper to take possession of any
Collateral and to enforce any of the Agent’s remedies with respect thereto
without prior notice or hearing.  To the maximum extent permitted by applicable
law, Borrower and each other Grantor waives all claims, damages, and demands
against the Agent, each Lender, their Affiliates, agents, and the officers and
employees of any of them arising out of the repossession, retention or sale of
any Collateral except such as are determined in a final judgment by a court of
competent jurisdiction to have arisen solely out of the gross negligence or
willful misconduct of such Person.  Borrower and each other Grantor agrees that
ten (10) days’ prior notice by the Agent to such Grantor of the time and place
of any public sale or of the time after which a private sale may take place is
reasonable notification of such matters.  Borrower and each other Grantor shall
remain liable for any deficiency if the proceeds of any sale or disposition of
the Collateral are insufficient to pay all amounts to which the Agent and each
Lender are entitled.

(d)         The Agent’s rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies that the Agent may
have under any Loan Document or at law or in equity.  Recourse to the Collateral
shall not be required. All provisions of this Agreement are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited, to the extent necessary, so that they do not render this
Agreement invalid or unenforceable, in whole or in part.

7.3           Waivers by Credit Parties.
  Except as otherwise provided for in this Agreement and to the fullest extent
permitted by applicable law, Borrower and each other Credit Party executing this
Agreement waives:  (a) presentment, demand and protest, and notice of
presentment, dishonor, intent to accelerate, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
Loan Documents; (b) all rights to notice and a hearing prior to the Agent’s
taking possession or control of, or to the Agent’s replevy, attachment or levy
upon, any Collateral or any bond or security that might be required by any court
prior to allowing the Agent or any Lender to exercise any of its remedies; and
(c) the benefit of all valuation, appraisal and exemption laws.  Borrower  and
each other Credit Party executing this Agreement acknowledges that it has been
advised by counsel of its choices and decisions with respect to this Agreement,
the other Loan Documents and the transactions evidenced hereby and thereby.

7.4           Proceeds.
  The Proceeds of any sale, disposition or other realization upon any Collateral
during the continuance of an Event of Default shall be applied by the Agent upon
receipt to the Obligations in such order as the Agent may deem advisable in its
sole discretion and after the indefeasible payment and satisfaction in full in
cash of all of the Obligations, and after the payment by the Agent of any other
amount required by any provision of law, including Sections 9-608(a)(1) and
9-615(a)(3) of the Code (but only after the Agent has received what the Agent
considers reasonable proof of a subordinate party’s security interest), the
surplus, if any, shall be paid to the applicable Grantor or its representatives
or to whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct.

8.           SUCCESSORS AND ASSIGNS

(a)  Each Loan Document shall be binding on and shall inure to the benefit of
Borrower and each other Credit Party executing such Loan Document, the Agent,
each Lender and their respective successors and assigns, except as otherwise
provided herein or therein.  If more than one party signs this instrument as
Borrower, then the term “Borrower” as used herein shall mean all of such
parties, jointly and severally.  Neither Borrower nor any other Credit Party may
assign, transfer, hypothecate, delegate or otherwise convey its rights,
benefits, obligations or duties under any Loan Document without the prior
express written consent of the Agent .  Any such purported conveyance by
Borrower or such Credit Party without the prior express written consent of the
Agent shall be void.  There shall be no third party beneficiaries of any of the
terms and provisions of any of the Loan Documents.  Each Lender reserves the
right at any time to create and sell participations in the Loan and the Loan
Documents to any other Person (a “Participant”) and to sell, transfer or assign
any or all of its rights in the Loan and under the Loan Documents to any other
Person (an “Assignee”). Any such sale, transfer or assignment shall be effected
by a written assignment agreement (an “Assignment Agreement”) delivered to the
Person who is the Lender on the Closing date (the “Initial Lender”).  The
Initial Lender shall, on behalf of the Borrower and acting for this purpose as
an agent of the Borrower, maintain at one of its offices a copy of each
Assignment Agreement delivered to it and a register for the recordation of the
names and addresses of each Lender and the principal amount of the Term Loan
owing to each Lender pursuant to the terms hereof from time to time (the
“Register”).  The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower and each Lender may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary.  Any assignment of the Term Loan, whether or not evidenced by a Note,
shall be effective only upon appropriate entries with respect thereto being made
in the Register. Any assignment or transfer of all or part of the Term Loan
evidenced by a Note shall be registered on the Register only upon surrender for
registration of assignment or transfer of such Note evidencing the Loan,
accompanied by a duly executed Assignment Agreement or transfer; thereupon a new
Note in the same aggregate principal amount shall be issued to the designated
Assignee, and the old Note shall be returned to the Borrower marked
“canceled.”  The Register shall be available for inspection by the Borrower at
any reasonable time and from time to time upon reasonable prior notice.

 
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(b)            Lender (and any Participant or Assignee), if it is not a “U.S.
Person” as defined in Section 7701(a)(30) of the IRC (a “Non-U.S. Lender”),
shall deliver to the Borrower (or, in the case of a Participant, to the Lender
from which the related participation shall have been purchased) two copies of
either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case
of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under
Section 871(h) or 881(c) of the IRC with respect to payments of “portfolio
interest,” a certificate in form and substance acceptable to the Agent that such
Non-U.S. Lender Party is not (1) a “bank” within the meaning of Section
881(c)(3)(A) of the Code, (2) a “10 percent shareholder” of the Borrower within
the meaning of Section 881(c)(3)(B) of the Code or (3) a “controlled foreign
corporation” described in Section 881(c)(3)(C) of the Code and a Form W-8BEN, or
any subsequent versions thereof or successors thereto, properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from, or a
reduced rate of, U.S. federal withholding tax on all payments by the Credit
Parties under this Agreement and the other Loan Documents.  Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation).  In addition, each Non-U.S.
Lender shall deliver such forms within ten (10) Business Days after receipt of a
written notification from the Borrower that any form previously delivered by
such Non-U.S. Lender is invalid or is due to expire or to become obsolete.  Each
Non-U.S. Lender shall promptly notify the Borrower at any time it determines
that it is no longer in a position to provide any previously delivered
certificate to the Borrower (or any other form of certification adopted by the
U.S. taxing authorities for such purpose).  Notwithstanding any other provision
of this paragraph, a Non-U.S. Lender shall not be required to deliver any form
pursuant to this paragraph that such Non-U.S. Lender is not legally able to
deliver.  A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the Borrower
is located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Agent), at the time or times prescribed by applicable law or reasonably
requested by the Borrower, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate, provided that such Lender is legally entitled
to complete, execute and deliver such documentation and in such Lender’s
judgment such completion, execution or submission would not materially prejudice
the legal position of such Lender.

9.AGENT

9.1Appointment and Duties.  

(a)Appointment of Agent.  Each Lender hereby appoints ICON AGENT, LLC (together
with any successor Agent pursuant to Section 9.8) as Agent hereunder and
authorizes Agent to (i) execute and deliver the Loan Documents and accept
delivery thereof on its behalf from any Credit Party, (ii) take such action on
its behalf and to exercise all rights, powers and remedies and perform the
duties as are expressly delegated to Agent under such Loan Documents and
(iii) exercise such powers as are reasonably incidental thereto.

(b)Duties as Collateral and Disbursing Agent.  Without limiting the generality
of clause (a) above, Agent shall have the sole and exclusive right and authority
(to the exclusion of the Lenders), and is hereby authorized, to (i) act as the
disbursing and collecting agent for the Lenders with respect to all payments and
collections arising in connection with the Loan Documents (including in any
proceeding described in Section 7.1(i) or (j) or any other bankruptcy,
insolvency or similar proceeding), and each Person making any payment in
connection with any Loan Document to any Lender is hereby authorized to make
such payment to Agent, (ii) file and prove claims and file other documents
necessary or desirable to allow the claims of the Lenders with respect to any
Obligation in any proceeding described in Section 7.1(i) or (j) or any other
bankruptcy, insolvency or similar proceeding (but not to vote, consent or
otherwise act on behalf of such Lender), (iii) act as collateral agent for each
Lender for purposes of the perfection of all Liens created by such agreements
and all other purposes stated therein, (iv) manage, supervise and otherwise deal
with the Collateral, (v) take such other action as is necessary or desirable to
maintain the perfection and priority of the Liens created or purported to be
created by the Loan Documents, (vi) except as may be otherwise specified in any
Loan Document, exercise all remedies given to Agent and the other Lenders with
respect to the Collateral, whether under the Loan Documents, applicable
Requirements of Law or otherwise and (vii) execute any amendment, consent or
waiver under the Loan Documents on behalf of any Lender that has consented in
writing to such amendment, consent or waiver; provided, however, that Agent
hereby appoints, authorizes and directs each Lender to act as collateral
sub-agent for Agent and the Lenders for purposes of the perfection of all Liens
with respect to the Collateral, including any deposit account maintained by a
Credit Party with, and cash and cash equivalents held by, such Lender, and may
further authorize and direct the Lenders to take further actions as collateral
sub-agents for purposes of enforcing such Liens or otherwise to transfer the
Collateral subject thereto to Agent, and each Lender hereby agrees to take such
further actions to the extent, and only to the extent, so authorized and
directed.

(c)Limited Duties.  Under the Loan Documents, Agent (i) is acting solely on
behalf of the Lenders, with duties that are entirely administrative in nature,
notwithstanding the use of the defined term “Agent”, the terms “agent”,
“administrative agent” and “collateral agent” and similar terms in any Loan
Document to refer to Agent, which terms are

 
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used for title purposes only, (ii) is not assuming any obligation under any Loan
Document other than as expressly set forth therein or any role as agent,
fiduciary or trustee of or for any Lender and (iii) shall have no implied
functions, responsibilities, duties, obligations or other liabilities under any
Loan Document, and each Lender hereby waives and agrees not to assert any claim
against Agent based on the roles, duties and legal relationships expressly
disclaimed in clauses (i) through (iii) above.

9.2Binding Effect.
  Each Lender agrees that (i) any action taken by Agent or the Required Lenders
(or, if expressly required hereby, a greater proportion of the Lenders) in
accordance with the provisions of the Loan Documents, (ii) any action taken by
Agent in reliance upon the instructions of Required Lenders (or, where so
required, such greater proportion) and (iii) the exercise by Agent or the
Required Lenders (or, where so required, such greater proportion) of the powers
set forth herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the Lenders.

9.3Use of Discretion.  

(a)No Action without Instructions.  Agent shall not be required to exercise any
discretion or take, or to omit to take, any action, including with respect to
enforcement or collection, except any action it is required to take or omit to
take (i) under any Loan Document or (ii) pursuant to instructions from the
Required Lenders (or, where expressly required by the terms of this Agreement, a
greater proportion of the Lenders).

(b)Right Not to Follow Certain Instructions.  Notwithstanding clause (a) above,
Agent shall not be required to take, or to omit to take, any action (i) unless,
upon demand, Agent receives an indemnification satisfactory to it from the
Lenders against all costs, expenses, claims, actions or liabilities that, by
reason of such action or omission, may be imposed on, incurred by or asserted
against Agent or any Related Person thereof or (ii) that is, in the opinion of
Agent or its counsel, contrary to any Loan Document or applicable Requirement of
Law.

9.4Delegation of Rights and Duties.
  Agent may, upon any term or condition it specifies, delegate or exercise any
of its rights, powers and remedies under, and delegate or perform any of its
duties or any other action with respect to, any Loan Document by or through any
trustee, co-agent, employee, attorney-in-fact and any other Person (including
any Lender).  Any such Person shall benefit from this Section 9 to the extent
provided by Agent.

9.5Reliance and Liability.  

(a)Agent may, without incurring any liability hereunder, (i) treat the payee of
any Note as its holder until such Note has been assigned in accordance with
Section 8(a), (ii) rely on the Register to the extent set forth in Section 8(a),
(iii) consult with any of its Related Persons and, whether or not selected by
it, any other advisors, accountants and other experts (including advisors to,
and accountants and experts engaged by, any Credit Party) and (iv) rely and act
upon any document and information (including those transmitted by electronic
transmission) and any telephone message or conversation, in each case believed
by it to be genuine and transmitted, signed or otherwise authenticated by the
appropriate parties.

(b)None of Agent and its Related Persons shall be liable for any action taken or
omitted to be taken by any of them under or in connection with any Loan Document
(x) with the consent or at the request of the Required Lenders or (y) in the
absence of its own gross negligence or willful misconduct, and each Lender,
Borrower and each other Credit Party to this Agreement hereby waive and shall
not assert any right, claim or cause of action based thereon, except to the
extent of liabilities resulting primarily from the gross negligence or willful
misconduct of Agent or, as the case may be, such Related Person (each as
determined in a final, non-appealable judgment by a court of competent
jurisdiction) in connection with the duties expressly set forth herein.  Without
limiting the foregoing, Agent:

(i)shall not be responsible or otherwise incur liability for any action or
omission taken in reliance upon the instructions of the Required Lenders or for
the actions or omissions of any of its Related Persons selected with reasonable
care (other than employees, officers and directors of Agent, when acting on
behalf of Agent);

(ii)shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, effectiveness, genuineness, sufficiency or value of,
or the attachment, perfection or priority of any Lien created or purported to be
created under or in connection with, any Loan Document;

(iii)makes no warranty or representation, and shall not be responsible, to any
Lender for any statement, document, information, representation or warranty made
or furnished by or on behalf of any Related Person or any Credit Party in
connection with any Loan Document or any transaction contemplated therein or any
other document or information with respect to any Credit Party, whether or not
transmitted or (except for documents expressly required under any Loan Document
to be transmitted to the Lenders) omitted to be transmitted by Agent, including
as to

 
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completeness, accuracy, scope or adequacy thereof, or for the scope, nature or
results of any due diligence performed by Agent in connection with the Loan
Documents; and

(iv)shall not have any duty to ascertain or to inquire as to the performance or
observance of any provision of any Loan Document, whether any condition set
forth in any Loan Document is satisfied or waived, as to the financial condition
of any Credit Party or as to the existence or continuation or possible
occurrence or continuation of any Default and shall not be deemed to have notice
or knowledge of such occurrence or continuation unless it has received a notice
from Borrower or any Lender describing such Default clearly labeled “notice of
default” (in which case Agent shall promptly give notice of such receipt to all
Lenders);

and, for each of the items set forth in clauses (i) through (iv) above, each
Lender and Borrower and each other Credit Party to this Agreement hereby waives
and agrees not to assert any right, claim or cause of action it might have
against Agent based thereon.

9.6Agent Individually.
  Agent and its Affiliates may make loans and other extensions of credit to,
acquire Stock of, engage in any kind of business with, any Credit Party or
Affiliate thereof as though it were not acting as Agent and may receive separate
fees and other payments therefor.  To the extent Agent or any of its Affiliates
makes any Loan or otherwise becomes a Lender hereunder, it shall have and may
exercise the same rights and powers hereunder and shall be subject to the same
obligations and liabilities as any other Lender and the terms “Lender”,
“Required Lender” and any similar terms shall, except where otherwise expressly
provided in any Loan Document, include, without limitation, Agent or such
Affiliate, as the case may be, in its individual capacity as Lender or as one of
the Required Lenders.

9.7Expenses; Indemnities.  

(a)Each Lender agrees to reimburse Agent and each of its Related Persons (to the
extent not reimbursed by any Credit Party) promptly upon demand for such
Lender’s pro rata share with respect to the Loan of any costs and expenses
(including fees, charges and disbursements of financial, legal and other
advisors and taxes paid in the name of, or on behalf of, any Credit Party) that
may be incurred by Agent or any of its Related Persons in connection with the
preparation, syndication, execution, delivery, administration, modification,
consent, waiver or enforcement (whether through negotiations, through any
work-out, bankruptcy, restructuring or other legal or other proceeding or
otherwise) of, or legal advice in respect of its rights or responsibilities
under, any Loan Document.

(b)Each Lender further agrees to indemnify Agent and each of its Related Persons
(to the extent not reimbursed by any Credit Party), from and against such
Lender’s aggregate pro rata share with respect to the Loan of the costs,
expenses, claims and liabilities (including taxes, interests and penalties
imposed for not properly withholding or backup withholding on payments made to
on or for the account of any Lender) that may be imposed on, incurred by or
asserted against Agent or any of its Related Persons in any matter relating to
or arising out of, in connection with or as a result of any Loan Document, or
any other act, event or transaction related, contemplated in or attendant to any
such document, or, in each case, any action taken or omitted to be taken by
Agent or any of its Related Persons under or with respect to any of the
foregoing; provided, however, that no Lender shall be liable to Agent or any of
its Related Persons to the extent such liability has resulted primarily from the
gross negligence or willful misconduct of Agent or, as the case may be, such
Related Person, as determined by a court of competent jurisdiction in a final
non-appealable judgment or order.

9.8Resignation of Agent.  

(a)Agent may resign at any time by delivering notice of such resignation to the
Lenders and Borrower, effective on the date set forth in such notice or, if not
such date is set forth therein, upon the date such notice shall be
effective.  If Agent delivers any such notice, the Required Lenders shall have
the right to appoint a successor Agent.  If, within 30 days after the retiring
Agent having given notice of resignation, no successor Agent has been appointed
by the Required Lenders that has accepted such appointment, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent from among the
Lenders.  Each appointment under this clause (a) shall be subject to the prior
consent of Borrower, which may not be unreasonably withheld but shall not be
required during the continuance of a Default.

(b)Effective immediately upon its resignation, (i) the retiring Agent shall be
discharged from its duties and obligations under the Loan Documents, (ii) the
Lenders shall assume and perform all of the duties of Agent until a successor
Agent shall have accepted a valid appointment hereunder, (iii) the retiring
Agent and its Related Persons shall no longer have the benefit of any provision
of any Loan Document other than with respect to any actions taken or omitted to
be taken while such retiring Agent was, or because such Agent had been, validly
acting as Agent under the Loan Documents and (iv) subject to its rights under
Section 9.3, the retiring Agent shall take such action as may be reasonably
necessary to assign to the successor Agent its rights as Agent under the Loan
Documents.  Effective immediately upon its acceptance of a valid appointment as
Agent, a successor Agent shall succeed to, and become vested with, all the
rights, powers, privileges and duties of the retiring Agent under the Loan
Documents.

 
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9.9Release of Collateral.
  Each Lender hereby consents to the release and hereby directs Agent to release
(or, in the case of clause (ii) below, release or subordinate) any Lien held by
Agent for the benefit of the Lenders against (i) any Collateral that is sold by
a Credit Party in an Asset Sale permitted by the Loan Documents (including
pursuant to a valid waiver or consent), (ii) any property subject to a Lien
permitted hereunder to secure Purchase Money Indebtedness and (iii) all of the
Collateral and all Credit Parties, upon the Termination Date.  Each Lender
hereby directs Agent, and Agent hereby agrees, upon receipt of reasonable
advance notice from Borrower, to execute and deliver or file such documents and
to perform other actions reasonably necessary to release the Liens when and as
directed in this Section 9.9.

10.           MISCELLANEOUS

10.1           Complete Agreement; Modification of Agreement.
  This Agreement and the other Loan Documents constitute the complete agreement
between the parties with respect to the subject matter hereof and thereof,
supersede all prior agreements, commitments, understandings or inducements (oral
or written, expressed or implied).  No Loan Document may be modified, altered or
amended except by a written agreement signed by Lender, and each other Credit
Party a party to such Loan Document.  Borrower and each other Credit Party
executing this Agreement or any other Loan Document shall have all duties and
obligations under this Agreement and such other Loan Documents from the date of
its execution and delivery, regardless of whether the Loan has been funded at
that time.

10.2           Expenses.
  Borrower agrees to pay or reimburse the Agent (but not any Assignee or
Participants) for all costs and expenses (including the reasonable fees and
expenses of all counsel retained in connection therewith), incurred in
connection with:  (a) the preparation, negotiation, execution, delivery,
performance and enforcement of the Loan Documents and the preservation of any
rights thereunder; (b) collection, including deficiency collections; (c) any
amendment, waiver or other  modification with respect to any Loan Document or
advice in connection with the administration of the Loan or the rights
thereunder; and (d) any litigation, dispute, suit, proceeding or action (whether
instituted by or between any combination of the Agent, Borrower or any other
Person), and an appeal or review thereof, in any way relating to the Collateral,
any Loan Document, or any action taken or any other agreements to be executed or
delivered in connection therewith, whether as a party, witness or otherwise,
provided however, that upon the occurrence and during the continuation of an
Event of Default, Borrower agrees to pay or reimburse the Agent(but not any
Assignee or Participants) for all additional costs and expenses (including the
reasonable fees and expenses of all counsel, advisors, consultants and auditors
retained in connection therewith), incurred in connection with any effort (i) to
monitor the Loan, (ii) to evaluate, observe or assess Borrower or any other
Credit Party or the affairs of such Person, and (iii) to verify, protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the
Collateral.

10.3           No Waiver.
  Neither the Agent’s failure, at any time, to require strict performance by
Borrower or any other Credit Party of any provision of any Loan Document, nor
the Agent’s or any Lender’s failure to exercise, nor any delay in exercising,
any right, power or privilege hereunder, shall operate as a waiver thereof or
waive, affect or diminish any right of the Agent thereafter to demand strict
compliance and performance therewith,. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. Any suspension
or waiver of a Default or other provision under the Loan Documents shall not
suspend, waive or affect any other Default or other provision under any Loan
Document, and shall not be construed as a bar to any right or remedy that the
Agent or any Lender would otherwise have had on any future occasion. None of the
undertakings, indemnities, agreements, warranties, covenants and representations
of Borrower or any other Credit Party to the Agent contained in any Loan
Document and no Default by Borrower or any other Credit Party under any Loan
Document shall be deemed to have been suspended or waived by the Agent or any
Lender, unless such waiver or suspension is by an instrument in writing signed
by an officer or other authorized employee of the Agent or the Lenders, as
applicable, and directed to Borrower, specifying such suspension or waiver (and
then such waiver shall be effective only to the extent therein expressly set
forth), and neither the Agent nor any Lender shall, by any act (other than
execution of a formal written waiver), delay, omission or otherwise, be deemed
to have waived any of its rights or remedies hereunder.

10.4           Severability; Section Titles.
  Wherever possible, each provision of the Loan Documents shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of any Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of such Loan Document.  Except as otherwise
expressly provided for in the Loan Documents, no termination or cancellation
(regardless of cause or procedure) of any financing arrangement under the Loan
Documents shall in any way affect or impair the Obligations, duties, covenants,
representations and warranties, indemnities, and liabilities of Borrower or any
other Credit Party or the rights of the Agent relating to any unpaid Obligation,
(due or not due, liquidated, contingent or unliquidated), or any transaction or
event occurring prior to such termination, or any transaction or event, the
performance of which is not required until after the Maturity Date, all of which
shall not terminate or expire, but rather shall survive such termination or
cancellation and shall continue in full force and effect until the Termination
Date; provided, that all indemnity obligations of the Credit Parties under the
Loan Documents

 
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shall survive the Termination Date.  The Section titles contained in any Loan
Document are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between parties hereto.

