Exhibit 10.118

Noncompetition, Nondisclosure and Nonsolicitation Agreement
 
This Noncompetition, Nondisclosure and Nonsolicitation Agreement (this
“Agreement”) is made as of the 26th day of February, 2008, by and among Xfone,
Inc., a Nevada corporation (“Purchaser”), on the one hand, and each of Telephone
Electronics Corporation, a Mississippi corporation (“TEC”), Joseph D. Fail,
Chris Chelette, Robert Healea, Joey Garner, and Walter Frank (each a “TEC
Affiliate” and collectively the “TEC Affiliates”), severally and not jointly,
each of such individuals being an officer or director of TEC or an affiliate of
TEC, including NTS (as defined herein), on the other hand.  TEC and the TEC
Affiliates shall each be referred to herein from time to time as a “TEC Party,”
and collectively as the ‘TEC Parties.”
 
RECITALS
 
 
A.
TEC owns 799,214 shares of the common stock which constitutes 63.5 percent
(63.5%) of all the issued and outstanding Equity Interests of NTS
Communications, Inc. (together with its subsidiaries “NTS”), a Texas
corporation, and is the single largest shareholder of NTS.

 
 
B.
Concurrently with the execution and delivery of this Agreement, Purchaser is
purchasing from TEC all of the Equity Interests owned by TEC in NTS pursuant to
the terms and conditions of a stock purchase agreement made as of the 22nd day
of August, 2007, as amended (the “Stock Purchase Agreement”), by and among
Purchaser, NTS and the shareholders of NTS identified as the “Sellers” on the
signature pages of the Stock Purchase Agreement.

 
 
C.
Section 2.5(q) of the Stock Purchase Agreement requires that a noncompetition
agreement in the form of this Agreement be executed and delivered by the TEC
Parties to Purchaser on or before the Closing.

 
 
D.
This Agreement represents all of the agreements and obligations of any of the
TEC parties arising under Section 2.5 of the Stock Purchase Agreement or
otherwise with regard to the subject matter hereof, including the Confidential
Information (as subsequently defined) of NTS.

 
AGREEMENT
 
The parties, intending to be legally bound, agree as follows:
 
1.            DEFINITIONS
 
“Confidential Information,” is defined in Section 2.
 
Capitalized terms not expressly defined in this Agreement shall have the
meanings ascribed to them in the Stock Purchase Agreement.
 
2.            ACKNOWLEDGMENTS BY THE TEC PARTIES
 

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Each of the TEC Parties acknowledge that he (or it) has occupied a position of
trust and confidence with TEC or NTS prior to the date hereof and has had access
to and has become familiar with the following, any and all of which constitute
confidential information of NTS (collectively the “Confidential Information”):
Except as provided in the final sentence of this paragraph, (a) any and all
trade secrets concerning the business and affairs of NTS, including product
specifications, data, compositions, processes, past, current and planned
research and development, current and planned construction, products and
distribution methods and processes, customer lists, current and anticipated
customer requirements, price lists, market studies, business plans, computer
software and programs (including object code and source code), database
technologies, systems, structures architectures processes, improvements,
devices, know-how, discoveries, concepts, methods and information of NTS’s
business and any other information, however documented, of NTS that is a trade
secret within the meaning of applicable law as of the date hereof; (b) any and
all information concerning the business and affairs of NTS (which includes
historical financial statements, financial projections and budgets, historical
and projected sales, capital spending budgets and plans, personnel training and
techniques and confidential information related to NTS’ customers, however
documented; and (c) any and all notes, analysis, compilations, studies,
summaries and other material prepared by or for NTS containing or based, in
whole or in part, upon any information included in the foregoing which has been
treated as confidential by NTS or the creator thereof, as the case may
be.  Notwithstanding the foregoing, the Confidential Information shall not
include: (i) information that has been provided to TEC or any TEC Party solely
in connection with such person or entity’s (or such person’s status as an
officer or agent of another business entity) commercial dealings with NTS,
outside of the TEC Party’s relationship of authority or trust with NTS, if any,
(ii) information readily ascertainable or compilable from the books and records
of any other business or governmental entity, other than those provided to a TEC
Party in confidence by NTS, (iii) information that relates to the business
dealings between TEC and its affiliates and the TEC Parties, on the one hand,
and NTS on the other, other than any information received in such TEC Party’s
service as an officer or director of NTS, (iv) information which is also the
confidential information of TEC or any of the TEC Parties, or their respective
Affiliates.
 