10.5           Authorized Signature.
  Until the Agent shall be notified in writing by Borrower or any other Credit
Party to the contrary, the signature upon any document or instrument delivered
pursuant hereto and believed by the Agent or any of the Agent’s officers,
agents, or employees to be that of an officer of Borrower or such other Credit
Party shall bind Borrower and such other Credit Party and be deemed to be the
act of Borrower or such other Credit Party affixed pursuant to and in accordance
with resolutions duly adopted by Borrower’s or such other Credit Party’s Board
of Directors, and the Agent shall be entitled to assume the authority of each
signature and authority of the person whose signature it is or appears to be
unless the person acting in reliance thereon shall have actual knowledge to the
contrary.

10.6           Notices.
  Except as otherwise provided herein, whenever any notice, demand, request or
other communication shall or may be given to or served upon any party by any
other party, or whenever any party desires to give or serve upon any other party
any communication with respect to this Agreement or any other Loan Document,
each communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
10.6), (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid or (d) when hand-delivered, all of which shall be
addressed to the party to be notified and sent to the address or facsimile
number indicated in Schedule C or to such other address (or facsimile number) as
may be substituted by notice given as herein provided.  Failure or delay in
delivering copies of any such communication to any Person (other than Borrower,
any other Credit Party, the Agent or any Lender) designated in Schedule C to
receive copies shall in no way adversely affect the effectiveness of such
communication.

10.7           Counterparts.
  Any Loan Document may be authenticated in any number of separate counterparts
by any one or more of the parties thereto, and all of said counterparts taken
together shall constitute one and the same instrument.  Any Loan Document may be
authenticated by manual signature, facsimile or, if approved in writing by
Lender, electronic means, all of which shall be equally valid.

10.8           Time of the Essence.
  Time is of the essence for performance of the Obligations under the Loan
Documents.

10.9           GOVERNING LAW.
  THE LOAN DOCUMENTS AND THE OBLIGATIONS ARISING UNDER THE LOAN DOCUMENTS SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE,
WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS OTHER THAN
SECTION 5-1401 OF THE GENERAL OBLIGATION LAWS OF NEW YORK.

10.10           SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

(a)         BORROWER AND EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT HEREBY
CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK SHALL
HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
BORROWER AND SUCH CREDIT PARTY AND LENDER PERTAINING TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER, BORROWER
AND SUCH CREDIT PARTY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO
BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK; AND FURTHER PROVIDED, THAT
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER.
BORROWER AND EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT EXPRESSLY SUBMIT
AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND BORROWER AND SUCH CREDIT PARTY HEREBY WAIVE ANY OBJECTION
THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS.  BORROWER AND EACH OTHER CREDIT PARTY EXECUTING THIS
AGREEMENT HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER OR SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN SCHEDULE
C OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF BORROWER’S OR

 
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SUCH CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN
THE U.S. MAILS, PROPER POSTAGE PREPAID.

(b)         THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN LENDER, BORROWER AND ANY CREDIT PARTY ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.

10.11            Press Releases.
Neither any Credit Party nor any of its Affiliates will in the future issue any
press release or other public disclosure using the name of ICON Agent, LLC or
its affiliates or referring to this Agreement or the other Loan Documents
without prior notice to the Agent and without the prior written consent of the
Agent unless (and only to the extent that) such Credit Party or Affiliate is
required to do so under law and then, in any event, such Credit Party or
Affiliate will consult with the Agent before issuing such press release or other
public disclosure.  Notwithstanding anything to the contrary in this Section
10.11, any Credit Party may make such public disclosures with respect to the
transactions contemplated by the Loan Documents in connection with all regular
and periodic reports (including without limitation any Form 8-Ks) and all
registration statements and prospectuses, if any, filed by any Credit Party with
any securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority.  The Borrower hereby authorizes
the Agent to make mention of the Agent’s participation in this transaction (a)
in its public filings as required by the Securities and Exchange Commission and
(b) in its marketing, sales materials, printed media, tombstones or web-based
material, provided, however the aforementioned materials shall contain only the
name of the Borrower, a description of the transaction, the amount of the Loan,
the term of the Loan and a description of the Collateral and use of such
materials described in this clause (b) shall only occur after the Borrower has
publicly disclosed this transaction.

10.12           Reinstatement.
  This Agreement shall continue to be effective, or be reinstated, as the case
may be, if at any time payment of all or any part of the Obligations is
rescinded or must otherwise be returned or restored by the Agent  or the Lenders
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
Borrower or any other Credit Party, or otherwise, all as though such payments
had not been made.

10.13USA PATRIOT Act Notice and Customer Verification.
  Each Lender that is subject to the USA PATRIOT Act and the Agent (for itself
and not on behalf of such Lender) hereby notify Borrower that pursuant to the
“know your customer” regulations and the requirements of the USA PATRIOT Act,
they are required to obtain, verify and record information that identifies each
Credit Party, which information includes the name, address and tax
identification number (and other identifying information in the event this
information is insufficient to complete verification) that will allow such
Lender or Agent, as applicable, to verify the identity of each Credit
Party.  This information must be delivered to such Lender and Agent no later
than five days prior to the Closing Date and thereafter promptly upon
request.  This notice is given in accordance with the requirements of the USA
PATRIOT Act and is effective as to the Lenders and the Agent.

11.GUARANTEE

11.1           The Guarantee.
  The Guarantors hereby jointly and severally guarantee, as a primary obligor
and not as a surety to Agent and the Lenders and their respective successors and
assigns, the prompt payment in full when due (whether at stated maturity, by
required prepayment, declaration, demand, by acceleration or otherwise) of the
principal of and interest on (including any interest, fees, costs or charges
that would accrue but for the provisions of the Title 11 of the United States
Code after any bankruptcy or insolvency petition under Title 11 of the United
States Code whether or not any such interest, fees, costs or charges are allowed
in any proceeding thereunder) the Loan made by the Lenders to, and the Notes
held by each Lender of, Borrower, and all other Obligations from time to time
owing to Agent and the Lenders by any Credit Party under any Loan Document (such
obligations being herein collectively called the “Guaranteed Obligations”).  The
Guarantors hereby jointly and severally agree that if Borrower or other
Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors
will promptly pay the same in cash, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, by acceleration or otherwise) in accordance with the terms
of such extension or renewal.

11.2           Obligations Unconditional.
  The obligations of the Guarantors under Section 11.1 shall constitute a
guarantee of payment and to the fullest extent permitted by applicable
Requirements of Law, are absolute, irrevocable and unconditional, joint and
several, irrespective of the value, genuineness, validity, regularity or
enforceability of the Guaranteed Obligations of Borrower under this Agreement,
the Notes, if any, or any other agreement or instrument referred to herein or
therein, or any substitution, release or exchange of any other guarantee of or
security for any of the Guaranteed Obligations, and, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or

 
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Guarantor (except for payment in full).  Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Guarantors hereunder which shall
remain absolute, irrevocable and unconditional under any and all circumstances
as described above:

(i)             at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;
 
(ii)             any of the acts mentioned in any of the provisions of this
Agreement or the Notes, if any, or any other agreement or instrument referred to
herein or therein shall be done or omitted;
 
(iii)             the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be amended in any
respect, or any right under the Loan Documents or any other agreement or
instrument referred to herein or therein shall be amended or waived in any
respect or any other guarantee of any of the Guaranteed Obligations or any
security therefor shall be released or exchanged in whole or in part or
otherwise dealt with;
 
(iv)             any Lien or security interest granted to, or in favor of any
Lender or Agent as security for any of the Guaranteed Obligations shall fail to
be perfected; or
 
(v)             the release of any other Guarantor pursuant to Section 11.9.
 
The Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that Agent or any Lender
exhaust any right, power or remedy or proceed against Borrower under this
Agreement or the Notes, if any, or any other agreement or instrument referred to
herein or therein, or against any other person under any other guarantee of, or
security for, any of the Guaranteed Obligations.  The Guarantors waive any and
all notice of the creation, renewal, extension, waiver, termination or accrual
of any of the Guaranteed Obligations and notice of or proof of reliance by Agent
or any Lender upon this Guarantee or acceptance of this Guarantee, and the
Guaranteed Obligations, and any of them, shall conclusively be deemed to have
been created, contracted or incurred in reliance upon this Guarantee, and all
dealings between Borrower and Agent or any Lender shall likewise be conclusively
presumed to have been had or consummated in reliance upon this Guarantee.  This
Guarantee shall be construed as a continuing, absolute, irrevocable and
unconditional guarantee of payment without regard to any right of offset with
respect to the Guaranteed Obligations at any time or from time to time held by
Agent or any Lender, and the obligations and liabilities of the Guarantors
hereunder shall not be conditioned or contingent upon the pursuit by Agent or
any Lender or any other person at any time of any right or remedy against
Borrower or against any other person which may be or become liable in respect of
all or any part of the Guaranteed Obligations or against any collateral security
or guarantee therefor or right of offset with respect thereto.  This Guarantee
shall remain in full force and effect and be binding in accordance with and to
the extent of its terms upon the Guarantors and the successors and assigns
thereof, and shall inure to the benefit of Agent and the Lenders, and their
respective successors and assigns.

11.3           Reinstatement.
  The obligations of the Guarantors under this Section 11 shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf
of Borrower or other Credit Party in respect of the Guaranteed Obligations is
rescinded or must be otherwise restored by any holder of any of the Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise.

11.4           Subrogation; Subordination.
  Each Guarantor hereby agrees that until the indefeasible payment and
satisfaction in full in cash of all Guaranteed Obligations it shall waive any
claim and shall not exercise any right or remedy, direct or indirect, arising by
reason of any performance by it of its guarantee in Section 11.1, whether by
subrogation or otherwise, against Borrower or any Guarantor of any of the
Guaranteed Obligations or any security for any of the Guaranteed
Obligations.  Any Indebtedness of any Credit Party permitted pursuant to
Section 5.1(d) shall be subordinated to such Credit Party’s Obligations in the
manner set forth in the Intercompany Note evidencing such Indebtedness.

11.5           Remedies.
  The Guarantors jointly and severally agree that, as between the Guarantors and
the Lenders, the obligations of Borrower under this Agreement and the Notes, if
any, may be declared to be forthwith due and payable as provided in Section 7.2
(and shall be deemed to have become automatically due and payable in the
circumstances provided in Section 7.2) for purposes of Section 11.1,
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable) as
against Borrower and that, in the event of such declaration (or such obligations
being deemed to have become automatically due and payable), such obligations
(whether or not due and payable by Borrower) shall forthwith become due and
payable by the Guarantors for purposes of Section 11.1.

11.6           Instrument for the Payment of Money.
  Each Guarantor hereby acknowledges that the guarantee in this Section 11
constitutes an instrument for the payment of money, and consents and agrees that
any Lender or Agent, at its sole option, in the event of a dispute by such
Guarantor in the payment of any moneys due hereunder, shall have the right to
bring a motion-action under New York CPLR Section 3213.

 
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11.7           Continuing Guarantee.
  The guarantee in this Section 11 is a continuing guarantee of payment, and
shall apply to all Guaranteed Obligations whenever arising.

11.8           General Limitation on Guarantee Obligations.
  In any action or proceeding involving any state corporate limited partnership
or limited liability company law, or any applicable state, federal or foreign
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under Section 11.1
would otherwise be held or determined to be void, voidable, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under Section 11.1, then, notwithstanding any
other provision to the contrary, the amount of such liability shall, without any
further action by such Guarantor, any Credit Party or any other person, be
automatically limited and reduced to the highest amount (after giving effect to
the right of contribution established in Section 11.10) that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.

11.9           Release of Guarantors.
  If, in compliance with the terms and provisions of the Loan Documents, all or
substantially all of the Equity Interests of any Guarantor are sold or otherwise
transferred (a “Transferred Guarantor”) to a person or persons, none of which is
Borrower or a Subsidiary, such Transferred Guarantor shall, upon the
consummation of such sale or transfer, be automatically released from its
obligations under this Agreement (including under Section 10.2 hereof) and its
obligations to pledge and grant any Collateral owned by it pursuant to any Loan
Document and the pledge of such Equity Interests to Agent pursuant to the Loan
Documents shall be automatically released, and, so long as Borrower shall have
provided Agent such certifications or documents as Agent shall reasonably
request, Agent shall take such actions as are necessary to effect each release
described in this Section 11.9 in accordance with the relevant provisions of the
Loan Documents, so long as Borrower shall have provided Agent such
certifications or documents as Agent shall reasonably request in order to
demonstrate compliance with this Agreement.

11.10           Right of Contribution.
  Each Subsidiary Guarantor hereby agrees that to the extent that a Subsidiary
Guarantor shall have paid more than its proportionate share of any payment made
hereunder, such Subsidiary Guarantor shall be entitled to seek and receive
contribution from and against any other Subsidiary Guarantor hereunder which has
not paid its proportionate share of such payment.  Each Subsidiary Guarantor’s
right of contribution shall be subject to the terms and conditions of Section
11.4.  The provisions of this Section 11.10 shall in no respect limit the
obligations and liabilities of any Subsidiary Guarantor to Agent and the
Lenders, and each Subsidiary Guarantor shall remain liable to Agent and the
Lenders for the full amount guaranteed by such Subsidiary Guarantor hereunder.

[Remainder of Page Intentionally Left Blank, Next Page is Signature Page]

 
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IN WITNESS WHEREOF, this Loan, Guarantee and Security Agreement has been duly
executed as of the date first written above.

XFONE, INC., as a Guarantor and Grantor

By: /s/ Guy Nissenson           
Name: Guy Nissenson
Title: CEO                                      

XFONE USA, INC., as Borrower and Grantor

By: /s/ Brad Worthington                                         
Name: Brad Worthington
Title: President                                                

NTS COMMUNICATIONS, INC., as Borrower and Grantor

By: /s/ Brad Worthington                                               
Name: Brad Worthington
Title: 
President                                                                      

GULF COAST UTILITIES, INC., as Borrower and Grantor

 
By: /s/ Brad Worthington                                            
Name: Brad Worthington
Title: President                                            

EXPETEL COMMUNICATIONS, INC., as Borrower and Grantor

By: /s/ Brad Worthington                            
Name: Brad Worthington
Title: President                                                        

PRIDE NETWORK, INC., as Government Funded SPE and Credit Party

By: /s/ Brad Worthington                                    
Name: Brad Worthington
Title: President                                                                         

NTS CONSTRUCTION COMPANY, as Borrower and Grantor

By: /s/ Brad Worthington                                                     
Name: Brad Worthington
Title: President                                                        

GAREY M. WALLACE COMPANY, INC., as Borrower and Grantor

By: /s/ Brad Worthington                                          
Name: Brad Worthington
Title: President                                                            

 
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MIDCOM OF ARIZONA, INC., as Borrower and Grantor

By: /s/ Brad Worthington
Name: Brad Worthington
Title: President

 
COMMUNICATIONS BROKERS, INC., as Borrower and Grantor

By: /s/ Brad Worthington                   
Name: Brad Worthington
Title: President                                

NTS TELEPHONE COMPANY, LLC, as Government Funded SPE andCredit Party

By: /s/ Jerry Hoover                                                 
Name: Jerry Hoover
Title: Manager

N.T.S. MANAGEMENT COMPANY, L.L.C., as Borrower and Grantor

By: /s/ Brad Worthington        
Name: Brad Worthington
Title: Manager                                      

 
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ICON AGENT, LLC, as Agent for the Lenders

By:  IEMC Corp., its Manager

By:  /s/ David J.
Verlizzo                                                           
Name: David J. Verlizzo
Title: Senior Vice President, Business and Legal
Affairs                                                             

ICON ECI PARTNERS, L.P., as a Lender

By:  ICON ECI GP, LLC, its General Partner

By: /s/ David J. Verlizzo
Name: David J. Verlizzo
Title: Senior Vice President, Business and Legal Affairs

 

ICON EQUIPMENT AND CORPORATE INFRASTRUCTURE FUND FIFTEEN, L.P., as a Lender

By:  ICON GP 15, LLC, its General Partner
 

By: /s/ David J. Verlizzo
Name: David J. Verlizzo
Title: Senior Vice President, Business and Legal Affairs
 

HARDWOOD PARTNERS, LLC, as a Lender

By:  John Koren, its Manager

By: /s/ John Koren                                                       
Name: John Koren
Title: Manager                                                   

 
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SCHEDULE A - DEFINITIONS

Capitalized terms used in this Agreement and the other Loan Documents shall have
(unless otherwise provided elsewhere in this Agreement or in the other Loan
Documents) the following respective meanings:

“Account Statement” means that certain account statement delivered by the
Borrower to the Agent pursuant to Section 4.1(e) in substantially the form of
Exhibit J.

“Adjusted EBITDA” means, for any period, the consolidated net income during such
period of the Credit Parties, plus without duplication and to the extent
deducted in determining such consolidated net income, interest expense,
consolidated income tax and property tax expense, depreciation and amortization
expense and stock based compensation for such period, but excluding (a) any
gains or losses on any Asset Sale for such period and (b) non-recurring,
non-cash gains or losses for such period, in each case determined on a
consolidated basis for the Credit Parties in conformity with GAAP.

“Affiliate” means, with respect to any Person: (i) each other Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, ten percent (10%) or more of the Stock having
ordinary voting power for the election of directors of such Person or (ii) each
other Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person.  For the purpose of this
definition, “control” of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.

“Affiliated Change of Control” means any Change of Control that arises out of a
transaction with any Affiliate of any Credit Party.

“Agreement” means this Agreement including all appendices, exhibits or schedules
attached or otherwise identified thereto, restatements and modifications and
supplements thereto, and any appendices, exhibits or schedules to any of the
foregoing, each as effect at the time such reference becomes operative;
provided, that except as specifically set forth in this Agreement, any reference
to the Disclosure Schedules to this Agreement shall be deemed a reference to the
Disclosure Schedules as in effect on the Closing Date or in a written amendment
thereto executed by the Borrower and the Agent.

“Anti-Money Laundering Laws” has the meaning given to such term in Section 3.22.

“Anti-Money Laundering Measures” has the meaning given to such term in Section
3.22.

“Anti-Terrorism Laws” has the meaning given to such term in Section 3.22.

“Applicable Reinvestment Period” has the meaning given to such term in Section
1.11.

“Asset Sale” has the meaning given to such term in Section 5.4.

“Assignee” has the meaning given to such term in Section 8(a).

“Assignment Agreement” has the meaning given to such term in Section 8(a).

“Books and Records” means all books, records, board minutes, contracts,
licenses, insurance policies, environmental audits, business plans, files,
computer files, computer discs and other data and software storage and media
devices, accounting books and records, financial statements (actual and pro
forma), filings with Governmental Authorities and any and all records and
instruments relating to the Collateral or each Grantor’s business.

“Borrower” means the Persons identified as such in the preamble of this
Agreement and references to Borrower shall mean any one Borrower and the
collective reference to all Borrowers.

“BSA” has the meaning given to such term in Section 3.22.

“Burlingame Note” means the note made by Holdings pursuant the Burlingame
Securities Purchase Agreement in a principal amount equal to $3,500,000.

“Burlingame Securities Purchase Agreement” means that certain securities
purchase agreement between Holdings and Burlingame Equity Investors, LP dated as
of March 23, 2010.

 
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“Business Day” means any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the State of New York.

“Capital Asset” means, with respect to any Person, all equipment, fixed assets
and Real Property or improvements of such Person, or replacements or
substitutions thereof or additions thereto, that, in accordance with GAAP, have
been or should be reflected as additions to property, plant or equipment on the
balance sheet of such Person.

“Capital Expenditures” means, for any period, without duplication, all
expenditures made directly or indirectly by the Credit Parties during such
period for Capital Assets and which were not financed by the incurrence of
Indebtedness, accrued as a liability, or purchased with the proceeds of grants
or loans by the RUS to any Government Funded SPE.
 
 
“Capital Lease” means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee that, in accordance
with GAAP, either would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person or otherwise would be disclosed
as such in a note to such balance sheet, other than, in the case of Borrower,
any such lease under which Borrower is the lessor.

“Capital Lease Obligation” means, with respect to any Capital Lease, the amount
of the obligation of the lessee thereunder that, in accordance with GAAP, would
appear on a balance sheet of such lessee in respect of such Capital Lease or
otherwise be disclosed in a note to such balance sheet.

“Cash Collateral Account” means a deposit or investment account of a Grantor
that is (i) subject to a first-priority security interest in favor of Lender to
secure the Obligations and that is perfected by control pursuant to a duly
executed and delivered Control Agreement in form and substance reasonably
satisfactory to Lender, and (ii) established and used solely for the purpose of
holding any Involuntary Disposition Proceeds prior to the use thereof pursuant
to Section 1.11.

“Casualty Event” means any involuntary loss of title or ownership, any
involuntary loss of, damage to or any destruction of, or any condemnation or
other taking (including by a Governmental Authority) of, any property of a
Credit Party.  “Casualty Event” shall include but not be limited to any taking
of all or any part of any real property of any person or any part thereof, in or
by condemnation or other eminent domain proceedings pursuant to any Requirement
of Law, or by reason of the temporary requisition of the use or occupancy of all
or any part of any real property of any Person or any party thereof by any
Governmental Authority, civil or military, or any settlement in lieu thereof.

“Change of Control” means any event, transaction or occurrence as a result of
which (a) a single Person, or a group of Persons acting together, acquires and
controls all of the economic and voting rights associated with ownership of at
least fifty percent (50.0%) of any voting class of the outstanding Ownership
Interests of Holdings on a fully diluted basis, (b) Holdings ceases to own and
control all of the economic and voting rights associated with all of the
outstanding Ownership Interests of Xfone USA, Inc. and NTS Communications, Inc.,
(c) Xfone USA, Inc. ceases to own and control all of the economic and voting
rights associated with all of the outstanding Ownership Interests of Gulf Coast
Utilities, Inc. and eXpeTel Communications, Inc. and (d) NTS Communications,
Inc. ceases to own and control all of the economic and voting rights associated
with all of the outstanding Ownership Interests of PRIDE Network, Inc., NTS
Construction Company, Garey M. Wallace Company, Inc., Midcom of Arizona, Inc.,
Communications Brokers, Inc., NTS Telephone Company, LLC and NTS Management
Company, LLC.

“Charges” means all Federal, state, county, city, municipal, local, foreign or
other governmental taxes (including taxes owed to PBGC at the time due and
payable), levies, customs or other duties, assessments, charges, liens, and all
additional charges, interest, penalties, expenses, claims or encumbrances upon
or relating to (i) the Collateral, (ii) the Obligations, (iii) the employees,
payroll, income or gross receipts of any Credit Party, (iv) the ownership or use
of any assets by any Credit Party, or (v) any other aspect of any Credit Party’s
business.

“Chief Executive Office” means the office located at 5307 West Loop 289,
Lubbock, Texas 79414.

“Closing Certificate” means that certain closing certificate of Borrower
delivered to the Agent as of the Closing Date in substantially the form of
Exhibit G.

“Closing Date” means the Business Day on which the conditions precedent set
forth in Section 2 have been satisfied or specifically waived in writing by the
Agent, and the Loan has been made.

“Closing Fee” has the meaning assigned to it in Section 1.6.

“Code” means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of New York; provided, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or

 
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remedies with respect to, the Agent’s Lien on any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, the term “Code” shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions of this Agreement
relating to such attachment, perfection, priority or remedies and for purposes
of definitions related to such provisions; provided further, that to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern.

“Collateral” has the meaning assigned to it in Section 6.1.

“Commencement Date” means November 1, 2011.

“Consolidated Fixed Charges” means, for any period, the sum of (a) Consolidated
Interest Expense for such period, (b) United States, state, local and foreign
income and property taxes expense of the Credit Parties, for such period,
determined on a consolidated basis in accordance with GAAP, (c) the aggregate
amount of scheduled principal payments in respect of all Indebtedness of the
Credit Parties during such period.

“Consolidated Interest Expense” means, for any period, consolidated cash
interest expense (including all associated fees required to be accounted for as
interest expense in accordance with GAAP and imputed interest on Capital Lease
Obligations) during such period of the Credit Parties, determined on a
consolidated basis for the Credit Parties in conformity with GAAP.

“Contractual Obligation” means as to any Person, any provision of any security
issued by such Person or of any agreement, instrument, or other undertaking to
which such Person is a party or by which it or any of its property is bound.

“Control Agreement” means a deposit account control agreement and/or lock box
agreement among any financial institution at which a Cash Collateral Account,
Controlled Account or the Restricted Cash Account, as applicable, is maintained,
the Agent and the applicable Credit Party, in form and substance acceptable to
the Agent , which shall provide, among other things, that such financial
institution executing such agreement has no rights of setoff or recoupment or
any other claim against such Cash Collateral Account, Controlled Account or
Restricted Cash Account, as applicable, other than for payment of its service
fees and other charges directly related to the administration of such account,
and shall give the Agent “control” of such Cash Collateral Account, Controlled
Account or Restricted Cash Account, as applicable, as such term is defined in
Section 9-104 of the Code.

“Controlled Accounts” has the meaning given to such term in Section 3.26(a).

“Copyright License” means rights under any written agreement now owned or
hereafter acquired by any Person granting the right to use any Copyright or
Copyright registration.

“Copyrights” shall mean all of the following now owned or hereafter adopted or
acquired by any Person:  (i) all copyrights in any original work of authorship
fixed in any tangible medium of expression, now known or later developed, all
registrations and applications for registration of any such copyrights in the
United States or any other country, including registrations, recordings and
applications, and supplemental registrations, recordings, and applications in
the United States Copyright Office; and (ii) all Proceeds of the foregoing,
including license royalties and proceeds of infringement suits, the right to sue
for past, present and future infringements, all rights corresponding thereto
throughout the world and all renewals and extensions thereof.

“Credit Party” means Borrower, Guarantors and any Government Funded SPE that
becomes party to this Agreement.

“Default” means any Event of Default or any event that, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.

“Default Rate” has the meaning assigned to it in Section 1.5(c).

“Disbursement Accounts” has the meaning given to such term in Section 3.26(b).

“Dollars” or “$” means lawful currency of the United States of America.

“Earnest Money Deposit” means an amount equal to $40,000, as the same may be
supplemented from time to time.

“Environmental Laws” means all Federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any applicable judicial or
administrative interpretation thereof relating to the regulation and protection
of human health, safety, the environment and natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or subsurface
strata, wildlife, aquatic species and vegetation).

 
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“Environmental Liabilities” means all liabilities, obligations,
responsibilities, remedial actions, removal costs, losses, damages of whatever
nature, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim, suit, action or demand of whatever nature by any Person and
which relate to any health or safety condition regulated under any Environmental
Law, environmental permits or in connection with any Release, threatened
Release, or the presence of a Hazardous Material.

“ERISA” means the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with any Credit Party, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the IRC, or, solely for the purposes of
Section 302 of ERISA and Section 412 of the IRC, is treated as a single employer
under Section 414 of the IRC.

“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Credit Party or any ERISA Affiliate of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Credit Party or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan
or to appoint a trustee to administer any Plan; (f) the incurrence by any Credit
Party or any ERISA Affiliate of any liability with respect to any withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
any Credit Party or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from any Credit Party or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

“Event of Default” has the meaning assigned to it in Section 7.1.

“Executive Orders” has the meaning given to such term in Section 3.22.

“FCC License” means any license , authorization, registration or permit to
construct or operate now held or hereafter acquired by any Credit Party from the
Federal Communications Commission.

“Fees” means any and all fees due to the Agent as set forth in Section 1.6.

“Financial Statements” means, with respect to any Person, the income statement,
balance sheet and statement of cash flows of such Person, prepared for the time
period specified and prepared in accordance with GAAP setting forth in each case
in comparative form the figures for such time period the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects.

“Fiscal Month” means any of the monthly accounting periods of Borrower.

“Fiscal Quarter” means any of the quarterly accounting periods of Borrower.

“Fiscal Year” means the 12 month period of Borrower ending December 31 of each
year.  Subsequent changes of the fiscal year of Borrower shall not change the
term “Fiscal Year” unless the Agent shall consent in writing to such change.

“Fixed Charge Coverage Ratio” means, with respect to the Credit Parties for any
measuring period, the ratio of (a) Adjusted EBITDA for such measuring period
minus Capital Expenditures for such measuring period to (b) Consolidated Fixed
Charges for such measuring period.

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time, consistently applied.

“Goodwill” means all goodwill, trade secrets, proprietary or confidential
information, technical information, procedures, formulae, quality control
standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.

 
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“Government Funded SPE” means any special purpose entity formed or acquired or
at any time to be formed or acquired as a Subsidiary of any Credit Party and
that has received funding from the U.S. Department of Agriculture’s Rural
Utility Service, and only in the case that such debt is recourse solely to the
assets of any such Government Funded SPE and is non-recourse to any of the other
Credit Parties or any of their assets or properties.  PRIDE Network, Inc. and
NTS Telephone Company, LLC are the only Government Funded SPEs in existence as
of the Closing Date.

“Government Funded SPE Servicing Agreement” means a servicing agreement between
a Grantor and a Government Funded SPE pursuant to which such Grantor agrees to
provide services to the Government Funded SPE.  Such services may include
wholesale telecommunications, general billing, management and administrative
services.  The Government Funded SPE Servicing Agreements currently in effect as
of the Closing Date are listed on Schedule D.

“Government Funded SPE Loan Agreement” means the loan agreement between RUS and
a Government Funded SPE. The  Government Funded SPE Loan Agreements currently in
effect as of the Closing Date are listed on Schedule D.

“Government Authorization” means FCC License and any license, authorization,
permit or franchise  issued by a Governmental Authority or quasi-governmental
authority, including any public utility commission or cable franchising
authority, or similar entity.
 
 
“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

“Grantor” means each Borrower, Holdings and each Subsidiary Guarantor that is a
signatory to this Agreement.

“Guaranteed Indebtedness” means, as to any Person, any obligation of such Person
guaranteeing any indebtedness, lease, dividend, or other obligation (“primary
obligations”) of any other Person (the “primary obligor”) in any manner,
including any obligation or arrangement of such guaranteeing Person (whether or
not contingent): (i) to purchase or repurchase any such primary obligation;
(ii) to advance or supply funds (a) for the purchase or payment of any such
primary obligation or (b) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor; (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation; or (iv) to indemnify the owner of such primary
obligation against loss in respect thereof.

“Guarantors” means Holdings and the Subsidiary Guarantors.

“Hazardous Material” means any substance, material or waste that is regulated by
or forms the basis of liability now or hereafter under, any Environmental Laws,
including any material or substance that is (a) defined as a “solid waste,”
“hazardous waste,” “hazardous material,” “hazardous substance,” “extremely
hazardous waste,” “restricted hazardous waste,” “pollutant,” “contaminant,”
“hazardous constituent,” “special waste,” “toxic substance” or other similar
term or phrase under any Environmental Laws, (b) petroleum or any fraction or
by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or any
radioactive substance.

“Hazardous Waste” has the meaning ascribed to such term in the Resource
Conservation and Recovery Act (42 U.S.C. §§ 6901 et. seq.).

“Holdings” means Xfone, Inc., a Nevada corporation.

“Indebtedness” of any Person means:  (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(including reimbursement and all other obligations with respect to surety bonds,
letters of credit and bankers’ acceptances, whether or not matured, but not
including obligations to trade creditors incurred in the ordinary course of
business and not more than sixty (60 days past due); (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments; (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property);
(iv) all Capital Lease Obligations; (v) all Guaranteed Indebtedness in respect
of Indebtedness of any other Person; (vi) all Indebtedness referred to in
clauses (i), (ii), (iii), (iv) or (v) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; and (vii) the Obligations.

“Indemnified Liabilities” and “Indemnified Person” have the respective meanings
assigned to them in Section 1.10.

 
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“Initial Lender” has the meaning given to such term in Section 8(a).

“Installment” means, with respect to the Term Loan, each monthly principal and
interest payment of the Loan, and the total amount and the principal and
interest components of each such payment shall be set forth on Schedule B-1 to
the Term Note(s) evidencing Term Loan; provided that (A) the amount of each
Installment is subject to adjustment in accordance with Section 1.2(b) and
Section 1.11, (B) the final Installment on the Loan shall be in an amount equal
to the entire remaining unpaid principal and accrued interest balance thereof.

“Intellectual Property” means any and all Licenses, Patents, Copyrights,
Trademarks, trade secrets and customer lists.

“Involuntary Disposition Proceeds” means, with respect to any of the Collateral,
the proceeds of any claim made by or on behalf of any Grantor (i) under any
policy of insurance arising from the loss, damage or destruction of such
Collateral or (ii) for any injury or damage to, or loss of, such Collateral, as
a result of the condemnation of or the exercise of the right of eminent domain
with respect to such Collateral.

“IRC” and “IRS” mean respectively, the Internal Revenue Code of 1986 and the
Internal Revenue Service, and any successors thereto.

“Israel Office” means the office located at 11 Rabbi Akiva Street, Modi'in
Illit, 71919, Israel.

“Joinder Agreement” means each Joinder Agreement of a new Subsidiary delivered
to the Agent after the Closing Date in substantially the form of Exhibit I
pursuant to Section 1.12.

“Lender” means the Persons identified as such in the preamble of this Agreement
and, if at any time any Lender shall decide to assign or syndicate all or any of
the Obligations, such term shall include such assignee or such other members of
the syndicate.

“License” means any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by any
Person.

“Lien” means any mortgage, security deed or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, security title, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any jurisdiction).

“Liquidity” means, in relation to any Person, as of any date, the sum of
aggregate amount of the Unrestricted Cash of such Person as of such date.

“Lists” has the meaning given to such term in Section 3.22.

“Litigation” means any claim, lawsuit, litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority.

“Loan” means the collective reference to the Term Loans.

“Loan Documents”  means this Agreement, the Note, each Guarantee, each Mortgage,
the Pledge Agreement, the Control Agreements, each Power of Attorney, any waiver
or consent of a landlord or mortgagee executed in favor of the Agent, and all
other agreements, instruments, documents and certificates identified in Schedule
C executed and delivered to, and in favor of, the Agent and including all other
agreements, pledges, consents, assignments, contracts and notices whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to, and in favor of, the Agent
in connection with the Agreement or the transactions contemplated thereby.  Any
reference in the Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to the
Agreement or such Loan Document as the same may be in effect at any and all
times such reference becomes operative.

“Lubbock Property” means the real property located at 1220 Broadway, Lubbock, TX
79401-3202.

“Material Adverse Effect” means:  a material adverse effect on (a) the business,
assets, operations, or financial or other condition of the Credit Parties taken
as a whole, (b) the validity and enforceability of any Loan Document,
(c) Borrower’s or any other Credit Party’s ability to pay or perform the
Obligations under the Loan Documents to which such Credit Party is a party in

 
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accordance with the terms thereof, (d) the Collateral or the Agent’s Liens on
the Collateral or the priority of any such Lien, or (e) the Agent’s rights and
remedies under this Agreement and the other Loan Documents.

“Maturity Date” means, with respect to the Term Loan, the earliest to occur of
(i) the date of the termination of the acceleration of the maturity of any
Obligations pursuant to Section 7.2 and (ii) the Stated Maturity Date.

“Mortgage” means any mortgage or deed of trust from the relevant Grantor in
favor of the Agent relating to the Lubbock Property and any other mortgage or
deed of trust delivered to the Agent pursuant to Section 3.28.
 
 
“Multiemployer Plan” means a “multiemployer plan,” as defined in Section 4001(a)
(3) of ERISA, to which Borrower, any other Credit Party or any ERISA Affiliate
is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.

“Net Cash Proceeds” means the cash proceeds received by any Credit Party
(including cash proceeds subsequently received (as and when received by any
Credit Party) in respect of non-cash consideration initially received) net of
(i) selling expenses (including reasonable broker’s fees or commissions, legal,
accounting and other professional and transactions fees, transfer and similar
taxes and the Borrower’s good faith estimate of incomes taxes actually paid or
payable in connection with such sale); (ii) amounts provide as a reserve, in
accordance with GAAP, against (x) any liabilities under any indemnification
obligations associated with such Asset Sale or (y) any other liabilities
retained buy any Credit Party associated with the properties sold in such Asset
Sale (provided, that, to the extent and at the time any such amounts are
released from such reserve, such amounts shall constitute Net Cash Proceeds);
(iii) Borrower’s good faith estimate of payments required to be made with
respect to unassumed liabilities relating to the properties sold within 90 days
of such Asset Sale (provided, that, to the extent that such cash proceeds are
not used to make payments in respect of such unassumed liabilities within 90
days of such Asset Sale, such cash proceeds shall constitute Net Cash Proceeds);
and (iv) the principal amount, premium or penalty, if any, interest and other
amounts on any Indebtedness for borrowed money which is secured by a Lien on the
properties sold in such Asset Sale (so long as such Lien was permitted to
encumber such properties under the  Loan Documents at the time of such sale) and
which is repaid with such proceeds (other than any Indebtedness assumed but the
purchaser of such properties).

“Net Income” shall mean, for the Credit Parties on a consolidated basis, for any
period, net income determined in accordance with GAAP.

“Non-U.S. Lender” has the meaning given to such term in Section 8(b).

“Note” means any Term Note.

“Obligations” means all loans, advances, debts, expense reimbursement, fees,
liabilities, and obligations for the performance of covenants, tasks or duties
or for payment of monetary amounts (whether or not such performance is then
required or contingent, or amounts are liquidated or determinable) owing by
Borrower and any other Credit Party to Lender arising under any of the Loan
Documents, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, and all covenants and duties regarding
such amounts.  This term includes all principal, interest (including interest
accruing at the then applicable rate provided in this Agreement after the
maturity of the Loan and interest accruing at the then applicable rate provided
in this Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding), Fees, Charges, expenses, attorneys’ fees and any other sum
chargeable to Borrower under any of the Loan Documents, and all principal and
interest due in respect of the Loan and all obligations and liabilities of any
Guarantor under any Guarantee.

“OFAC” has the meaning given to such term in Section 3.22.

“OFAC Laws and Regulations” has the meaning given to such term in Section 3.22.

“Organizational Documents” shall mean, with respect to any Person, (i) in the
case of any corporation or unlimited liability corporation, the certificate or
articles of incorporation, as applicable, and by-laws (or similar documents) of
such Person, (ii) in the case of any limited liability company, the certificate
of formation and operating agreement (or similar documents) of such Person,
(iii) in the case of any limited partnership, the certificate of formation and
limited partnership agreement (or similar documents) of such Person, (iv) in the
case of any general partnership, the partnership agreement (or similar document)
of such Person and (v) in any other case, the functional equivalent of the
foregoing.

“Other Lists” has the meaning given to such term in Section 3.22.

“Ownership Interests” means, as applied to any Person, corporate stock and any
and all securities, shares, partnership interests (whether general, limited,
special or other), limited liability company interests, membership interests,
equity interests,

 
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participations, rights or other equivalents (however designated and of any
character) of corporate stock of such Person or any of the foregoing issued by
such Person (whether a corporation, a partnership, a limited liability company
or another entity) and shall include securities convertible into Ownership
Interests and rights, warrants or options to acquire Ownership Interests.

“Participant” has the meaning given to such term in Section 8(a).

“Patent License” means rights under any written agreement now owned or hereafter
acquired by any Person granting any right with respect to any invention on which
a Patent is in existence.

“Patents” means all of the following in which any Person now holds or hereafter
acquires any interest:  (i) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State or Territory thereof, or any other country; and (ii) all reissues,
continuations, continuations-in-part or extensions thereof.

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Perfection Certificate” means a certificate in the form of Exhibit A attached
to this Agreement or any other form approved by the Agent.

“Permit” means, with respect to any Person, any permit, approval, authorization,
license, registration, certificate, concession, grant, franchise, variance or
permission from, and any other Contractual Obligations with, any Governmental
Authority, in each case whether or not having the force of law and applicable to
or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

“Permitted Disposition” means a sale or other disposition of assets for the fair
market value of the asset in an arms-length transaction.

“Permitted Encumbrances” means the following encumbrances:  (i) Liens for taxes
or assessments or other governmental Charges or levies, either not yet due and
payable or to the extent that nonpayment thereof is permitted by the terms of
Section 3.10; (ii) carriers’, warehousemen’s, suppliers’, mechanics’,
materialmen’s, repairmen’s or other similar liens arising in the ordinary course
of business and securing indebtedness not yet due and payable or overdue for
more than 30 days or being contested in good faith by appropriate proceedings
and in either case in an outstanding aggregate amount not in excess of $25,000
at any time; (iii) attachment, judgment or other similar Liens arising in
connection with court or arbitration proceedings, provided that the same are
discharged, or that execution or enforcement thereof is stayed pending appeal,
within 30 days or (in the case of any execution or enforcement pending appeal)
such lesser time during which such appeal may be taken; (iv) zoning
restrictions, easements, licenses, or other restrictions on the use of real
property or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not materially impair the use, value, or
marketability of such real estate, (v) Purchase Money Liens securing Purchase
Money Indebtedness (or rent) to the extent permitted under Section 5.1(f), (vi)
Liens in favor of the federal government confined solely to assets of a
Government Funded SPE securing Indebtedness of such Government Funded SPE
permitted under Section 5.1(e), (vii) Liens in favor of Reach Broadband securing
Indebtedness owing to Reach Broadband permitted by Section 5.1(h) provided such
Liens shall be at all times confined solely to the Capital Assets acquired from
Reach Broadband as permitted by Section 5.3 and (viii) Liens in favor of the
Agent securing the Obligations.

“Person” means any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or government (whether Federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person’s successors and assigns.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the IRC or
Section 302 of ERISA, and in respect of which any Credit Party or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledge Agreement” means that certain Pledge Agreement among the Credit Parties
and the Agent pledging as Collateral for the Obligations any Ownership Interests
of Subsidiaries owned by each Credit Party.

“Power of Attorney” means each Power of Attorney of the Credit Parties delivered
to the Agent as of the Closing Date in substantially the form of Exhibit D and
any Power of Attorney delivered to the Agent after the Closing Date pursuant to
Section 1.12.

 
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“Proceeds” means “proceeds,” as such term is defined in the Code and, in any
event, shall include:  (i) any and all proceeds of any insurance, indemnity,
warranty or guarantee payable to any Grantor from time to time with respect to
any Collateral; (ii) any and all payments (in any form whatsoever) made or due
and payable to any Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of any Collateral by any
governmental body, authority, bureau or agency (or any person acting under color
of governmental authority); (iii) any recoveries by any Grantor against third
parties with respect to any litigation or dispute concerning any Collateral,
including claims arising out of the loss or  nonconformity of, interference with
the use of, defects in, or infringement of rights in, or damage to, Collateral;
and (iv) any and all other amounts, rights to payment or other property acquired
upon the sale, lease, license, exchange or other disposition of Collateral
(excluding amounts and rights to payment arising from the rental of any of the
Collateral to customers of the Borrower or any of its Subsidiaries or
distributors) and all rights arising out of Collateral.

“Projections” means as of any date the consolidated balance sheet, statements of
income and cash flow for the Credit Parties by month for the next Fiscal Year,
in each case prepared in a manner consistent with GAAP and accompanied by senior
management’s discussion and analysis of such plan.

“Purchase Money Indebtedness” means for any Person the obligations of such
Person in respect of Indebtedness (including Capital Lease Obligations) incurred
for the purpose of financing all or any part of the purchase price of any
property (including Equity Interests of any Person) or the cost of installation,
construction or improvement of any property and any refinancing thereof;
provided, however, that (i) such Indebtedness is incurred within one year after
such acquisition, installation, construction or improvement of such property by
such Person and (ii) the amount of such Indebtedness does not exceed 100% of the
cost of such acquisition, installation, construction or improvement, as the case
may be.

“Purchase Money Lien” means any Lien upon any fixed assets that secure the
Purchase Money Indebtedness related thereto but only if such Lien shall at all
times be confined solely to the asset the purchase price of which was financed
or refinanced through the incurrence of the Purchase Money Indebtedness secured
by such Lien (and the proceeds thereof) and only if such Lien secures only such
Purchase Money Indebtedness.

“Register” has the meaning given to such term in Section 8(a).

“Related Persons” means, with respect to any Person, each Affiliate of such
Person and each director, officer, employee, agent, trustee, representative,
attorney, accountant and each insurance, environmental, legal, financial and
other advisor and other consultants and agents of or to such Person or any of
its Affiliates.

“Release” means as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials in the indoor or outdoor environment by such
Person, including the movement of Hazardous Materials through or in the air,
soil, surface water, ground water or property.

“Rental Office” means any rental office of the Borrower or any of its
Subsidiaries that is not located in the 48 states constituting the continental
United States.

“Required Lenders” means, at any time, Lenders having at such time in excess of
50% of the sum of the aggregate amount outstanding under the Loan.

“Responsible Officer” means, with respect to any Person (other than an
individual), any officer at the level of vice president or higher of, but in any
event, with respect to financial matters, the chief financial officer, chief
accounting officer, treasurer or controller of such Person.

“Restricted Payment” means:  (a) the declaration or payment of any dividend or
the incurrence of any liability to make any other payment or distribution of
cash or other property or assets on or in respect of Borrower’s or any other
Credit Party’s Stock, (b) any payment or distribution made in respect of any
subordinated Indebtedness of Borrower or any other Credit Party in violation of
any subordination or other agreement made in favor of the Agent for the benefit
of the Lenders, (c) any payment on account of the purchase, redemption,
defeasance or other retirement of Borrower’s or any other Credit Party’s Stock
or Indebtedness or any other payment or distribution made in respect of any
thereof, either directly or indirectly; other than (i) that arising under this
Agreement or (ii) interest and principal, when due without acceleration or
modification of the amortization as in effect on the Closing Date, under
Indebtedness (not including subordinated Indebtedness, payments of which shall
be permitted only in accordance with the terms of the relevant subordination
agreement made in favor of the Agent for the benefit of the Lenders) permitted
under Sections 5.1(b) and 5.1(f) or (d) any payment, loan, contribution, or
other transfer of funds or other property to any holder of Stock of such Person
which is not expressly and specifically permitted in this Agreement; provided
that the following shall not constitute a Restricted Payment: (x) any payment to
the Agent or any of the Lenders, and (y) any loan to Holdings by a Credit Party,
permitted by and made in accordance with the terms of Section 5.7, to permit

 
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Holdings to make payments of regularly scheduled principal and interest on the
Unsecured Bonds or the Burlingame Note permitted by, and made in accordance with
the terms of, Section 5.1(g).

“Requirement of Law” means as to any Person, the Certificate or Articles of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case binding upon
such Person or any of its property or to which such Person or any of its
property is subject.

“RUS” has the meaning given to such term in Section 5.1.

“RUS Payment Date” means, with respect to any Government Funded SPE, any date on
which a regularly scheduled payment of principal and/or interest is due under
the related Government Funded Loan Agreement as in effect on the date hereof
without giving effect to any amendments or modifications made after the date
hereof.

“SDN List” has the meaning given to such term in Section 3.22.

“Secretarial Certificate” means each Secretarial Certificate of the Credit
Parties delivered to the Agent as of the Closing Date in substantially the form
of Exhibit C and any Secretarial Certificate delivered to the Agent after the
Closing Date pursuant to Section 1.12.

“Senior Leverage Ratio” means as of any date of determination, the ratio of (a)
total Indebtedness of the Credit Parties (not including Indebtedness outstanding
under the Unsecured Bonds and the Burlingame Note or Indebtedness owing by any
Government Funded SPE to the RUS, in each case, to the extent that such
Indebtedness is permitted by Section 5.1), divided by (b) Adjusted EBITDA for
the trailing 4 Fiscal Quarters most recently ended.

“Solvent” means, with respect to any Person on a particular date, that on such
date (a) the assets of such Person, at a fair valuation, exceed its liabilities,
including contingent liabilities, (b) the remaining capital of such Person is
not unreasonably small to conduct its business and (c) such Person will not have
incurred debts, and does not have the present intent to incur debts, beyond its
ability to pay such debts as they mature.  For purposes of this definition,
“debt” means any liability on a claim, and “claim” means any (i) right to
payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured.  In
computing the amount of contingent liabilities of any Person on any date, such
liabilities shall be computed at the amount that, in the judgment of the Agent
in light of all facts and circumstances existing at such time, represents the
amount of such liabilities that reasonably can be expected to become actual or
matured liabilities.

“Stated Maturity Date” means November 1, 2016.

“Stock” means all certificated and uncertificated shares, options, warrants,
membership interests, general or limited partnership interests, participation or
other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or equivalent entity whether voting or
nonvoting, including common stock, preferred stock, beneficial interests in a
trust or any other “equity security” (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934) or other equity interests
in any Person.

“Subsidiary” means, with respect to any Person, (i) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, Stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person, or
with respect to which any such Person has the right to vote or designate the
vote of more than 50% of such Stock whether by proxy, agreement, operation of
law or otherwise, and (ii) any partnership or limited liability company in which
such Person or one or more Subsidiaries of such Person has an equity interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is a general partner
or manager or may exercise the powers of a general partner or manager.

“Subsidiary Guarantor” means any direct or indirect Subsidiary of a Borrower
(other than a Government Funded SPE) as of the Closing Date and each other
direct or indirect Subsidiary of a Borrower (other than a Government Funded SPE)
that becomes a party to this Agreement pursuant to Section 1.12.

“Taxes” means taxes, levies, imposts, deductions, Charges or withholdings, and
all liabilities with respect thereto, excluding taxes imposed on or measured by
the net income of Lender.

 
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“Term Loan” has the meaning given to such term in Section 1.1(a).

“Term Loan Commitment” means the commitment of each Lender under this Agreement
to make or otherwise fund its Term Loan.  The aggregate amount of the Term Loan
Commitments as of the Closing Date is $7,500,000.

“Term Note” has the meaning given to such term in Section 1.1(a).

“Termination Date” means the date on which all Obligations under this Agreement
are paid in full, in cash (other than contingent obligations not yet due and
payable), and Borrower shall have no further right to borrow any moneys or
obtain other credit extensions or financial accommodations from Lender under
this Agreement.

“Total Debt” shall mean, for the Credit Parties on a consolidated basis as of
any date, the sum (without duplication) of (a) the principal amount of all
Indebtedness outstanding under this Agreement and (b) all other Indebtedness for
borrowed money of the Credit Parties determined in accordance with GAAP.

“Trademark License” means rights under any written agreement now owned or
hereafter acquired by any Person granting any right to use any Trademark or
Trademark registration.

“Trademarks” means all of the following now owned or hereafter adopted or
acquired by any Person:  (i) all trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether registered or
unregistered) all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications
in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State or Territory thereof, or any other
country or any political subdivision thereof: (ii) all reissues, extensions or
renewals thereof; and (iii) all goodwill associated with or symbolized by any of
the foregoing.

“Transactions” means, collectively, the transactions to occur on or prior to the
Closing Date pursuant to the Loan Documents, including (a) the execution,
delivery and performance of the Loan Documents and the borrowings hereunder; and
(b) the payment of all fees and expenses to be paid on or prior to the Closing
Date and owing in connection with the foregoing.

“Unrestricted Cash” means cash or cash equivalents of the Credit Parties (other
than any cash held by a Credit Party in a restricted bank account that was
directly received from the RUS pursuant to a Government Funded SPE Loan
Agreement that also appears as restricted cash on such Credit Parties’ balance
sheet in accordance with GAAP).

“Unsecured Bonds” means the Series A bonds issued pursuant to the amended and
restated indenture dated as of October 27, 2008 between Xfone, Inc. and Ziv Haft
Trusts Company Ltd. with a par value of 100,382,100 New Israeli Shekels at
commencement.

“USA PATRIOT Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Title III of Pub. L. 107-56).

“U.S. Publicly-Traded Entity” has the meaning given to such term in Section
3.22.

“Voluntary Prepayment” has the meaning given to such term in Section 1.2(b).

“Voluntary Prepayment Date” means the date any Voluntary Prepayment is made
pursuant to Section 1.2(b).

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

Any accounting term used in this Agreement or the other Loan Documents shall
have, unless otherwise specifically provided therein, the meaning customarily
given such term in accordance with GAAP, and all financial computations
thereunder shall be computed, unless otherwise specifically provided therein, in
accordance with GAAP consistently applied; provided, that all financial
covenants and calculations in the Loan Documents shall be made in accordance
with GAAP as in effect on the Closing Date unless Borrower and the Agent shall
otherwise specifically agree in writing.  That certain items or computations are
explicitly modified by the phrase “in accordance with GAAP” shall in no way be
construed to limit the foregoing.  All other undefined terms contained in this
Agreement or the other Loan Documents shall, unless the context indicates
otherwise, have the meanings provided for by the Code.

 
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The words “herein,” “hereof” and “hereunder” or other words of similar import
refer to this Agreement as a whole, including the exhibits and schedules
thereto, as the same may from time to time be amended, modified or supplemented,
and not to any particular section, subsection or clause contained in this
Agreement.

For purposes of this Agreement and the other Loan Documents, the following
additional rules of construction shall apply, unless specifically indicated to
the contrary:  (a) wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural including the term “Borrower,” which shall include any one Borrower and
all the Borrowers collectively ; (b) the term “or” is not exclusive; (c) the
term “including” (or any form thereof) shall not be limiting or exclusive;
(d) all references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations; and (e) all
references to any instruments or agreements, including references to any of the
Loan Documents, shall include any and all modifications or amendments thereto
and any and all extensions or renewals thereof.

 
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SCHEDULE B

TERM LOAN COMMITMENTS

Lender
Term Loan Commitment
 
ICON Equipment and Corporate Infrastructure Fund Fifteen, L.P.
 
$6,850,000
ICON ECI Partners, L.P.
$   150,000
 
Hardwood Partners, LLC
 
$   500,000

AMORTIZATION OF THE LOAN

The Loan will amortize in sixty (60) monthly payments as follows:

Payment Date
Interest
Principal
Balance o/s
01-Nov-11
   
$ 7,500,000
01-Dec-11
$ 78,596
$      -
$ 7,500,000
01-Jan-12
$ 81,216
$      -
$ 7,500,000
01-Feb-12
$ 81,216
$      -
$ 7,500,000
01-Mar-12
$ 75,976
$      -
$ 7,500,000
01-Apr-12
$ 81,216
$      -
$ 7,500,000
01-May-12
$ 78,596
$      -
$ 7,500,000
01-Jun-12
$ 81,216
$      -
$ 7,500,000
01-Jul-12
$ 78,596
$      -
$ 7,500,000
01-Aug-12
$ 81,216
$      -
$ 7,500,000
01-Sep-12
$ 81,216
$      -
$ 7,500,000
01-Oct-12
$ 78,596
$      -
$ 7,500,000
01-Nov-12
$ 81,216
$      -
$ 7,500,000
01-Dec-12
$78,596
$ 93,750
$ 7,406,250
01-Jan-13
$ 80,201
$ 93,750
$ 7,312,500
01-Feb-13
$ 79,185
$ 93,750
$ 7,218,750
01-Mar-13
$ 70,605
$ 93,750
$ 7,125,000
01-Apr-13
$ 77,155
$ 93,750
$ 7,031,250
01-May-13
$ 73,684
$ 93,750
$ 6,937,500
01-Jun-13
$ 75,125
$ 93,750
$ 6,843,750
01-Jul-13
$ 71,719
$ 93,750
$ 6,750,000
01-Aug-13
$ 73,094
$ 93,750
$ 6,656,250
01-Sep-13
$ 72,079
$ 93,750
$ 6,562,500
01-Oct-13
$ 68,771
$ 93,750
$ 6,468,750
01-Nov-13
$ 70,049
$ 93,750
$ 6,375,000
01-Dec-13
$ 66,807
$ 93,750
$ 6,281,250
01-Jan-14
$ 68,018
$ 93,750
$ 6,187,500
01-Feb-14
$ 67,003
$ 93,750
$ 6,093,750
01-Mar-14
$ 59,602
$ 93,750
$ 6,000,000
01-Apr-14
$ 64,973
$ 93,750
$ 5,906,250
01-May-14
$ 61,894
$ 93,750
$ 5,812,500
01-Jun-14
$ 62,942
$ 93,750
$ 5,718,750
01-Jul-14
$ 59,929
$ 93,750
$ 5,625,000
01-Aug-14
$ 60,912
$ 93,750
$ 5,531,250
01-Sep-14
$ 59,897
$ 93,750
$ 5,437,500
01-Oct-14
$ 56,982
$ 93,750
$ 5,343,750
01-Nov-14
$ 57,866
$ 93,750
$ 5,250,000
01-Dec-14
$ 55,017
$ 93,750
$ 5,156,250
01-Jan-15
$ 55,836
$ 93,750
$ 5,062,500
01-Feb-15
$ 54,821
$ 93,750
$ 4,968,750
01-Mar-15
$ 48,598
$ 93,750
$ 4,875,000
01-Apr-15
$ 52,790
$ 93,750
$ 4,781,250
01-May-15
$ 50,105
$ 93,750
$ 4,687,500
01-Jun-15
$ 50,760
$ 93,750
$ 4,593,750
01-Jul-15
$ 48,140
$ 93,750
$ 4,500,000
01-Aug-15
$ 48,729
$ 93,750
$ 4,406,250
01-Sep-15
$ 47,714
$ 93,750
$ 4,312,500
01-Oct-15
$ 45,193
$ 93,750
$ 4,218,750
01-Nov-15
$ 45,684
$ 93,750
$ 4,125,000
01-Dec-15
$ 43,228
$ 93,750
$ 4,031,250
01-Jan-16
$ 43,653
$ 93,750
$ 3,937,500
01-Feb-16
$ 42,638
$ 93,750
$ 3,843,750
01-Mar-16
$ 38,938
$ 93,750
$ 3,750,000
01-Apr-16
$ 40,608
$ 93,750
$ 3,656,250
01-May-16
$ 38,315
$ 93,750
$ 3,562,500
01-Jun-16
$ 38,577
$ 93,750
$ 3,468,750
01-Jul-16
$ 36,351
$ 93,750
$ 3,375,000
01-Aug-16
$ 36,547
$ 93,750
$ 3,281,250
01-Sep-16
$ 35,532
$ 93,750
$ 3,187,500
01-Oct-16
$ 33,403
$ 93,750
$ 3,093,750
01-Nov-16
$ 33,501
$ 3,093,750
$ 0

 
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SCHEDULE C
Agent’s, Lenders’ And Credit Parties’ Addresses For Notices

Agent’s Address

Name:                 ICON Agent, LLC
Address:                      100 5th Avenue, 4th Floor
New York, New York 10011
Attn:                 Harry Giovani and David Verlizzo
Telephone:                      (212) 418-4705 (Giovani)
(212) 418-4707 (Verlizzo)
Facsimile:

with a copy to:

Name:                 Chapman and Cutler LLP
Address:                      330 Madison Avenue, 34th Floor
New York, New York 10017
Attn:                 Anthony M. DiGiacomo
Telephone:                      (212) 655-2530
Facsimile:                      (212) 655-2531

Lenders’ Addresses

Name:
ICON Equipment and Corporate Infrastructure Fund Fifteen, L.P.

Address:                      100 5th Avenue, 4th Floor
New York, New York 10011
Attn:                 Harry Giovani and David Verlizzo
Telephone:                      (212) 418-4705 (Giovani)
(212) 418-4707 (Verlizzo)
Facsimile:

Name:                 ICON ECI Partners, L.P.
Address:                      100 5th Avenue, 4th Floor
New York, New York 10011
Attn:                 Harry Giovani and David Verlizzo
Telephone:                      (212) 418-4705 (Giovani)
(212) 418-4707 (Verlizzo)
Facsimile:

Name:                 Hardwood Partners, LLC
Address:                      One Landmark Square, Suite 620
Stamford, Connecticut 06901
Attn:                 Earl Hedin and John Koren
Telephone:                      (203) 569-1919
Facsimile:

Borrower’s Address

Name:
Address                 :

Attn:
Telephone:
Facsimile:

with a copy to:

Name:
Address                 :

Attn:
Telephone:
Facsimile:

Guarantors’ Addresses

As set forth in Exhibit A-2

 
-45-

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Schedule D - Schedule of Documents

The obligation of Lender to make the Loan under the Agreement is subject to
satisfaction of the condition precedent that Lender shall have received the
following, each, unless otherwise specified below or the context otherwise
requires, dated the Closing Date, in form and substance satisfactory to Lender
and its counsel:

 
PRINCIPAL LOAN DOCUMENTS

1.
Agreement. The Term Loan, Guarantee and Security Agreement duly executed by
Borrower, Holdings, and the Subsidiary Guarantors.

2.
Note. Duly executed Term Note to the order of the Agent evidencing the Term
Loan.

 
COLLATERAL DOCUMENTS.

1.
Mortgages or Deed of Trusts.  Delivery to the Agent of an executed mortgage or
deed of trust in recordable form for each real property owned or leased by a
Credit Party.

2.
Pledge Agreement.  Delivery to the Agent of an executed Pledge Agreement
substantially in the form of Exhibit L pledging as Collateral for the
Obligations any Ownership Interests of Subsidiaries owned by each Credit Party,
and a corresponding Stock Power for any certificated Stock and Acknowledgment of
Collateral Assignment for any uncertificated Stock.

3.
Financing Statement. Evidence of filing of proper Financing Statement (Form
UCC-l) under the Code in all jurisdictions as may be necessary or, in the
opinion of the Agent , desirable to perfect the Agent’s Lien on the Collateral.

4.
Lien Searches. Certified copies of UCC financing statement and other lien
searches, or other evidence satisfactory to the Agent , listing all effective
financing statements which name any Grantor (under present name, any previous
name or any trade or doing business name) as debtor and covering all
jurisdictions referred to in paragraph (1) immediately above and all other
jurisdictions as may be necessary in the opinion of Lender together with copies
of such other financing statements.

5.
Other Recordings and Filings. Delivery to the Agent of all other recordings and
filings as may be necessary or, in the opinion of and at the reasonable request
of Lender, desirable to perfect the Agent’s Lien on the Collateral, including
without limitation, Intellectual Property collateral agreements.

6.
Power of Attorney. Power of Attorney duly executed by each Grantor.

7.
Control Agreements. Delivery to the Agent of an executed Control Agreement for
each Controlled Account and the Restricted Cash Account.

8.
Discharge of Prior Indebtedness/Lien.  The Agent shall have received evidence
reasonably satisfactory to it that all Indebtedness of the Credit Parties
existing prior to the Closing Date and not permitted under Section 5.1 shall
have been paid in full from proceeds of the Loan, and that the commitment by any
prior lender to make extensions of credit to the Credit Parties has been
terminated to the satisfaction of the Agent with all liens in favor of such
prior lenders being unconditionally released; the Agent shall have received a
“payoff” letter in form and substance reasonably satisfactory to the Agent with
respect to all such Indebtedness being paid in full from such proceeds and any
such commitment to make extensions of credit terminated; and the Agent shall
have received from any Person holding any Lien securing any such debt, such UCC
termination statements, mortgage releases, releases of assignments of leases and
rents, releases of security interests in Intellectual Property and other
instruments, in each case in proper form for recording, as the Agent shall have
reasonably requested to release and terminate of record the Liens securing such
debt.

 
THIRD PARTY AGREEMENTS.

1.
Government Funded SPE Servicing Agreements.

2.
Government Funded SPE Loan Agreements.

3.
Burlingame Note.

4.
Burlingame Securities Purchase Agreement

 
OTHER DOCUMENTS.

1.
Secretarial Certificate. A Secretarial Certificate in the form of Exhibit C to
the Agreement duly completed and executed by the Secretary of each Credit Party
executing the Agreement, together with all attachments thereto.

2.
Financial Statements. Copies of the unaudited Financial Statements of Borrower
for the Fiscal Quarter ending September 30, 2011 and the audited Financial
Statements of Borrower for the period ending December 31, 2010.

3.
Insurance Policies. Certificates of insurance with respect to all policies
described in Section 3.16, together with evidence showing loss payable or
additional insured clauses or endorsements in favor of the Agent .

4.
Closing Certificate. A Closing Certificate in the form of Exhibit G, duly
completed and executed by the Chief Executive Officer of the Borrower.

 
-46-

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5.
Solvency Certificate. A Solvency Certificate with respect to the Borrower and
its Subsidiaries on a consolidated basis in the form of Exhibit H, duly
completed and executed by the Chief Financial Officer of the Borrower.

6.
Compliance Certificate. A compliance certificate dated as of the Closing Date
showing compliance with the financial covenants set forth in Section 4.2 of the
Agreement.

7.
Landlord and Mortgagee Consents.  A duly executed landlord and mortgagee waivers
and consents from the landlords and mortgagees of the Chief Executive Office, in
form and substance reasonably satisfactory to the Agent .

8.
Title Insurance Policies.  Delivery to the Agent of title insurance policies or
marked-up unconditional insurance binders (in each case, together with copies of
all documents referred to therein) issued by title insurance companies
reasonably satisfactory to the Agent for each real property owned or leased by a
Credit Party.

9.
Surveys.  Delivery to the Agent of ALTA (or TLTA, if applicable) as-built
surveys certified to the Lender for each real property owned or leased by a
Credit Party.

10.
Environmental Reports with Reliance Letters.  Delivery to the Agent of
environmental reports or assessments for each real property owned or leased by a
Credit Party addressed to the Agent or with a corresponding Reliance Letter.

11.
Perfection Certificate.  A Perfection Certificate in the form of Exhibit A to
the Agreement and duly completed and executed.

 
-47-

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EXHIBIT A

FORM OF PERFECTION CERTIFICATE
This Perfection Certificate (this “Certificate”) is delivered pursuant to that
certain Term Loan, Guarantee and Security Agreement dated as of [______], 2011
(the “Loan Agreement”) by and among Xfone, Inc., (“Holdings”), Xfone USA, Inc.,
NTS Communications, Inc., Gulf Coast Utilities, Inc., eXpeTel Communications,
Inc., NTS Construction Company, Garey M. Wallace Company, Inc., Midcom of
Arizona, Inc., Communications Brokers, Inc., and NTS Management Company, LLC,
(individually and collectively referred to herein as the “Borrower”), the other
Credit Parties signatory hereto, and ICON AGENT, LLC, as agent (the “Agent”) for
the lenders set forth on Schedule B attached to the Loan Agreement (each herein
referred to as a “Lender” and collectively, the “Lenders”). Capitalized terms
used but not defined herein have the meanings assigned in the Loan Agreement.
As used herein, the term “Companies” means the Credit Parties.
Each of the undersigned hereby certifies to the Agent as follows:
1. Names. (a) The exact legal name of each Company, as such name appears in its
respective certificate of incorporation or any other organizational document, is
set forth in Schedule 1(a). Each Company is (i) the type of entity disclosed
next to its name in Schedule 1(a) and (ii) a registered organization except to
the extent disclosed in Schedule 1(a). Also set forth in Schedule 1(a) is the
organizational identification number, if any, of each Company that is a
registered organization, the Federal Taxpayer Identification Number, if any, of
each Company and the jurisdiction of formation of each Company.
(b) Set forth in Schedule 1(b) hereto is any other corporate or organizational
names each Company has had in the past five years, together with the date of the
relevant change.
(c) Set forth in Schedule 1(c) is a list of all other names (including trade
names or similar appellations) used by each Company, or any other business or
organization to which each Company became the successor by merger, amalgamation,
consolidation, acquisition, change in form, nature or jurisdiction of
organization or otherwise, at any in the past five years. Also set forth in
Schedule 1(c) is the information required by Section 1 of this Certificate for
any other business or organization to which each Company became the successor by
merger, amalgamation, consolidation, acquisition, change in form, nature or
jurisdiction of organization or otherwise, at any time in the past five years.
Except as set forth in Schedule 1(c), no Company has changed its jurisdiction of
organization at any time during the past four months.
2. Current Locations. (b) The chief executive office of each Company is located
at the address set forth in Schedule 2(a) hereto.
(b) Set forth in Schedule 2(b) are all locations where each Company maintains
any Books and Records relating to any Collateral.
(c) Set forth in Schedule 2(c) hereto are all the other places of business of
each Company.
(d) Set forth in Schedule 2(d) hereto are all other locations where each Company
maintains any of the Collateral consisting of inventory or equipment not
identified above.

 
Exhibit A - 1-

--------------------------------------------------------------------------------

 

(e) Set forth in Schedule 2(e) hereto are the names and addresses of all persons
or entities other than each Company, such as lessees, consignees, warehousemen
or purchasers of chattel paper, which had possession as of [January 1, 2011]
[CHECK WITH ICON] or are intended to have possession of any of the Collateral
consisting of instruments, chattel paper, inventory or equipment.
3. Prior Locations. Set forth in Schedule 3(a) is the information required by
Schedule 2(a), Schedule 2(b) or Schedule 2(c) with respect to each location or
place of business previously maintained by each Company at any time during the
past four months.
4. Extraordinary Transactions. Except for those purchases, acquisitions and
other transactions described on Schedule 4 attached hereto, all of the
Collateral has been originated by each Company in the ordinary course of
business or consists of goods which have been acquired by such Company in the
ordinary course of business from a person in the business of selling goods of
that kind.
5. File Search Reports. Attached hereto as Schedule 5 is a true and accurate
summary of file search reports from (A) the Uniform Commercial Code filing
offices (i) in each jurisdiction identified in Section 1(a) with respect to each
legal name set forth in Section 1 and (ii) in each jurisdiction described in
Schedule 1(c) or Schedule 4 relating to any of the transactions described in
Schedule (1)(c) or Schedule 4 with respect to each legal name of the person or
entity from which each Company purchased or otherwise acquired any of the
Collateral, and (B) each filing officer in each real estate recording office
identified on Schedule 8 with respect to real property on which Collateral
consisting of fixtures is or is to be located. A true copy of each financing
statement (to the extent provided by the applicable jurisdiction), including
judgment and tax liens, bankruptcy and pending lawsuits or other filing
identified in such file search reports has been delivered to the Agent.
6. UCC Filings. The financing statements (duly authorized by each Company
constituting the debtor therein), including the indications of the Collateral,
attached as Schedule 6 relating to the applicable Collateral Documents or the
applicable Mortgage, are in the appropriate forms for filing in the filing
offices in the jurisdictions identified in Schedule 7 hereof.
7. Schedule of Filings. Attached hereto as Schedule 7 is a schedule of (i) the
appropriate filing offices for the financing statements attached hereto as
Schedule 6 and (ii) the appropriate filing offices for the filings described in
Schedule 12(c) and (iii) any other actions required to create, preserve, protect
and perfect the security interests in the Collateral granted to the Agent
pursuant to the Collateral Documents. No other filings or actions are required
to create, preserve, protect and perfect the security interests in the
Collateral granted to the Agent pursuant to the Collateral Documents.
8. Real Property. Attached hereto as Schedule 8(a) is a list of all real
property owned or leased by each Company noting any mortgaged properties as of
the Closing Date and the filing offices for each Mortgage as of the Closing
Date. Except as described on Schedule 8(b) attached hereto, no Company has
entered into any leases, subleases, tenancies, franchise agreements, licenses or
other occupancy arrangements as owner, lessor, sublessor, licensor, franchisor
or grantor with respect to any of the real property described on Schedule 8(a)
and no Company has any leases which require the consent of the landlord, tenant
or other party thereto to the Transactions.
9. Termination Statements. Attached hereto as Schedule 9(a) are the duly
authorized termination statements in the appropriate form for filing in each
applicable jurisdiction identified in Schedule 9(b) hereto with respect to each
Lien described therein.
10. Stock Ownership and Other Equity Interests. Attached hereto as Schedule
10(a) is an accurate organizational chart, showing the ownership structure of
each Borrower and each Subsidiary,

 
Exhibit A - 2-

--------------------------------------------------------------------------------

 

(c) including a true and correct list of each of all of the authorized, and the
issued and outstanding, stock, partnership interests, limited liability company
membership interests or other equity interest of each Company and its
Subsidiaries and the record and beneficial owners of such stock, partnership
interests, membership interests or other equity interests. Also set forth on
Schedule 10(b) is each equity investment of each Company that represents 50% or
less of the equity of the entity in which such investment was made.
11. Instruments and Tangible Chattel Paper. Attached hereto as Schedule 11 is a
true and correct list of all promissory notes, instruments (other than checks to
be deposited in the ordinary course of business), tangible chattel paper,
electronic chattel paper and other evidence of indebtedness held by each Company
as of the date hereof, including all intercompany notes between or among any two
or more Companies.
12. Intellectual Property. (d) Attached hereto as Schedule 12(a) is a schedule
setting forth all of each Company's Patents, Patent Licenses, Trademarks and
Trademark Licenses (each as defined in the applicable Collateral Document)
registered with the United States Patent and Trademark Office and all other
Patents, Patent Licenses, Trademarks and Trademark Licenses, including the name
of the registered owner and the registration number of each Patent, Patent
License, Trademark and Trademark License owned by each Company.
(b) Attached hereto as Schedule 12(b) is a schedule setting forth all of each
Company's United States Copyrights and Copyright Licenses (each as defined in
the applicable Collateral Document), and all other Copyrights and Copyright
Licenses, including the name of the registered owner and the registration number
of each Copyright or Copyright License owned by each Company.
(c) Attached hereto as Schedule 12(c) in proper form for filing with the United
States Patent and Trademark Office or United States Copyright Office are the
filings necessary to preserve, protect and perfect the security interests in the
United States Trademarks, Trademark Licenses, Patents, Patent Licenses,
Copyrights and Copyright Licenses set forth on Schedule 12(a) and Schedule
12(b), including duly signed copies of each Patent Security Agreement, Trademark
Security Agreement and Copyright Security Agreement, as applicable.
13. Commercial Tort Claims. Attached hereto as Schedule 13 is a true and correct
list of all commercial tort claims held by each Company, including a brief
description thereof.
14. Blocked Accounts. Attached hereto as Schedule 14 is a true and complete list
of all Blocked Accounts maintained by each Company, including the name of each
institution where each such account is held, the name of each such account and
the name of each entity that holds each account.
15. Letter-of-Credit Rights. Attached hereto as Schedule 15 is a true and
correct list of all Letters of Credit issued in favor of each Company, as
beneficiary thereunder.
[16. Motor Vehicles and Serial Number Goods. Attached hereto as Schedule 16 is a
true and correct list of all motor vehicles covered by certificate of title or
ownership and serial number goods, in each case, valued at or over $[50,000] and
owned by any Company.]
17. FCC Licenses. Attached hereto as Schedule 17 is a true and correct list of
all FCC Licenses owned by any Company.

 
Exhibit A - 3-

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, this Certificate has been duly executed as of this ____ day
of June 2011.
 
GUARANTOR:
XFONE, INC.

By:
Name:
Title:

BORROWERS:

XFONE USA, INC.

By:
Name:
Title:

NTS COMMUNICATIONS, INC.

By:
Name:
Title:

GULF COAST UTILITIES, INC.

By:
Name:
Title:

EXPETEL COMMUNICATIONS, INC.

By:
Name:
Title:

NTS CONSTRUCTION COMPANY

By:
Name:
Title:

 
Exhibit A - 4-

--------------------------------------------------------------------------------

 

GAREY M. WALLACE COMPANY, INC.

By:
Name:
Title:

MIDCOM OF ARIZONA, INC.

By:
Name:
Title:

COMMUNICATIONS BROKERS, INC.

By:
Name:
Title:

NTS MANAGEMENT COMPANY, LLC

By:
Name:
Title:

GOVERNMENT FUNDED SPE’S:

PRIDE NETWORK, INC.

By:
Name:
Title:

NTS TELEPHONE COMPANY, LLC

By:
Name:
Title:

 
Exhibit A - 5-

--------------------------------------------------------------------------------

 

Schedule 1(a)
Legal Names, Etc.
Legal Name
Type of Entity
Registered Organization
(Yes/No)
Organizational Number1
Federal Taxpayer
Identification Number
Jurisdiction of Formation
                                   

--------------------------------------------------------------------------------

1If none, so state.

 
Exhibit A - 6-

--------------------------------------------------------------------------------

 

Schedule 1(b)
Prior Organizational Names
Company/Subsidiary
Prior Name
Date of Change
                       

 
Exhibit A - 7-

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Schedule 1(c)
Changes in Corporate Identity; Other Names
Company/Subsidiary
Corporate Name of Entity
Action
Date of Action
Jurisdiction of Formation
List of All Other Names Used During Past Five Years
                                                                               
                           

 
Exhibit A - 8-

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Schedule 2(a)
Chief Executive Offices
Company/Subsidiary
Address
                       

 
Exhibit A - 9-

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Schedule 2(b)
Location of Books

Company/Subsidiary
Address
                       

 
Exhibit A - 10-

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Schedule 2(c)
Other Places of Business
Company/Subsidiary
Address
               

 
Exhibit A - 11-

--------------------------------------------------------------------------------

 

Schedule 2(d)
Additional Locations of Equipment and Inventory
Company/Subsidiary
Address
           

 
Exhibit A - 12-

--------------------------------------------------------------------------------

 

Schedule 2(e)
Locations of Collateral in Possession of Persons Other Than Company or Any
Subsidiary
Company/Subsidiary
Name of Entity in Possession of Collateral/Capacity of such Entity
Address/Location of Collateral
                       

 
Exhibit A - 13-

--------------------------------------------------------------------------------

 

Schedule 3(a)
Prior Locations Maintained by Company/Subsidiaries
Company/Subsidiary
Address
           

 
Exhibit A - 14-

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Schedule 3(b)
Prior Locations/Other Entities
Company/Subsidiary
Prior Locations of Collateral: Address
Other Entity in Possession of Collateral/Capacity
Address of Such Other Entity
                       

 
Exhibit A - 15-

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Schedule 4
Transactions Other Than in the Ordinary Course of Business
Company/Subsidiary
Description of Transaction Including Parties Thereto
Date of Transaction
                 

 
Exhibit A - 16-

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Schedule 5
File Search Reports
Company/Subsidiary
Search Report dated
Prepared by
Jurisdiction
                       

 
Exhibit A - 17-

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Schedule 6
Copy of Financing Statements To Be Filed

 
Exhibit A - 18-

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Schedule 7
Filings/Filing Offices
Type of Filing2
Entity
Applicable Collateral Document
[Mortgage, Security Agreement or Other]
Jurisdictions
                               

--------------------------------------------------------------------------------

2UCC-1 financing statement, fixture filing, mortgage, intellectual property
filing or other necessary filing.

 
Exhibit A - 19-

--------------------------------------------------------------------------------

 

Schedule 8(a)
Real Property

Entity of Record
Location Address
Owned or Leased
Landlord/Owner if Leased
Description of Lease Documents
                                                                     

 
Exhibit A - 20-

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Schedule 8(b)

Leases, Subleases, Tenancies, Franchise agreements, Licenses or Other Occupancy
Arrangements

 
Exhibit A - 21-

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Schedule 9
(a) Termination Statements

[(b) Termination Statement Filings Information

Debtor
Jurisdiction
Secured Party
Type of Collateral
File Date
File Number
                                               

 
Exhibit A - 22-

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Schedule 10
(a) Equity Interests of Companies and Subsidiaries
Current Legal Entities Owned
Record Owner
Certificate No.
No. Shares/Interest
Percent Pledged
                                       

(b) Other Equity Interests

 
Exhibit A - 23-

--------------------------------------------------------------------------------

 

Schedule 11
Instruments and Tangible Chattel Paper
1. Promissory Notes:
Entity
Principal Amount
Date of Issuance
Interest Rate
Maturity Date
                             

2. Chattel Paper:

 
Exhibit A - 24-

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Schedule 12(a)
Patents and Trademarks
UNITED STATES PATENTS:
Registrations:

OWNER
REGISTRATION NUMBER
DESCRIPTION
     

Applications:
OWNER
APPLICATION NUMBER
DESCRIPTION
     

Licenses:
LICENSEE
LICENSOR
REGISTRATION/ APPLICATION NUMBER
DESCRIPTION
       

OTHER PATENTS:
Registrations:

OWNER
REGISTRATION NUMBER
COUNTRY/STATE
DESCRIPTION
       

Applications:
OWNER
APPLICATION NUMBER
COUNTRY/STATE
DESCRIPTION
       

Licenses:
LICENSEE
LICENSOR
COUNTRY/STATE
REGISTRATION/ APPLICATION NUMBER
DESCRIPTION
         

 
Exhibit A - 25-

--------------------------------------------------------------------------------

 
UNITED STATES TRADEMARKS:
Registrations:
OWNER
REGISTRATION NUMBER
TRADEMARK
     

Applications:
OWNER
APPLICATION NUMBER
TRADEMARK
     

Licenses:
LICENSEE
LICENSOR
REGISTRATION/ APPLICATION NUMBER
TRADEMARK
       

OTHER TRADEMARKS:
Registrations:
OWNER
REGISTRATION NUMBER
COUNTRY/STATE
TRADEMARK
       

Applications:
OWNER
APPLICATION NUMBER
COUNTRY/STATE
TRADEMARK
       

Licenses:
LICENSEE
LICENSOR
COUNTRY/STATE
REGISTRATION/ APPLICATION NUMBER
TRADEMARK

 
Exhibit A - 26-

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Schedule 12(b)
Copyrights
UNITED STATES COPYRIGHTS

Registrations:

OWNER
TITLE
REGISTRATION NUMBER
     

Applications:
OWNER
APPLICATION NUMBER
   

Licenses:
LICENSEE
LICENSOR
REGISTRATION/ APPLICATION NUMBER
DESCRIPTION
       

OTHER COPYRIGHTS

Registrations:

OWNER
COUNTRY/STATE
TITLE
REGISTRATION NUMBER
       

Applications:
OWNER
COUNTRY/STATE
APPLICATION NUMBER
     

Licenses:
LICENSEE
LICENSOR
COUNTRY/STATE
REGISTRATION/ APPLICATION NUMBER
DESCRIPTION

 
Exhibit A - 27-

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Schedule 12(c)
Intellectual Property Filings

 
Exhibit A - 28-

--------------------------------------------------------------------------------

 

Schedule 13
Commercial Tort Claims

 
Exhibit A - 29-

--------------------------------------------------------------------------------

 

Schedule 14
Blocked Accounts
OWNER
TYPE OF ACCOUNT
BANK OR INTERMEDIARY
ACCOUNT NUMBERS
       

 
Exhibit A - 30-

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Schedule 15
Letter of Credit Rights

 
Exhibit A - 31-

--------------------------------------------------------------------------------

 

[Schedule 16]
[Motor Vehicles and Serial Number Goods]

 
Exhibit A - 32-

--------------------------------------------------------------------------------

 

Schedule 17
FCC Licenses

REGISTERED OWNER
FCC LICENSE NUMBER
DATE ACQUIRED
                       

 
Exhibit A - 33-

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EXHIBIT B

FORM OF TERM NOTE

$[COMMITMENT AMOUNT] [DATE]

1.FOR VALUE RECEIVED, the receipt and sufficiency of which are hereby
acknowledged, Xfone USA, Inc., a Mississippi corporation, NTS Communications,
Inc., a Texas corporation, Gulf Coast Utilities, Inc., a Mississippi
corporation, eXpeTel Communications, Inc., a Mississippi corporation, NTS
Construction Company, a Texas corporation, Garey M. Wallace Company, Inc., a
Texas corporation, Midcom of Arizona, Inc., an Arizona corporation,
Communications Brokers, Inc., a Texas corporation, and N.T.S. Management
Company, L.L.C., a Texas limited liability company (each, and collectively, the
“Borrower”), hereby, jointly and severally, promises to pay to the order of
[NAME OF LENDER], a [jurisdiction of organization] [type of organization]
(“Lender”), [COMMITMENT AMOUNT IN WORDS] DOLLARS ($[COMMITMENT AMOUNT]), or if
less, the outstanding principal amount of the Tern Loan made by the Agent to the
Borrower pursuant to the Agreement (defined below) and evidenced by this Term
Note, together with interest on the unpaid balance of such amount from the date
of this Term Note. This Term Note is one of the Term Notes issued under the Term
Loan, Guarantee and Security Agreement among Borrower, the other Credit Parties
signatory thereto, Lender, the other lenders from time to time party thereto and
ICON AGENT, LLC as agent for the lenders (the “Agent”), dated [DATE], 2011 (said
agreement, as the same may be amended, restated or supplemented from time to
time, being herein called the “Agreement”) to which a reference is made for a
statement of all of the terms and conditions of the Term Loan evidenced hereby.
Capitalized terms not defined in this Term Note shall have the respective
meanings assigned to them in the Agreement. This Term Note is secured by the
Collateral to the extent provided pursuant to the Loan Documents, and is
entitled to the benefit of the rights and security provided thereby.

2.Interest on the outstanding principal balance under this Term Note is payable
at a fixed rate equal to twelve and three quarters percent (12.75%) per annum
or, to the extent otherwise expressly provided under the Agreement, at the
Default Rate (in each case calculated in the manner specified in the Agreement),
in immediately available Dollars at the time and in the manner specified in the
Agreement. The outstanding principal and interest under this Term Note shall be
immediately due and payable on the Maturity Date, and prior to the Maturity
Date, such outstanding principal and accrued interest shall be due and payable
in accordance with the schedule attached as Schedule 1 hereto and incorporated
herein by reference.

3.This Term Note may be voluntarily prepaid only on the terms and conditions set
forth in the Agreement.

4.Payments received by Lender shall be applied against principal and interest as
provided for in the Agreement. Except as otherwise provided for in this Term
Note or the Agreement and to the fullest extent permitted by applicable law,
Borrower waives: (a) presentment, demand and protest, and notice of presentment,
dishonor, intent to accelerate, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all of the Obligations,
the Loan Documents or this Term Note; (b) all rights to notice and a hearing
prior to Agent’s or Lender’s taking possession or control of, or to Agent’s or
Lender’s replevy, attachment or levy upon, the Collateral or any bond or
security that might be required by any court prior to allowing Agent or Lender
to exercise any of its remedies; and (c) the benefit of all valuation, appraisal
and exemption laws.

 
Exhibit B - 1-

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5.Borrower acknowledges that this Term Note is executed as part of a commercial
transaction and that the proceeds of this Term Note will not be used for any
personal or consumer purpose.

6.Borrower agrees to pay to Lender all Fees and expenses described in the
Agreement.

7.Upon the occurrence and continuance of any one or more of the Events of
Default specified in the Agreement, all amounts then remaining unpaid on this
Term Note shall become, or may be declared to be, immediately due and payable,
all as provided in the Agreement.

8.BORROWER ACKNOWLEDGES THAT BORROWER HAS WAIVED THE RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING ON THIS TERM NOTE. THIS TERM NOTE IS GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.

[Remainder of Page Intentionally Left Blank]

 
Exhibit B - 2-

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IN WITNESS WHEREOF, intending to be legally bound, the Borrower has caused this
Term Note to be executed as of the date first written above.

BORROWERS:

XFONE USA, INC.

By:
Name:
Title:

NTS COMMUNICATIONS, INC.

By:
Name:
Title:

GULF COAST UTILITIES, INC.

By:
Name:
Title:

EXPETEL COMMUNICATIONS, INC.

By:
Name:
Title:

NTS CONSTRUCTION COMPANY

By:
Name:
Title:

GAREY M. WALLACE COMPANY, INC.

By:
Name:
Title:

MIDCOM OF ARIZONA, INC.

By:
Name:
Title:

COMMUNICATIONS BROKERS, INC.

By:
Name:
Title:

N.T.S. MANAGEMENT COMPANY, L.L.C.

By:
Name:
Title:

 
Exhibit B - 3-

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SCHEDULE 1 TO TERM NOTE DATED [DATE]

IN THE ORIGINAL PRINCIPAL AMOUNT OF $[COMMITMENT AMOUNT]

MADE BY
[NAME OF BORROWER]

Amortization Schedule

The outstanding principal and accrued interest balance of the Term Loan
evidenced by this Term Note shall amortize in 60 consecutive monthly
installments in the amounts and on the dates set forth below with such payments
due on the first day of each calendar month commencing on the first day of the
calendar month following the Closing Date. The remaining outstanding principal
and accrued interest balance (if any) of this Term Note shall be paid on the
Maturity Date of such Term Loan.

[Months] [Due Date]
Beginning Principal Balance
Interest
Installment
Principal Paid
Ending Principal Balance
                                   

 
Exhibit B - 4-

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EXHIBIT C

FORM OF SECRETARIAL CERTIFICATE

[BORROWER TO PROVIDE]

 
Exhibit B - 5-

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EXHIBIT D

FORM OF POWER OF ATTORNEY

This POWER OF ATTORNEY is executed and delivered by [NAME OF CREDIT PARTY]
(“Credit Party”), to ICON AGENT, LLC, as Agent for the Lenders (hereinafter
referred to as “Agent”) under that certain Term Loan, Guarantee and Security
Agreement dated as even date herewith (the “Agreement”; capitalized terms are
used herein as defined in the Agreement) among the Credit Party, the other
Credit Parties signatory thereto, the lenders from time to time party thereto
and Agent. No person to whom this Power of Attorney is presented, as authority
for Agent to take any action or actions contemplated hereby, shall inquire into
or seek confirmation from Credit Party as to the authority of Agent to take any
action described below, or as to the existence of or fulfillment of any
condition to this Power of Attorney, which is intended to grant to Agent
unconditionally the authority to take and perform the actions contemplated
herein, and Credit Party irrevocably waives any right to commence any suit or
action, in law or equity, against any person or entity which acts in reliance
upon or acknowledges the authority granted under this Power of Attorney. The
Power of Agent granted hereby is coupled with an interest, and may not be
revoked or canceled by Credit Party without Agent’s written consent upon payment
in full of all Obligations due to Agent under the Loan Documents.

Credit Party hereby irrevocably constitutes and appoints Agent (and all
officers, employees or agents designated by Agent), with full power of
substitution, as Credit Party’s true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Credit Party and in
the name of Credit Party or in its own name, from time to time in Agent’s
discretion, to take any and all appropriate action and to execute and deliver
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of the Loan Documents and, without limiting the
generality of the foregoing, Credit Party hereby grants to Agent the power and
right, on behalf of Credit Party, without notice to or assent by Credit Party,
and at any time, to do the following: (a) sign and endorse any invoices, freight
or express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, and notices in connection with any of the
Collateral; (b) effect any repairs to any Collateral, or continue or obtain any
insurance with respect to any Collateral and pay all or any part of the premiums
therefor and costs thereof, and make, settle and adjust all claims under such
policies of insurance, and make all determinations and decisions with respect to
such policies; (c) pay or discharge any taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against any Collateral; (d)
defend any suit, action or proceeding brought against Credit Party with respect
to any Collateral if Credit Party does not defend such suit, action or
proceeding or if Agent believes that Credit Party is not pursuing such defense
in a manner that will maximize the recovery to Agent, and settle, compromise or
adjust any suit, action, or proceeding described above and, in connection
therewith, give such discharges or releases as Agent may deem appropriate; and
(e) sell, transfer, pledge, compromise payment or make any other agreement with
respect to, or otherwise deal with any Collateral, and execute, in connection
with such sale or action, any endorsements, assignments or other instruments of
conveyance or transfer in connection therewith; and to do, at Agent’s option and
Credit Party’s expense, at any time or from time to time, all acts and other
things that Agent reasonably deems necessary to perfect, preserve, or realize
upon any Collateral and Agent’s Liens thereon, all as fully and effectively as
Credit Party might do.

Credit Party hereby ratifies, to the extent permitted by law, all that said
attorneys shall lawfully do or cause to be done by virtue hereof.

 
Exhibit B - 6-

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IN WITNESS WHEREOF, this Power of Attorney has been executed by Credit Party, on
[DATE].

[NAME OF CREDIT PARTY]

By:
Name:
Title:

STATE OF )
) ss.:
COUNTY OF )

On the [__] day of [Month] in the year 201[1] before me, the undersigned,
personally appeared _______________________ personally known to me or proved to
me on the basis of satisfactory evidence to be the individual(s) whose name(s)
is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.

_____________________________
Notary Public

My Commission Expires:

_____________________________

[Notary Seal]

 
Exhibit B - 7-

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EXHIBIT E

FORM OF COMPLIANCE CERTIFICATE

_______, 2011

I, __________, the Chief Financial Officer of XFONE, INC., a Nevada corporation
(in such capacity and not in my individual capacity), with respect to that
certain Term Loan, Guarantee and Security Agreement dated as of October [__],
2011 (as it may be amended, modified, extended or restated from time to time,
the “Loan Agreement”); all capitalized terms are used herein as defined in the
Loan Agreement) by and among the Borrowers, the Credit Parties party thereto,
the Lenders, ICON AGENT, LLC, as agent, in accordance with Section 4.1(c) of the
Loan Agreement, hereby certify that:

a.
Attached hereto as Schedule 1 are detailed calculations demonstrating compliance
by the Credit Parties with Section 4.2(b) of the Loan Agreement.

b.
Attached hereto as Schedule 2 are detailed calculations demonstrating compliance
by the Credit Parties with Section 4.2(a) of the Loan Agreement.

c.
The Credit Parties are in compliance with Section 4.2 in all material respects
as of the date hereof.

d.
No Default has occurred or is continuing under the Loan Agreement.

[Signature Page Follows]

 
Exhibit B - 8-

--------------------------------------------------------------------------------

 

Dated this ___ day of __________, 2011.

XFONE, INC.

By:
Name:
Title:

 
Exhibit B - 9-

--------------------------------------------------------------------------------

 

SCHEDULE 1
Financial Covenants
Covenant 4.2(b) Senior Leverage Ratio

             
Fiscal Quarter Ending
                                       
Adjusted EBITDA Calculation
                         
Net Income
                       
Add
Income Tax
         
Add
Property Tax
         
Add
Interest Expense
         
Add
Depreciation and Amortization
         
Add
Stock Based Compensation
         
Add
Non-recurring non-cash Loss
         
Less
Non-recurring non-cash Gain
         
Add
Loss on Asset Sale
         
Less
Gain on Asset Sale
                         
Adjusted EBITDA (a)
$
                                   
Senior Debt Calculation
                         
Total Indebtedness
         
Less
Unsecured Bonds
         
Less
Burlingame Note
         
Less
Government Funded SPE Debt
                         
Senior Debt (b)
$
                                     
Senior Leverage (b)/(a)
 
<
1.50x
                             

 
Exhibit B - 10-

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SCHEDULE 2
Covenant 4.2(a) Fixed Charge Coverage Ratio

Fiscal Quarter Ending
                         
Liquidity
                   
2011
2012+
   
Liquidity
$-
>
$3,500,000
$3,000,000
                             
If below the Liquidity threshold, test for Fixed Charge Coverage Ratio
                   
Fixed Charge Coverage Ratio Calculation
                         
Adjusted EBITDA (From Schedule 1)
         
Less
Capital Expenditures
                         
(c)
$-
                       
Cash Interest
         
Add
Scheduled Principal Payments on All Indebtedness
         
Add
Taxes (Income & Property)
                         
(d)
$-
                       
Fixed Charge Coverage (c)/(d)
 
>
1.15x
 

 
Exhibit B - 11-

--------------------------------------------------------------------------------

 

EXHIBIT F

FORM OF CLOSING CERTIFICATE

October __, 2011

I, the undersigned, Chief Financial Officer of XFONE, INC., a Neveada
Corporation (the “Holdings”) (in such capacity and not in my individual
capacity), DO HEREBY CERTIFY on behalf of the Credit Parties (as defined below)
that:

1. This Closing Certificate is furnished pursuant to Section 2.1(a) and Schedule
D of that certain Term Loan, Guarantee and Security Agreement, (as in effect on
the date of this Certificate; the capitalized terms defined therein being used
herein as therein defined) dated as of October __, 2011 among the Credit
Parties, the Lenders, ICON AGENT, LLC, as agent (in such capacity, “Agent”) (as
from time to time in effect, the “Loan Agreement”).
2. I am the Chief Financial Officer of Holdings and as such have full and
complete knowledge of the business and affairs of the Borrower and the matters
herein set forth and contained.
3. The Holdings and each other Credit Party is in compliance in all material
respects with all the terms and provisions set forth in the Loan Agreement and
in each other Loan Document on its part to be observed or performed, and, at the
time of and immediately after giving effect to the Loan and the application of
the proceeds thereof, no Default has occurred and is continuing.
4. Each of the representations and warranties made by any Credit Party set forth
in Section 3 of the Loan Agreement or in any other Loan Document is true and
correct in all respects (in the case of any representation or warranty
containing a materiality modification) or in all material respects (in the case
of any representation or warranty not containing a materiality modification),
except that any representation and warranty that is qualified as to “Material
Adverse Effect” is true and correct in all material respects as qualified by the
definition of Material Adverse Effect with the same effect as though made on and
as of the date hereof, except to the extent such representations and warranties
expressly relate to an earlier date, in which case they are true as of such
earlier date.
5. As of the date hereof, the Borrower has received $4,500,000 in gross proceeds
from the issuance of equity.
6. Attached as Exhibit A are true and correct copies of the Burlingame Note and
the Burlingame Securities Purchase Agreement including any amendments or
supplements thereto as of the date hereof.
7. Attached as Exhibit B are true and correct copies of each Government Funded
SPE Servicing Agreement including any amendments or supplements thereto as of
the date hereof.
8. Attached as Exhibit C are true and correct copies of each Government Funded
SPE Loan Agreement including any amendments or supplements thereto as of the
date hereof.
9. I make this certificate in my capacity as Responsible Officer of Holdings and
not personally and it is not intended to attract or attach personal liability to
me.

[Signature Page Follows]

 
Exhibit B - 12-

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of October, 2011.

_____________________________
Name:
Title:Chief Financial Officer

 
Exhibit B - 13-

--------------------------------------------------------------------------------

 

EXHIBIT A
(Burlingame Note and Burlingame Securities Purchase Agreement)

 
Exhibit B - 14-

--------------------------------------------------------------------------------

 

EXHIBIT B
(Government Funded SPE Servicing Agreements)

 
Exhibit B - 15-

--------------------------------------------------------------------------------

 

EXHIBIT C
(Government Funded SPE Loan Agreements)

 
Exhibit B - 16-

--------------------------------------------------------------------------------

 

EXHIBIT G

FORM OF SOLVENCY CERTIFICATE

[DATE]

I, the undersigned, Chief Financial Officer of XFONE, INC., a Nevada corporation
“Holdings” (in such capacity and not in my individual capacity), DO HEREBY
CERTIFY on behalf of the Credit Parties that:

1.This Solvency Certificate is furnished pursuant to Sections 3.17 and 2.1(a) of
that certain Term Loan, Guarantee and Security Agreement, (as in effect on the
date of this Solvency Certificate) dated as of [DATE] among Holdings, the Credit
Parties a party thereto, the Lenders and ICON AGENT, LLC, as agent (in such
capacity, “Agent”) (as from time to time in effect, the “Loan Agreement”).
Capitalized terms used but not defined herein have the meanings assigned in the
Loan Agreement.

2.Immediately following the consummation of the Transactions and immediately
following the making of the Loan and after giving effect to the application of
the proceeds of the Loan on the date hereof, (a) the fair value of the
properties of each Credit Party (individually and on a consolidated basis with
its Subsidiaries) exceeds its debts and liabilities, subordinated, contingent or
otherwise; (b) the present fair saleable value of the property of each Credit
Party (individually and on a consolidated basis with its Subsidiaries) is
greater than the amount that will be required to pay the probable liability of
its debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (c) each Credit Party
(individually and on a consolidated basis with its Subsidiaries) is able to pay
its debts and liabilities, subordinated, contingent or otherwise, as such debts
and liabilities become absolute and matured; (d) each Credit Party (individually
and on a consolidated basis with its Subsidiaries) does not have unreasonably
small capital with which to conduct the business in which it is engaged as such
business is now conducted and is presently contemplated to be conducted
following the Closing Date; (e) the property of each Credit Party (individually
and on a consolidated basis with its Subsidiaries) is sufficient, if disposed of
at a fairly conducted sale under legal process, to enable payment of all its
obligations, due and accruing due; (f) the property of each Credit Party
(individually and on a consolidated basis with its Subsidiaries) is, at a fair
valuation, greater than the total amount of liabilities including contingent
liabilities, of such Credit Party; (g) each Credit Party has not ceased paying
its current obligations in the ordinary course of business as they generally
become due; and (h) each Credit Party (individually and on a consolidated basis
with its Subsidiaries) is not for any reason unable to meet its obligations as
they generally become due. The amount of contingent liabilities (such as
litigation, guaranties and pension plan liabilities) are computed as the amount
that, in light of all the facts and circumstances existing at the time,
represents the amount that can be reasonably expected to become an actual or
matured liability.

[Signature Page Follows]

 
Exhibit B - 17-

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, I have hereunto set my hand this __ day of [Month], 201[1].

XFONE, INC.

By:
Name:
Title:

 
Exhibit B - 18-

--------------------------------------------------------------------------------

 

EXHIBIT H

FORM OF JOINDER AGREEMENT

[DATE]

THIS JOINDER AGREEMENT (this “Joinder”), dated as of [DATE], is executed by
[NAME OF ADDITIONAL GUARANTOR], a [jurisdiction of organization] [type of
organization] (“Additional Guarantor”) in favor of Agent for the benefit of the
Lenders described below.

W I T N E S S E T H:
WHEREAS, pursuant to that certain Term Loan, Guarantee and Security Agreement
dated as of [DATE] among Xfone USA, Inc., a Mississippi corporation, NTS
Communications, Inc., a Texas corporation, Gulf Coast Utilities, Inc., a
Mississippi corporation, eXpeTel Communications, Inc., a Mississippi
corporation, NTS Construction Company, a Texas corporation, Garey M. Wallace
Company, Inc., a Texas corporation, Midcom of Arizona, Inc., an Arizona
corporation, Communications Brokers, Inc., a Texas corporation, and N.T.S.
Management Company, L.L.C., a Texas limited liability company (each a
“Borrower”), Xfone, Inc., a Nevada Corporation(“Holdings”), the other Credit
Parties signatory thereto (collectively, together with the Borrowers and
Holdings, the “Credit Parties”), the lenders from time to time party thereto
(“Lenders”), and ICON AGENT, LLC, as Agent for the Lenders (“Agent”) (including
all annexes, exhibits and schedules, collectively the “Loan Agreement”), the
Lenders have, subject to certain terms and conditions, agreed to make the loans
and other extensions of credit on behalf of Borrower;

WHEREAS, Additional Guarantor is a Subsidiary of [Name of Credit Party]
incorporated, organized or otherwise formed under the laws of [jurisdiction of
Additional Guarantor], and as such derives benefits from the loans and other
extensions of credit by the Lenders to the Borrower; and

WHEREAS, Additional Guarantor desires to join the Loan Agreement entered into
prior to this date as a Guarantor and Grantor thereunder, and to be bound
thereby;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and in the other Loan Documents, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

1.DEFINED TERMS. All capitalized terms used but not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.

2.JOINDER; GRANT OF SECURITY INTEREST; GUARANTEE.

(a) Joinder. Additional Guarantor hereby joins the Loan Agreement and each of
the other Loan Documents to which the Subsidiary Guarantors are a party, as a
Credit Party, Guarantor and Grantor, as applicable, thereunder and agrees to be
bound by all of the terms thereof, and shall be as fully a party thereto as if
Additional Guarantor were an original signatory thereto. Additional Guarantor
hereby assumes all of the obligations of a Credit Party, Guarantor and Grantor,
as applicable, under the Loan Documents to which it is hereby joining, and
agrees to be bound by all of the terms, provisions and conditions contained in
such Loan Documents applicable to a Credit Party, Guarantor and Grantor, as
applicable. Each reference to a “Guarantor,” “Credit Party” and “Grantor” in the
Loan Agreement or any other Loan Document heretofore, now or hereafter executed,
shall be deemed to include Additional Guarantor.

 
Exhibit B - 19-

--------------------------------------------------------------------------------

 

(b) Grant of Security Interest. Without limiting the generality of Section 2(a)
of this Joinder, Additional Guarantor hereby acknowledges, agrees and confirms
the grant by Additional Guarantor as of the date of this Joinder of a continuing
security interest, pledge and assignment to Agent of all of its right, title,
and interest in all currently existing and hereafter acquired or arising
Collateral in order to secure prompt repayment of any and all of the Obligations
pursuant to Section 6 of the Loan Agreement.

3.REPRESENTATIONS AND WARRANTIES. Additional Guarantor hereby represents and
warrants to Agent that (a) this Joinder has been duly authorized, executed and
delivered by Additional Guarantor, (b) after giving effect to this Joinder, no
Default or Event of Default has occurred and is continuing as of the date
hereof, and (c) all of the representations and warranties applicable to
Additional Guarantor in the Loan Documents are true and correct in all material
respects on and as of the date of this Joinder and after giving effect to this
Joinder.

4.LOAN DOCUMENTS. This Joinder shall be deemed a Loan Document for all purposes
under the Loan Agreement. Additional Guarantor hereby confirms that it has
received a copy as executed of the Loan Agreement, and all annexes, exhibits and
schedules thereto.

5.SEVERABILITY. Any provision of this Joinder which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent permitted by applicable law,
Additional Guarantor hereby waives any provision of law that renders any
provision hereof prohibited or unenforceable in any respect.

6.GOVERNING LAW. THIS JOINDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICTS OF LAWS OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATION
LAWS OF NEW YORK

7.CONDITIONS TO EFFECTIVENESS OF JOINDER. This Joinder shall not become
effective unless and until (i) one or more counterparts of the same have been
duly executed by Additional Guarantor and delivered to Agent, (ii) all of the
conditions set forth in Section 1.12 of the Loan Agreement have been satisfied
and (iii) the Borrower and the other Credit Parties shall have executed the
attached Confirmation and delivered same to Agent.

[Remainder of Page Intentionally Left Blank]

 
Exhibit B - 20-

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Additional Guarantor has caused this Joinder Agreement to be
duly executed and delivered as of the day and year first above written.

[ADDITIONAL GUARANTOR]

By:
Name:
Title:

 
Exhibit B - 21-

--------------------------------------------------------------------------------

 

CONFIRMATION

The undersigned Credit Parties hereby agree to the terms of the foregoing
Joinder Agreement and agree and confirm that its obligations under each Loan
Document to which it is a party will continue in full force and effect after
giving effect to such Joinder Agreement, and nothing in such Joinder Agreement
shall be deemed to constitute a novation or an accord and satisfaction of any of
the Obligations or to modify, affect or impair the perfection or continuity of
Agent’s security interests in, security titles to or other Liens on any
Collateral.

[BORROWER]

By:
Name:
Title:

[CREDIT PARTIES]

By:
Name:
Title:

[CREDIT PARTIES]

By:
Name:
Title:

 
Exhibit B - 22-

--------------------------------------------------------------------------------

 

EXHIBIT I

FORM OF PERFECTION CERTIFICATE SUPPLEMENT
This Perfection Certificate Supplement, dated as of [____], 2011 is delivered
pursuant to Section 4.1(f) of that certain Term Loan, Guarantee and Security
Agreement dated as of [______], 2011 (the “Loan Agreement”) by and among Xfone,
Inc., (“Holdings”), Xfone USA, Inc., NTS Communications, Inc., Gulf Coast
Utilities, Inc., eXpeTel Communications, Inc., NTS Construction Company, Garey
M. Wallace Company, Inc., Midcom of Arizona, Inc., Communications Brokers, Inc.,
and N.T.S. Management Company, L.L.C., (collectively referred to herein as the
“Borrower”), the Credit Parties party thereto and ICON AGENT, LLC, as agent (the
“Agent”). Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Loan Agreement. As used herein, the term “Companies”
means the Credit Parties.
Each of the undersigned hereby certifies to the Agent that, as of the date
hereof, there has been no change in the information described in the Perfection
Certificate delivered on the Closing Date (as supplemented by any perfection
certificate supplements delivered prior to the date hereof, the “Prior
Perfection Certificate”), other than as follows:
1.Names. (a) Except as listed on Schedule 1(a) attached hereto and made a part
hereof, (x) Schedule 1(a) to the Prior Perfection Certificate sets forth the
exact legal name of each Company, as such name appears in its respective
certificate of incorporation or any other organizational document (y) each
Company is (i) the type of entity disclosed next to its name in Schedule 1(a) to
the Prior Perfection Certificate and (ii) a registered organization except to
the extent disclosed in Schedule 1(a) to the Prior Perfection Certificate and
(z) set forth in Schedule 1(a) to the Prior Perfection Certificate is the
organizational identification number, if any, of each Company that is a
registered organization, the Federal Taxpayer Identification Number, if any, of
each Company and the jurisdiction of formation of each Company.
(b)Except as listed on Schedule 1(b) attached hereto and made a part hereof, set
forth in Schedule 1(b) of the Prior Perfection Certificate is any other
corporate or organizational names each Company has had in the past five years,
together with the date of the relevant change.
2.Current Locations. (a) Except as listed on Schedule 2(a) attached hereto and
made a part hereof, the chief executive office of each Company is located at the
address set forth in Schedule 2(a) of the Prior Perfection Certificate.
(b)Except as listed on Schedule 2(b) attached hereto and made a part hereof, set
forth in Schedule 2(b) of the Prior Perfection Certificate are all locations
where each Company maintains any Books and Records relating to any Collateral.
(c)Except as listed on Schedule 2(c) attached hereto and made a part hereof, set
forth in Schedule 2(c) of the Prior Perfection Certificate are all the other
places of business of each Company.

 
Exhibit B - 23-

--------------------------------------------------------------------------------

 

(d)Except as listed on Schedule 2(d) attached hereto and made a part hereof, set
forth in Schedule 2(d) of the Prior Perfection Certificate are all other
locations where each Company maintains any of the Collateral consisting of
inventory or equipment not identified above.
(e)Except as listed on Schedule 2(e) attached hereto and made a part hereof, set
forth in Schedule 2(e) of the Prior Perfection Certificate are the names and
addresses of all persons or entities other than each Company, such as lessees,
consignees, warehousemen or purchasers of chattel paper, which had possession as
of January 1, 2011 or are intended to have possession of any of the Collateral
consisting of instruments, chattel paper, inventory or equipment.
3.[Intentionally omitted].
4.Extraordinary Transactions. Except for those purchases, acquisitions and other
transactions described on Schedule 4 attached hereto and on Schedule 4 to the
Prior Perfection Certificate, all of the Collateral has been originated by each
Company in the ordinary course of business or consists of goods which have been
acquired by such Company in the ordinary course of business from a person in the
business of selling goods of that kind.
5.[Intentionally omitted].
6.UCC [and PPSA] Filings. Except as listed on Schedule 6 attached hereto and
made a part hereof, the financing statements (duly authorized by each Company
constituting the debtor therein), including the indications of the collateral
relating to the Loan Agreement or the applicable Mortgage, are set forth in
Schedule 6 of the Prior Perfection Certificate and are in the appropriate forms
for filing in the filing offices in the jurisdictions identified in Schedule 7
hereto and thereto.
7.Schedule of Filings. Except as listed on Schedule 7 attached hereto and made a
part hereof, attached to the Prior Perfection Certificate as Schedule 7 is a
schedule of (i) the appropriate filing offices for the financing statements
attached hereto and thereto as Schedule 6 and (ii) the appropriate filing
offices for the filings described in Schedule 12(c) hereto and thereto and (iii)
any other actions required to create, preserve, protect and perfect the security
interests in the Collateral granted to the Agent pursuant to the Collateral
Documents. No other filings or actions are required to create, preserve, protect
and perfect the security interests in the Collateral granted to the Agent
pursuant to the Collateral Documents.
8.Real Property. Except as listed in Schedule 8(a) attached hereto and made a
part hereof, Schedule 8(a) to the Prior Perfection Certificate is a list of all
real property owned or leased by each Company noting Mortgaged Property as of
the Closing Date and filing offices for each Mortgage as of the Closing Date.
Except as described on Schedule 8(b) attached hereto, no Company has entered
into any leases, subleases, tenancies, franchise agreements, licenses or other
occupancy arrangements as owner, lessor, sublessor, licensor, franchisor or
grantor with respect to any of the real property described on Schedule 8(a) or
Schedule 8(a) of the Prior Perfection Certificate, other than those listed on
Schedule 8(b) of the Prior Perfection

 
Exhibit B - 24-

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Certificate, and no Company has any Leases which require the consent of the
landlord, tenant or other party thereto to the Transactions.
9.[Intentionally omitted].
10.Stock Ownership and Other Equity Interests. Except as listed on Schedule
10(a) attached hereto and made a part hereof, Schedule 10(a) to the Prior
Perfection Certificate is an accurate organizational chart, showing the
ownership structure of the Borrower and each Subsidiary thereof, including a
true and correct list of each of all of the authorized, and the issued and
outstanding, stock, partnership interests, limited liability company membership
interests or other equity interest of each Company and its Subsidiaries and the
record and beneficial owners of such stock, partnership interests, membership
interests or other equity interests. Except as set forth on Schedule 10(b)
attached hereto and made a part hereof, Schedule 10(b) to the Prior Perfection
Certificate sets forth equity investment of each Company that represents 50% or
less of the equity in which such investment was made.
11.Instruments and Tangible Chattel Paper. Except as listed on Schedule 11
attached hereto and made a part hereof, Schedule 11 to the Prior Perfection
Certificate is a true and correct list of all promissory notes, instruments
(other than checks to be deposited in the ordinary course of business), tangible
chattel paper, electronic chattel paper and other evidence of indebtedness held
by each Company as of the date hereof, including all intercompany notes between
or among any two or more Companies.
12.Intellectual Property. (a) Except as listed on Schedule 12(a) attached hereto
and made a part hereof, Schedule 12(a) to the Prior Perfection Certificate is a
schedule setting forth all of each Company’s Patents, Patent Licenses,
Trademarks and Trademark Licenses (each as defined in the applicable Collateral
Document) registered with the United States Patent and Trademark Office [or
Canadian Intellectual Property Office], and all other Patents, Patent Licenses,
Trademarks and Trademark Licenses, including the name of the registered owner
and the registration number of each Patent, Patent License, Trademark and
Trademark License owned by each Company.
(b)Except as listed on Schedule 12(b) attached hereto and made a part hereof,
Schedule 12(b) to the Prior Perfection Certificate is a schedule setting forth
all of each Company’s United States [and Canadian] Copyrights and Copyright
Licenses (each as defined in the applicable Collateral Document), and all other
Copyrights and Copyright Licenses, including the name of the registered owner
and the registration number of each Copyright or Copyright License owned by each
Company.
(c)Except as attached hereto and made a part hereof as Schedule 12(c), attached
to the Prior Perfection Certificate as Schedule 12(c) in proper form for filing
with the United States Patent and Trademark Office or United States Copyright
Office are the filings necessary to preserve, protect and perfect the security
interests in the United States Trademarks, Trademark Licenses, Patents, Patent
Licenses, Copyrights and Copyright Licenses set forth on Schedule 12(a) and
Schedule 12(b) hereto and thereto[, including duly signed copies of each

 
Exhibit B - 25-

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Patent Security Agreement, Trademark Security Agreement and Copyright Security
Agreement, as applicable].
13.Commercial Tort Claims. Except as listed on Schedule 13 attached hereto and
made a part hereof, attached to the Prior Certificate as Schedule 13 is a true
and correct list of all commercial tort claims held by each Company, including a
brief description thereof.
14.Blocked Accounts. Except as listed on Schedule 14 attached hereto and made a
part hereof, attached to the Prior Perfection Certificate as Schedule 14 is a
true and complete list of all Blocked Accounts maintained by each Company,
including the name of each institution where each such account is held, the name
of each such account and the name of each entity that holds each account.
15.Letter-of-Credit Rights. Except as listed on Schedule 15 attached hereto and
made a part hereof, attached to the Prior Perfection Certificate as Schedule 15
is a true and correct list of all Letters of Credit issued in favor of each
Company, as beneficiary thereunder.
[16.Motor Vehicles and Serial Number Goods. Except as listed on Schedule 16
attached hereto and made a part hereof, attached to the Prior Perfection
Certificate as Schedule 16 is a true and correct list of all motor vehicles
covered by certificates of title or ownership and serial number goods, in each
case, valued at or over $[50,000] and owned by each Company.]
17.FCC Licenses. Except as listed on Schedule 17 attached hereto and made a part
hereof, attached to the Prior Perfection Certificate as Schedule 17 is a true
and complete list of all FCC Licenses owned by each Company.

 
Exhibit B - 26-

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IN WITNESS WHEREOF, this Perfection Certificate Supplement has been duly
executed and delivered as of this ____ day of [Month, [Year].

BORROWER:
 
[NAME OF BORROWER]

 
By:

 
Name:

 
Title:

SUBSIDIARY GUARANTORS:
 
[NAME OF SUBSIDIARY GUARANTOR]

 
By:

 
Name:

 
Title:

 
Exhibit B - 27-

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Schedule 1(a)
Legal Names, Etc.
Legal Name
Type of Entity
Registered Organization
(Yes/No)
Organizational Number1
Federal Taxpayer
Identification Number
Jurisdiction of Formation
                                   

--------------------------------------------------------------------------------

1 If none, so state.

 
Exhibit B - 28-

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Schedule 1(b)
Prior Organizational Names
Company/Subsidiary
Prior Name
Date of Change
                       

 
Exhibit B - 29-

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Schedule 1(c)
Changes in Corporate Identity; Other Names
Company/Subsidiary
Corporate Name of Entity
Action
Date of Action
Jurisdiction of Formation
List of All Other Names Used During Past Five Years
                                                                               
                           

 
Exhibit B - 30-

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Schedule 2(a)
Chief Executive Offices
Company/Subsidiary
Address
                       

 
Exhibit B - 31-

--------------------------------------------------------------------------------

 

Schedule 2(b)
Location of Books and Records

Company/Subsidiary
Address
                       

 
Exhibit B - 32-

--------------------------------------------------------------------------------

 

Schedule 2(c)
Other Places of Business
Company/Subsidiary
Address
               

 
Exhibit B - 33-

--------------------------------------------------------------------------------

 

Schedule 2(d)
Additional Locations of Equipment and Inventory
Company/Subsidiary
Address
           

 
Exhibit B - 34-

--------------------------------------------------------------------------------

 

Schedule 2(e)
Locations of Collateral in Possession of Persons Other Than Company or Any
Subsidiary
Company/Subsidiary
Name of Entity in Possession of Collateral/Capacity of such Entity
Address/Location of Collateral
                       

 
Exhibit B - 35-

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Schedule 4
Transactions Other Than in the Ordinary Course of Business
Company/Subsidiary
Description of Transaction Including Parties Thereto
Date of Transaction
                 

 
Exhibit B - 36-

--------------------------------------------------------------------------------

 

Schedule 6
Copy of Financing Statements To Be Filed

 
Exhibit B - 37-

--------------------------------------------------------------------------------

 

Schedule 7
Filings/Filing Offices
Type of Filing2
Entity
Applicable Collateral Document
[Mortgage, Security Agreement or Other]
Jurisdictions
                               

--------------------------------------------------------------------------------

2 UCC-1 financing statement, fixture filing, mortgage, intellectual property
filing or any other filing necessary to create, preserve, protect and perfect
the security interests in the Collateral.

 
Exhibit B - 38-

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Schedule 8(a)
Real Property

Entity of Record
Location Address
Owned or Leased
Landlord/Owner if Leased
Description of Lease Documents
                                                                     

 
Exhibit B - 39-

--------------------------------------------------------------------------------

 

Schedule 8(b)

Leases, Subleases, Tenancies, Franchise agreements, Licenses or Other Occupancy
Arrangements

 
Exhibit B - 40-

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Schedule 10
(a) Equity Interests of Companies and Subsidiaries
Current Legal Entities Owned
Record Owner
Certificate No.
No. Shares/Interest
Percent Pledged
                                       

(b) Other Equity Interests

 
Exhibit B - 41-

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Schedule 11
Instruments and Tangible Chattel Paper
1.Promissory Notes:
Entity
Principal Amount
Date of Issuance
Interest Rate
Maturity Date
                             

2.Chattel Paper:

 
Exhibit B - 42-

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Schedule 12(a)
Patents and Trademarks
UNITED STATES PATENTS:
Registrations:

OWNER
REGISTRATION NUMBER
DESCRIPTION
     

Applications:
OWNER
APPLICATION NUMBER
DESCRIPTION
     

Licenses:
LICENSEE
LICENSOR
REGISTRATION/ APPLICATION NUMBER
DESCRIPTION
       

OTHER PATENTS:
Registrations:

OWNER
REGISTRATION NUMBER
COUNTRY/STATE
DESCRIPTION
       

Applications:
OWNER
APPLICATION NUMBER
COUNTRY/STATE
DESCRIPTION
       

Licenses:
LICENSEE
LICENSOR
COUNTRY/STATE
REGISTRATION/ APPLICATION NUMBER
DESCRIPTION
         

UNITED STATES TRADEMARKS:
Registrations:
OWNER
REGISTRATION NUMBER
TRADEMARK
     

Applications:
OWNER
APPLICATION NUMBER
TRADEMARK
     

Licenses:
LICENSEE
LICENSOR
REGISTRATION/ APPLICATION NUMBER
TRADEMARK
       

OTHER TRADEMARKS:
Registrations:
OWNER
REGISTRATION NUMBER
COUNTRY/STATE
TRADEMARK
       

Applications:
OWNER
APPLICATION NUMBER
COUNTRY/STATE
TRADEMARK
       

 
Exhibit B - 43-

--------------------------------------------------------------------------------

 

Licenses:
LICENSEE
LICENSOR
COUNTRY/STATE
REGISTRATION/ APPLICATION NUMBER
TRADEMARK

 
Exhibit B - 44-

--------------------------------------------------------------------------------

 

Schedule 12(b)
Copyrights
UNITED STATES COPYRIGHTS

Registrations:

OWNER
TITLE
REGISTRATION NUMBER
     

Applications:
OWNER
APPLICATION NUMBER
   

Licenses:
LICENSEE
LICENSOR
REGISTRATION/ APPLICATION NUMBER
DESCRIPTION
       

OTHER COPYRIGHTS

Registrations:

OWNER
COUNTRY/STATE
TITLE
REGISTRATION NUMBER
       

Applications:
OWNER
COUNTRY/STATE
APPLICATION NUMBER
     

Licenses:
LICENSEE
LICENSOR
COUNTRY/STATE
REGISTRATION/ APPLICATION NUMBER
DESCRIPTION

 
Exhibit B - 45-

--------------------------------------------------------------------------------

 

Schedule 12(c)
Intellectual Property Filings

 
Exhibit B - 46-

--------------------------------------------------------------------------------

 

Schedule 13
Commercial Tort Claims

 
Exhibit B - 47-

--------------------------------------------------------------------------------

 

Schedule 14
Blocked Accounts
OWNER
TYPE OF ACCOUNT
BANK OR INTERMEDIARY
ACCOUNT NUMBERS
       

 
Exhibit B - 48-

--------------------------------------------------------------------------------

 

Schedule 15
Letter of Credit Rights

 
Exhibit B - 49-

--------------------------------------------------------------------------------

 

[Schedule 16]
[Motor Vehicles and Serial Number Goods]

 
Exhibit B - 50-

--------------------------------------------------------------------------------

 

Schedule 17
FCC Licenses

REGISTERED OWNER
FCC LICENSE NUMBER
DATE ACQUIRED
                       

 
Exhibit B - 51-

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EXHIBIT J

FORM OF ACCOUNT RECEIVABLES STATEMENT

 
Exhibit B - 52-

--------------------------------------------------------------------------------

 

EXHIBIT K

FORM OF OPINION OF CREDIT PARTIES’ COUNSEL

 
Exhibit B - 53-

--------------------------------------------------------------------------------

 

EXHIBIT L
 

PLEDGE AGREEMENT
 
THIS PLEDGE AGREEMENT, is entered into as of this [__] day of [______], 2011, by
and among XFONE, INC., a Nevada corporation, XFONE USA, INC., a Mississippi
corporation, NTS COMMUNICATIONS, INC., a Texas corporation, (each a “Pledgor”),
and ICON AGENT, LLC, a Delaware Limited Liability Company, as agent (in such
capacity, the “Agent”) on behalf of the Secured Parties (as defined below).
 
W I T N E S S E T H:
 
WHEREAS, Xfone, Inc. Xfone USA, Inc., NTS Communications, Inc., Gulf Coast
Utilities, Inc., eXpeTel Communications, Inc., Pride Network, Inc., NTS
Construction Company, Garey M. Wallace Company, Inc., Midcom Of Arizona, Inc.,
Communications Brokers, Inc., NTS Telephone Company, LLC and NTS Management
Company, LLC (each a “Credit Party) have entered into that certain Term Loan,
Guaranty and Security Agreement, dated as of [______], 2011 (as the same may be
hereafter amended, modified, supplemented or restated from time to time, the
“Loan Agreement”) by and among the Credit Parties, the Agent, the Lenders, and
the other credit parties signatory thereto; and
 
WHEREAS, as a condition precedent to the effectiveness of the Loan Agreement,
the Credit Parties are required to execute and deliver this Agreement; and
 
WHEREAS, to secure the due and punctual payment and performance of the
Obligations (as defined below), each Pledgor wishes to pledge and assign to the
Agent, on behalf of the Secured Parties (as defined below), its Pledged
Collateral (as defined below) and grant to them a security interest in all of
its right, title and interest in to and under such Pledged Collateral;
 
NOW, THEREFORE, for and in consideration of the above premises and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
 
SECTION 1.  DEFINITIONS.  
 
(a)Terms not otherwise defined herein shall have the meanings set forth in the
Loan Agreement, or, if not defined therein, in the Code, and the following terms
shall have the following meanings as used in this Agreement:
 
“Agent” has the meaning assigned to such term in the preamble.
 
“Agreement” means this Pledge Agreement, together with all Schedules hereto, as
the same may be amended, amended and restated, supplemented, replaced or
otherwise modified from time to time.
 
“Acknowledgement” means that certain acknowledgement substantially in the form
of Exhibit A.
 

 
Exhibit B - 54-

--------------------------------------------------------------------------------

 

“Burlingame Securities Purchase Agreement” means that certain securities
purchase agreement dated as of March 23, 2010 between Xfone, Inc. and Burlingame
Equity Investors, LP.
 
 “Certificated Security” means “certificated security” as defined in the Article
8 of the Code.
 
“Chattel Paper” means “chattel paper” as defined in Article 9 of the Code,
including “electronic chattel paper” or “tangible chattel paper”, as each term
is defined in Article 9 of the Code.
 
“Code” shall mean the Uniform Commercial Code as the same may, from time to
time, be enacted and in effect in the State of New York; provided, that in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, any Lien on
any Pledged Collateral is governed by the Uniform Commercial Code as enacted and
in effect in a jurisdiction other than the State of New York, the term “Code”
shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.
 
“Credit Party” has the meaning assigned to such term in the preamble.
 
“Equity Interests” means, with respect to any Person, shares of capital stock of
(or other ownership or profit interests in) such Person, warrants, options or
other rights for the purchase or other acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such Person,
whether preferred or common and whether voting or nonvoting, and securities
convertible into or exchangeable for shares of capital stock of (or other
ownership or profit interests in) such Person or warrants, rights or options for
the purchase or other acquisition from such Person of such shares (or such other
interests), and other ownership or profit interests in such Person (including,
without limitation, partnership, member or trust units or interests therein),
whether voting or nonvoting, and whether or not such shares, warrants, options,
rights or other interests are authorized or otherwise existing on any date of
determination.
 
“Instruments” means all “instruments” as defined in Article 9 of the Code.
 
“Loan Agreement” has the meaning assigned to such term in the preamble.
 
“Obligations” has the meaning assigned to such term in the Loan Agreement as in
effect from time to time.
 
“Pledged Collateral” has the meaning assigned to such term in Section 2.  
 
“Pledged Debt Securities” has the meaning assigned to such term in Section 2.  
 
“Pledged Equity Interests” has the meaning assigned to such term in Section 2.  
 

 
Exhibit B - 55-

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“Pledged Securities” means any promissory notes, stock certificates or other
securities now or hereafter included in the Pledged Collateral, including all
certificates, Instruments or other documents representing or evidencing any
Pledged Collateral.
 
“Pledgor” has the meaning assigned to such term in the preamble.
 
“Proceeds” means all “proceeds” as such term is defined in Article 9 of the Code
and, in any event, shall include all dividends or other income from the Pledged
Collateral, collections thereon or distributions or payments with respect
thereto.
 
“Secured Party” shall mean any holder from time to time of any Obligation and
shall include the Agent.
 
“Security” means “security” as defined in Article 8 of the Code.
 
“Uncertificated Security” means “uncertificated security” as defined in the
Article 8 of the Code.
 
(b)References in this Agreement to “Articles”, “Sections”, “Schedules” or
“Exhibits” shall be to Articles, Sections, Schedules or Exhibits of or to this
Agreement unless otherwise specifically provided.  Any of the terms defined in
this Section 1 may, unless the context otherwise requires, be used in the
singular or plural depending on the reference.  The terms “include”, “includes”
and “including” as used herein shall be deemed to be followed by the words
“without limitation” whether or not they are in fact followed by such words or
words of like import.  The terms “writing”, “written” and comparable terms as
used herein refer to printing, typing and other means of reproducing words in a
visible form.  References “from” or “through” any date herein mean, unless
otherwise specified, “from and including” or “through and including”,
respectively.  References to any statute and related regulation herein shall
include any amendments of the same and any successor statutes and regulations.
Unless otherwise expressly provided herein, references herein to any agreement
or contract herein are to such agreement or contract and any and all amendments,
supplements, extensions, restatements, replacements, refinancings or other
modifications thereof.  References to any Person herein shall be deemed to
include the successors and permitted assigns of such Person.  The words
“hereof”, “herein”, “hereto” and “hereunder” and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.  Any of the terms defined herein may be
used in either the singular or the plural.  The terms “payment in full”, “paid
in full” and any other similar terms or phrases when used herein with respect to
the Obligations means the unconditional, final and irrevocable payment in full,
in immediately available funds of all of the Obligations unless otherwise
specified, other than indemnification and other contingent obligations not then
due and payable.
 
SECTION 2.PLEDGE OF EQUITY INTERESTS; DEBT SECURITIES; CHATTEL PAPER;
INSTRUMENTS.
 
Each Pledgor, as security for the payment or performance, as the case may be, in
full of all Obligations hereby assigns and pledges to the Agent, its successors
and permitted assigns, for the benefit of the Secured Parties, and hereby grants
to the Agent, its successors and permitted
 

 
Exhibit B - 56-

--------------------------------------------------------------------------------

 

assigns, for the benefit of the Secured Parties, a security interest in all such
Pledgor’s right, title and interest in, to and under all of the following
property (collectively, the “Pledged Collateral”):
 
(a)(i) the Equity Interests in each Credit Party now owned or hereafter issued
to or acquired by such Pledgor, including those listed on Schedule 1, (ii) all
of the Equity Interests obtained in the future by such Pledgor of each Person
that becomes a Credit Party, and (iii) the certificates representing all such
Equity Interests (collectively, the “Pledged Equity Interests”);
 
(b)(i) the debt securities issued by any Credit Party now owned or hereafter
issued to or acquired by such Pledgor, including those listed on Schedule 1 and
(ii) the promissory notes and any other instruments evidencing such debt
securities (collectively, the “Pledged Debt Securities”).
 
(c)subject to Section 6, all payments of principal or interest, dividends, cash,
Chattel Paper, Instruments and other property from time to time received,
receivable or otherwise distributed in respect of, in exchange for or upon the
conversion of, and all other Proceeds received in respect of, the securities
referred to in clauses (a) and (b) above;
 
(d)subject to Section 6, all rights and privileges of such Pledgor with respect
to the Securities and other property referred to in clauses (a), (b) and (c)
above; and
 
(e)all Proceeds of any of the foregoing.
 
SECTION 3.DELIVERY OF PLEDGED SECURITIES.
 
(a)On or prior to the Closing Date, each Pledgor will deliver to the Agent all
Pledged Securities, Chattel Paper and Instruments constituting Pledged
Collateral then owned by such Pledgor.  Each Pledgor agrees promptly (but in any
event within three Business Days after receipt thereof by such Pledgor) to
deliver or cause to be delivered to the Agent any and all Pledged Securities
acquired by such Pledgor after the Closing Date.
 
(b)Each Pledgor will cause any Indebtedness for borrowed money owed to such
Pledgor by any Credit Party in principal amount in excess of $25,000 to be
evidenced by a duly executed promissory note that is pledged and delivered to
the Agent pursuant to the terms hereof.
 
(c)Upon the delivery thereof to the Agent, (i) any Pledged Security which is a
Certificated Security shall be accompanied by stock powers duly executed in
blank or other instruments of transfer satisfactory to the Agent and (ii) all
other property comprising part of the Pledged Securities shall be accompanied by
proper instruments of assignment duly executed by the applicable Pledgor.  Each
delivery of Pledged Securities shall be accompanied by a schedule describing the
securities included therein, which schedule shall be attached hereto as part of
Schedule 1 and made a part hereof, provided that failure to attach any such
schedule hereto shall not affect the validity of such pledge of such Pledged
Securities.  Each schedule so delivered shall supplement any prior schedules so
delivered.
 
(d)If any Pledged Collateral is or shall become evidenced or represented by an
Uncertificated Security, the Pledgors shall (i) cause the issuer to execute and
deliver to the Agent
 

 
Exhibit B - 57-

--------------------------------------------------------------------------------

 

an acknowledgment of the pledge of such Uncertificated Security in form and
substance reasonably satisfactory to the Agent, and (ii) if necessary to perfect
a security interest in such Uncertificated Security, cause such pledge to be
recorded on the equity holder register or the books of the issuer, execute any
customary pledge forms or other documents necessary or appropriate to complete
the pledge and give the Agent the right to transfer such Uncertificated Security
under the terms hereof.
 
SECTION 4.REPRESENTATIONS AND WARRANTIES.
 
Each Pledgor represents, warrants and covenants to and with the Agent, for the
benefit of the Secured Parties, that:
 
(a)Schedule 1 correctly sets forth the percentage of the issued and outstanding
units of each class of the Equity Interests of the issuer thereof represented by
the Pledged Equity Interests owned by such Pledgor and includes (i) all of the
Equity Interests in each Credit Party  and (ii) all of the debt securities,
including the promissory notes and other instruments evidencing such debt
securities, of each Credit Party held by the Pledgors.  No such Equity Interests
or debt securities are subject to prohibitions on assignment or encumbrance or
to agreements that require or purport to require consent of or notice to any
party in connection with the grant of a security interest thereon (including the
exercise of remedies by the Agent with respect thereto) except for such consents
that have been obtained and such notices have been given.
 
(b)In the case of Pledged Equity Interests and Pledged Debt Securities issued to
such Pledgor, such Pledged Equity Interests and Pledged Debt Securities have
been duly and validly authorized and issued by the issuers thereof and (i) in
the case of Pledged Equity Interests, are fully paid and nonassessable and (ii)
in the case of Pledged Debt Securities, are legal, valid and binding obligations
of the issuers thereof, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
 
(c)Each Credit Party has executed and delivered to the Agent an Acknowledgment,
in form and substance reasonably satisfactory to the Agent, to the pledge of the
Pledged Equity Interests pursuant to this Agreement.
 
(d)Except for the security interests granted hereunder, such Pledgor (i) is and,
subject to any transfers made in compliance with the Loan Agreement, will
continue to be the direct owner, beneficially and (subject to Agent’s
registration rights under Section 5 hereof) of record, of the Pledged Equity
Interests indicated on Schedule 1 as owned by such Pledgor, (ii) hold the same
free and clear of all Liens, including any Liens arising out of the Burlingame
Securities Purchase Agreement, other than Liens created by this Agreement, Liens
expressly permitted by the Loan Agreement and transfers made in compliance with
the Loan Agreement, (iii) will make no assignment, pledge, hypothecation or
transfer of, or create or permit to exist any security interest in or other Lien
on, the Pledged Collateral, other than Liens created by this Agreement, Liens
expressly permitted by the Loan Agreement and transfers made in compliance with
the Loan Agreement, and (iv) will defend his, her or its title or interest
thereto or therein against any
 

 
Exhibit B - 58-

--------------------------------------------------------------------------------

 

and all Liens on the Pledged Collateral (other than the Lien created by this
Agreement), however arising, of all persons whomsoever.
 
(e)Except for restrictions and limitations imposed by the Loan Documents or
securities laws generally, such Pledgor’s Pledged Collateral is and will
continue to be freely transferable and assignable, and none of such Pledgor’s
Pledged Collateral is or will be subject to any option, right of first refusal,
shareholders agreement, voting trust, charter or by-law provisions or
contractual restriction of any nature that might prohibit, impair, delay or
otherwise affect the pledge of such Pledgor’s Pledged Collateral hereunder, the
sale or disposition thereof pursuant hereto or the exercise by the Agent of
rights and remedies hereunder.
 
(f)Each Pledgor has the power and authority to pledge the Pledged Collateral
pledged by it hereunder in the manner hereby done or contemplated.
 
(g)No consent or approval of any Governmental Authority, any securities exchange
or any other person was or is necessary to ensure the validity of the pledge of
any of such Pledgor’s Pledged Collateral (other than such as have been obtained
and are in full force and effect).
 
(h)By virtue of the execution and delivery of this Agreement, when any of such
Pledgor’s Pledged Collateral is delivered to the Agent in accordance with this
Agreement, the Agent will obtain a legal, valid and perfected first priority
Lien upon and security interest in such Pledged Collateral as security for the
payment and performance of the Obligations.
 
(i)If such Pledgor shall become entitled to receive or shall receive any stock
or other ownership certificate (including any certificate representing a stock
dividend or a distribution in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection with any
reorganization), option or rights in respect of such Pledgor’s Pledged Equity
Interests in each Credit Party, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any shares of or other ownership interests in
the Pledged Equity Interests, or otherwise in respect thereof, such Pledgor
shall assign, pledge and grant such Pledgor’s right, title and interest in and
to the same to the Agent pursuant to Section 2(a) hereof, and deliver the same
to the Agent in the exact form received, duly endorsed by such Pledgor to the
Agent, if required, together with an undated stock power or similar instrument
of transfer covering such certificate duly executed in blank by such Pledgor and
with, if the Agent so requests, signature guaranteed, to be held by such
Pledgor, subject to the terms hereof, as additional collateral security for the
Obligations.  Subject to the Loan Agreement, any sums paid upon or in respect of
the Pledged Equity Interests upon the liquidation or dissolution of any Credit
Party shall be paid over to the Agent to be held by it hereunder as additional
collateral security for the Obligations, and in case any distribution of capital
shall be made on or in respect of the Pledged Equity Interests or any property
shall be distributed upon or with respect to the Pledged Equity Interests
pursuant to the recapitalization or reclassification of the capital of any
issuer or pursuant to the reorganization thereof, the property so distributed
shall, unless otherwise subject to a perfected security interest in favor of the
Agent, be delivered to the Agent to be held by it hereunder as additional
collateral security for the Obligations.  If any sums of money or property so
paid or distributed in respect of such Pledgor’s Pledged Equity Interests shall
be received by such Pledgor, such Pledgor shall, until such money or property is
paid or delivered to the Agent, hold
 

 
Exhibit B - 59-

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such money or property in trust for the Secured Parties, segregated from other
funds of such Pledgor, as additional collateral security for the Obligations.
 
SECTION 5.REGISTRATION IN NOMINEE NAME; DENOMINATIONS.
 
The Agent, on behalf of the Secured Parties, shall have the right (in its sole
and absolute discretion) to hold the Pledged Collateral in its own name as
pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the
Pledgor, endorsed or assigned in blank or in favor of the Agent.  To the extent
not prohibited by applicable Requirement of Law or contract, each Pledgor will
promptly give to the Agent copies of any material notices or other material
communications received by it with respect to Pledged Collateral registered in
the name of such Pledgor.  Upon the occurrence and during the continuation of an
Event of Default, the Agent shall at all times have the right to exchange the
certificates representing Pledged Collateral for certificates of smaller or
larger denominations for any purpose consistent with this Agreement.
 
SECTION 6.VOTING RIGHTS; DIVIDENDS AND INTEREST.  
 
(a)Unless and until an Event of Default shall have occurred and be continuing,
each Pledgor shall be entitled to exercise any and all voting and/or other
consensual rights and powers inuring to an owner of Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this Agreement,
the Loan Agreement and the other Loan Documents (and until an Event of Default
shall have occurred and be continuing, Agent shall not be entitled to any of
such rights), provided that such rights and powers shall not be exercised in any
manner that could reasonably be expected to materially and adversely affect the
rights inuring to a holder of any Pledged Collateral or the rights and remedies
of any of the Agent or the other Secured Parties under this Agreement, the Loan
Agreement or any other Loan Document or the ability of the Secured Parties to
exercise the same.
 
(b)Upon the occurrence and during the continuance of an Event of Default, all
rights of the Pledgors to exercise the voting and consensual rights and powers
they are entitled to exercise pursuant to Section 6(a) shall immediately cease,
and all such rights, at the option of Agent, in its sole discretion, shall
thereupon become vested in the Agent, which shall have the sole and exclusive
right and authority to exercise such voting and consensual rights and powers,
provided that, unless otherwise directed by the Required Lenders, the Agent
shall have the right from time to time following and during the continuance of
an Event of Default to permit the Pledgors to exercise such rights in Agent’s
sole and absolute discretion.  Each Pledgor shall execute and deliver to the
Agent, or cause to be executed and delivered to the Agent, all proxies, powers
of attorney and other instruments as the Agent may reasonably request for the
purpose of enabling the Agent to exercise the voting and/or consensual rights
and powers it is entitled to exercise pursuant to this Section 6.
 
SECTION 7.  REMEDIES.
 
(a)Upon the occurrence and during the continuance of an Event of Default, the
Agent, on behalf of the Secured Parties, may sell, transfer or otherwise dispose
of the Pledged Collateral or any interest or right therein or any part thereof,
in one or more parcels, at the same or different times, at a public or private
sale, or may make any other commercially reasonable
 

 
Exhibit B - 60-

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disposition of the Pledged Collateral or any portion thereof.  The Secured
Parties may purchase the Pledged Collateral or any portion thereof at any public
or private foreclosure sale.  Each purchaser at any sale or other disposition of
the Pledged Collateral shall hold the Pledged Collateral sold absolutely free
from any claim or right on the part of any Pledgor, and, to the extent permitted
by applicable Requirement of Law, each Pledgor hereby waives all rights of
redemption, stay, valuation and appraisal such Pledgor now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted.  The proceeds of the sale or other disposition shall be
applied to the Obligations in such order as set forth in the Loan
Agreement.  Any remaining proceeds shall be paid over to the Pledgor or others
as provided by applicable Requirement of Law.
 
(b)To the extent that the Pledged Collateral is not registered under the various
federal or state securities acts, the disposition thereof after the occurrence
and during the continuance of an Event of Default may be restricted to one or
more private (instead of public) sales in view of the lack of such registration;
each Pledgor understands that, upon such disposition, the Agent, on behalf of
the Secured Parties, may approach only a restricted number of potential
purchasers and further understands that a sale under such circumstances may
yield a lower price for the Pledged Collateral than if the Pledged Collateral
were registered pursuant to federal and state securities legislation and sold on
the open market.  The Pledged Collateral is not, as of the date of this
Agreement, registered under the various federal and state securities laws.  Each
Pledgor, therefore, agrees that:
 
(i)if the Agent, on behalf of the Secured Parties, shall, pursuant to the terms
of this Agreement, sell or cause the Pledged Collateral or any portion thereof
to be sold at a private sale, the Secured Parties shall have the right to rely
upon the advice and opinion of any national brokerage or investment firm having
recognized expertise and experience in connection with shares or obligations of
companies or entities in the same or similar business as the issuing company or
entity, which brokerage or investment firm shall have reviewed financial data
and other information available to the Secured Parties pertaining to each Credit
Party and any Subsidiaries (but shall not be obligated to seek such advice, and
the failure to do so shall not be considered in determining the commercial
reasonableness of the Agent’s action) as to the best manner in which to expose
the Pledged Collateral for sale and as to the best price reasonably obtainable
at the private sale thereof; and
 
(ii)absent manifest error, such reliance shall be conclusive evidence that the
Secured Parties have handled such disposition in a commercially reasonable
manner.
 
(c)The Agent, on behalf of the Secured Parties, shall have such rights and
remedies as are set forth in the Loan Documents, all the rights, powers and
privileges of a secured party under the Code as in effect in the applicable
jurisdiction, and all other rights and remedies available to the Agent, on
behalf of any Secured Party, at law or in equity.
 
SECTION 8.  SECURITY INTEREST ABSOLUTE; RIGHTS CUMULATIVE; PLEDGORS REMAIN
LIABLE; FURTHER ASSURANCES.
 

 
Exhibit B - 61-

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(a)All rights of the Secured Parties and all security interests and all
obligations of the Pledgors hereunder shall be continuing, absolute and
unconditional irrespective of: (a) any lack of validity or enforceability of the
Loan Agreement, the Notes, the Loan Documents, or any other documents executed
and delivered in connection therewith; (b) any change in the time, manner or
place of payment of, or any other term in respect of, all or any of the
Obligations, or any other amendment or waiver of or consent to any departure
from the Loan Agreement, the Notes, or any other document executed or delivered
in connection therewith; (c) any increase in, addition to, exchange or release
of, or non-perfection of any Lien on or security interest in any other
collateral or any release of, amendment of, waiver of, consent to or departure
from any security document or guaranty, for all or any of the Obligations; (d)
the failure of the Secured Parties to do any of the things or exercise any of
the rights, interests, powers and authorities hereunder or (e) the absence of
any action on the part of the Secured Parties to obtain payment or performance
of the Obligations from any other Person.  None of the Secured Parties shall in
any way be responsible for any failure to do any or all of the things for which
rights, interests, power and authority are herein granted.
 
(b)Each Pledgor agrees that the rights of the Secured Parties, under this
Agreement, the Loan Agreement, the Loan Documents, any other document executed
in connection therewith, or any other contract or agreement now or hereafter in
existence among any Secured Party and the Pledgors shall be cumulative, and that
any Secured Party may from time to time exercise such rights and such remedies
as such Secured Party may have thereunder and under the laws of the United
States and any state, as applicable, in the manner and at the time that such
Secured Party in its sole discretion, desires.  Each Pledgor further expressly
agrees that the Secured Parties shall not in any event be under any obligation
to resort to any Pledged Collateral prior to exercising any other rights that
the Secured Parties may have against any Pledgor or its property, or to resort
to any other collateral for the Obligations prior to the exercise of remedies
hereunder nor shall the rights and remedies of the Secured Parties be
conditional or contingent on any attempt of the Secured Parties to exercise any
of its or their rights under any other documents executed in connection herewith
against such party or against any other Person.
 
(c)Notwithstanding anything herein to the contrary, (i) each Pledgor shall
remain liable for all obligations under its Pledged Collateral and nothing
contained herein is intended or shall be construed as a delegation of duties to
the Agent or any other Secured Party and (ii) the exercise by the Agent of any
of its rights hereunder shall not release any Pledgor from any of its duties or
obligations under its Pledged Collateral. 
 
(d)This Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against any Pledgor for liquidation
or reorganization, should any Pledgor become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of any Pledgor’s assets, and shall continue to be effective
or be reinstated, as the case may be, if at any time payment and performance of
the Obligations, or any part thereof, is, pursuant to applicable law, rescinded
or reduced in amount, or must otherwise be restored or returned by Agent or any
Secured Party, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made.  In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
 

 
Exhibit B - 62-

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(e)Each Pledgor agrees to make, execute, deliver or cause to be done, executed
and delivered, from time to time, all such further acts, documents and things as
the Agent, on behalf of the Secured Parties, may reasonably require for the
purpose of perfecting or protecting its or their rights hereunder or otherwise
giving effect to this Agreement, all promptly upon request therefor, including,
but not limited to, delivery of updated schedules describing the Pledged
Collateral in form and substance satisfactory to the Agent.  Each Pledgor shall
take or cause to be performed such acts and actions as shall be necessary or
appropriate to assure that the security interest in and to the Pledged
Collateral shall not become subordinate or junior to the security interests,
liens or claims of any other Person except for Permitted Liens.
 
SECTION 9.  SUBORDINATION.
 
Each Pledgor executing this Agreement covenants and agrees that the payment of
all Indebtedness and any principal or interest (including interest which accrues
after the commencement of any case or proceeding in bankruptcy, or for the
reorganization of any Credit Party) thereon, owing by any Credit Party to such
Pledgor, including any intercompany trade payables or royalty or licensing fees
(collectively, the “Affiliated Obligations”), is subordinated, to the extent and
in the manner provided in this Section 9, to the prior payment in full of all
Obligations (other than contingent indemnification Obligations to the extent no
claim giving rise thereto has been asserted) (herein, the “Senior Obligations”)
and that the subordination is for the benefit of Agent and the other Secured
Parties, and Agent may enforce such provisions directly.
 
(b)Each Pledgor executing this Agreement hereby (i) authorizes Agent to demand
specific performance of the terms of this Section 9, whether or not any other
Pledgor shall have complied with any of the provisions hereof applicable to it,
at any time when such Pledgor shall have failed to comply with any provisions of
this Section 9 which are applicable to it and (ii) irrevocably waives (to the
maximum extent permitted by Requirement of Law) any defense based on the
adequacy of a remedy at law, which might be asserted as a bar to such remedy of
specific performance.
 
(c)Upon any distribution of assets of any Credit Party in any dissolution,
winding up, liquidation or reorganization (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise):
 
 (i)Agent and other Secured Parties shall first be entitled to receive payment
in full in cash of the Senior Obligations before any Pledgor is entitled to
receive any payment on account of the Affiliated Obligations.
 
 (ii)Any payment or distribution of assets of any Pledgor of any kind or
character, whether in cash, property or securities, to which any other Pledgor
would be entitled except for the provisions of this Section 9(c), shall be paid
by the liquidating trustee or agent or other Person making such payment or
distribution directly to Agent, to the extent necessary to make payment in full
of all Senior Obligations (other than contingent indemnification obligations as
to which no claim has been asserted) remaining unpaid after giving effect to any
concurrent payment or distribution or provisions therefor to Agent and the other
Secured Parties.
 

 
Exhibit B - 63-

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(iii)In the event that notwithstanding the foregoing provisions of this
Section 9(c), any payment or distribution of assets of any Credit Party of any
kind or character, whether in cash, property or securities, shall be received by
any Pledgor on account of the Affiliated Obligations before all Senior
Obligations (other than contingent indemnification obligations as to which no
claim has been asserted) are paid in full, such payment or distribution shall be
received and held in trust for and shall be paid over to Agent for application
to the payment of the Senior Obligations (other than contingent indemnification
obligations as to which no claim has been asserted) until all of the Senior
Obligations (other than contingent indemnification obligations as to which no
claim has been asserted) shall have been paid in full, after giving effect to
any concurrent payment or distribution or provision therefore to Agent and other
Secured Parties.
 
(d)No right of Agent and the other Secured Parties or any other present or
future holders of any Senior Obligations to enforce the subordination provisions
herein shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of any Pledgor or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by any Pledgor with the
terms hereof, regardless of any knowledge thereof which any such holder may have
or be otherwise charged with.
 
SECTION 10.  POWER OF ATTORNEY.  
 
(a)Each Pledgor hereby appoints the Agent its attorney-in-fact, effective upon
the occurrence and during the continuance of an Event of Default, with power of
substitution, to take such action, execute such documents, and perform such
work, as the Agent may deem reasonably appropriate to protect the Pledged
Collateral or exercise the rights and remedies granted the Agent herein
including the authority (i) to receive, open and dispose of in an appropriate
manner all mail addressed to such Pledgor in respect of the Pledged Collateral,
and to notify the postal authorities to change the address for delivery of mail
addressed to such Pledgor in respect of the Pledged Collateral to such address
as the Agent may designate, (ii) to endorse the name of such Pledgor on any
note, acceptance, check, draft, money order or other evidence of debt from or of
payment which may come into the possession of any Secured Party in respect of
the Pledged Collateral, (iii) to compromise and settle or to sell, assign or
transfer or to ask, collect, receive or issue any and all claims in respect of
the Pledged Collateral possessed by such Pledgor all in the name of such Pledgor
and (iv) generally to do such other things and acts in the name of such Pledgor
as are necessary or appropriate to protect the Pledged Collateral or exercise
the rights and remedies granted the Agent herein.    
 
(b)Each Pledgor ratifies its authorization for the Agent to file the financing
statements filed prior to the date hereof covering the Pledged Collateral, if
any.
 
(c)The power of attorney granted herein is coupled with an interest and shall be
irrevocable for so long as any of the Obligations remains unpaid or unperformed.
 
SECTION 11.  ASSIGNMENT.  
 
(a)The Pledgors agree that this Agreement and rights of any Secured Party
hereunder may in the discretion of such Secured Party be assigned in whole or in
part by such Secured
 

 
Exhibit B - 64-

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Party.  The Agent may also appoint sub-agents. The Pledgors agree that the
rights of any and all assignees shall be independent of any claims the Pledgors
may have against the assignor or assignors.  In the event this Agreement is so
assigned by any of the Secured Parties, the terms “Agent,” “Secured Parties,”
and “Secured Party” wherever used herein shall be deemed to refer to and include
any such assignee or assignees, as appropriate.  This Agreement may be assigned
by the Pledgors only with the written consent of the Secured Parties.
 
(b)This Agreement shall apply to and bind the Pledgors and the respective heirs,
administrators, representatives, executors, successors and assigns of the
Pledgors and inure to the benefit of the respective successors and assigns of
the Secured Parties.
 
SECTION 12.  INDEMNITY AND EXPENSES.  
 
(a)Each Pledgor agrees to indemnify each Secured Parties from and against any
and all reasonable claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities result from
the gross negligence or willful misconduct of the Agent or any Secured Party as
finally determined by a court of competent jurisdiction.
 
(b)Each Pledgor will, upon demand, pay to the Agent the amount of any and all
expenses, including the disbursements and reasonable fees of the Agent’s counsel
and of any experts, consultants and agents, which the Agent may incur in
connection with (i) the administration of this Agreement; (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Pledged Collateral; (iii) the exercise or enforcement of
any of the rights of the Secured Parties hereunder; or (iv) the failure by any
Pledgor to perform or observe any of the provisions hereof.
 
(c) Any amounts payable as provided hereunder shall constitute additional
Obligations and shall survive the termination of this Agreement.
 
SECTION 13.  MISCELLANEOUS.  
 
(a)Notices.  All notices and other communications required or permitted
hereunder shall be in writing and shall be given in a manner prescribed for
notices in the Loan Agreement and shall be effective as to any Pledgor if sent
to such Pledgor care of any Credit Party at the address of such Credit Party set
forth in the Loan Agreement.
 
(b)Governing Law.  The provisions of this Agreement shall be construed and
interpreted, and all rights and obligations of the parties hereto determined, in
accordance with the laws of the State of New York.  
 
(c)Binding Agreement.  This Agreement, together with all documents referred to
herein, constitutes the entire agreement among the Pledgors, the Agent and each
Secured Party with respect to the matters addressed herein.  In the event that a
provision of this Agreement is in direct conflict with a provision of the Loan
Agreement, the Loan Agreement shall govern.
 
(d)Amendment and Waiver.   This Agreement may not be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Required
 

 
Exhibit B - 65-

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Lenders and, in the case of an amendment, by the Pledgors.  None of the Secured
Parties shall by any act, delay, omission or otherwise, be deemed to have waived
any of their rights or remedies hereunder, unless such waiver is in writing and
signed by the Agent or one or more of the Agent or the Lenders in accordance
with the Loan Agreement and then only to the extent therein set forth.  A waiver
by the Secured Parties of any right or remedy on any occasion shall not be
construed as a bar to the exercise of any such right or remedy which any such
Person would otherwise have had on any other occasion.
 
(e)Severability.  If any paragraph or part thereof shall for any reason be held
or adjudged to be invalid, illegal or unenforceable by any court of competent
jurisdiction, such paragraph or part thereof so adjudicated invalid, illegal or
unenforceable shall be deemed separate, distinct and independent, and the
remainder of this Agreement shall remain in full force and effect and shall not
be affected by such holding or adjudication. 
 
(f)Counterparts.  This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all such separate
counterparts shall together constitute but one and the same instrument.
 
(g)Time is of the Essence.  Time is of the essence with regard to each Pledgor’s
performance of its obligations hereunder.
 
(h)Jurisdiction and Venue.  If any action or proceeding shall be brought by the
Agent in order to enforce any right or remedy under this Agreement, each Pledgor
hereby consents to the jurisdiction of any state or federal court of competent
jurisdiction sitting within the area comprising the Southern District of New
York on the date of this Agreement.  Each Pledgor hereby agrees, to the extent
permitted by applicable Requirement of Law that service of the summons and
complaint and all other process which may be served in any such suit, action or
proceeding may be effected by mailing by registered mail a copy of such process
to the offices of such Pledgor, as set forth in or otherwise provided pursuant
to Section 10.6 of the Loan Agreement, and that personal service of process
shall not be required.  Nothing herein shall be construed to prohibit service of
process by any other method permitted by law, or the bringing of any suit,
action or proceeding in any other jurisdiction.  Each Pledgor agrees that a
final judgment in such suit, action or proceeding shall be conclusive and may be
enforced in any other jurisdiction by suit on the judgment or in any other
manner provided by applicable Requirement of Law.
 
(i)WAIVER OF JURY TRIAL.  EACH OF THE AGENT, THE SECURED PARTIES AND EACH
PLEDGOR WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF
THIS AGREEMENT.
 

 
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Exhibit B - 66-

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IN WITNESS WHEREOF, the undersigned have hereunto set their hands by and through
their duly authorized representatives as of the day and year first written
above.
 
PLEDGORS:

XFONE, INC.

By:                                                                
Name:                                                                           
Title:                                                                

XFONE USA, INC.

By:                                                                
Name:                                                                           
Title:                                                                

NTS COMMUNICATIONS, INC.
By:                                                                
Name:                                                                           
Title:                                                                

 
Exhibit B - 67-

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ACKNOWLEDGED AND AGREED TO:

GULF COAST UTILITIES, INC.

By:                                                                
Name:
Title:                                                                

EXPETEL COMMUNICATIONS, INC.

By:                                                                
Name:
Title:                                                                

PRIDE NETWORK, INC.

By:                                                                
Name:
Title:                                                                

NTS CONSTRUCTION COMPANY

By:                                                                
Name:
Title:                                                                

GAREY M. WALLACE COMPANY, INC.

By:                                                                
Name:
Title:                                                                

MIDCOM OF ARIZONA, INC.

By:                                                                
Name:
Title:                                                                

COMMUNICATIONS BROKERS, INC.

By:                                                                
Name:
Title:                                                                

NTS TELEPHONE COMPANY, LLC

By:                                                                
Name:
Title:                                                                

NTS MANAGEMENT COMPANY, LLC

By:                                                                
Name:
Title:                                                                

 
Exhibit B - 68-

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AGENT:ICON AGENT, LLC,

 
 
as Agent, on behalf of the Secured Parties

 

 
 
By:  IEMC Corp., its Manager

 
By: ____________________________________________
 
Name:
 
Title:

 
Exhibit B - 69-

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SCHEDULE 1
to
Pledge Agreement
 
[Pledgors to Provide]
 
 Equity Interests
 
Pledgor
Issuer
Pledged Equity Description
 
Percentage of Interests/Number of Shares in Issuer
 
Certificate Number
                                                                               
                   

 
 
 Debt Securities
 
 
 
 Other Securities
 

 
Exhibit B - 70-

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