Each of the TEC Parties acknowledge that (a) the business of NTS relating to the
use and operation of all its assets prior to Closing (the “Business”) is
interstate in scope but relates primarily to that part of the State of Texas
west of a line drawn from the Grayson County Courthouse to the Jefferson County
Court House (the “Primary Market”); (b) its products and services related to
such Business are marketed in several regions of the United States, including
the Primary Market; (c) NTS’ s Business prior to Closing competes with other
businesses that are or could be located in any part of the United States; (d)
Purchaser has required that each of the TEC Parties make the covenants set forth
in Sections 3 and 4 of this Agreement as a condition to the closing of the Stock
Purchase Agreement; (e) the provisions of Sections 3 and 4 of this Agreement are
reasonable and necessary to protect and preserve NTS and its Business and the
Purchaser’s interests in and right to the use and operation of the Business from
and after Closing; and (f) Purchaser would be irreparably damaged if any of the
TEC Parties were to breach the covenants set forth in Sections 3 and 4 of this
Agreement.
 
 
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3.            CONFIDENTIAL INFORMATION
 
Each of the TEC Parties acknowledge and agree that the protection of the
Confidential Information is necessary to protect and preserve the value of the
Business. Therefore, each of the TEC Parties hereby agree not to disclose to any
unauthorized Persons or use for his or its own account or for the benefit of any
third party any Confidential Information, whether or not such information is
embodied in writing or other physical form or is retained in the memory any of
the TEC Parties, without Purchaser’s written consent, unless and to the extent
that the Confidential Information is or becomes generally known to by the public
other than as a result of the TEC Party’s fault, the provisions hereof are
waived by Purchaser or the disclosure in question is required by applicable law
or process of law.  Notwithstanding the foregoing, however, no provision of this
agreement shall be deemed to limit the ability of any TEC Party to provide
truthful testimony or to offer truthful information to any agent of the United
States Government or any member of the United States Congress.
 
4.            NONCOMPETITION AND NONSOLICITATION
 
As an inducement for Purchaser to enter into the Stock Purchase Agreement and as
additional consideration for the consideration to be paid to TEC under the Stock
Purchase Agreement, each of the TEC Parties agree that:
 
(a)            For a period of two (2) years after the Closing:
 
(i)            TEC will not, directly or indirectly, engage or invest in, own,
manage, operate, finance, control or participate in the ownership, management,
operation, financing or control of, be employed by, associated with or in any
manner connected with, or render services or advice or other aid to, or
guarantee any obligation of, any Person, engaged in or planning to become
engaged in providing to any Primary Market Customer, local or long distance
telecommunications services or any other products or services which compete with
the products and services provided by NTS prior to the Closing (“Competitive
Products”), including without limitation, local, long distance, broadband, dial
up data services, wireless, DSL, Voice-over-Internet Protocol (VoIP).  TEC
agrees that this covenant is reasonable with respect to its duration,
geographical area and scope.  For the purposes hereof, a “Primary Market
Customer” shall be any individual resident in, or any business entity whose
principal executive offices are located in, the Primary Market Area.
 
(ii)            The TEC Parties, severally and not jointly, will not directly or
indirectly, engage or invest in, own, manage, operate, finance, control or
participate in the ownership, management, operation, financing or control of, be
employed by, associated with or in any manner connected with, or render services
or advice or other aid to, or guarantee any obligation of, any Person, other
than a Current Competitor, engaged in or planning to become engaged in providing
to any Primary Market Customer, local or long distance telecommunications
services or any other products or services which compete with the Competitive
Products, including without limitation, local, long distance, broadband, dial up
data services, wireless, DSL, Voice-over-Internet Protocol (VoIP). The TEC
Parties agree that this covenant is reasonable with respect to its duration,
geographical area and scope. For the purposes hereof, the “Current Competitors”
shall mean those business entities of which a TEC Party is the record or
beneficial owner of less than all of such entity’s debt or equity securities as
of the date hereof, and which iscurrently offering or proposing to offer
Competitive Products in the Primary Market, including but not limited to Randy
White Telecommunications, Inc.
 

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(iii)            Each of the TEC Parties agree not to, directly or indirectly,
(A) induce or attempt to induce any employee of NTS or any NTS employee who
becomes an employee of Purchaser in connection with the purchase of the Business
to leave the employ of NTS or Purchaser; (B) in any way interfere with the
relationship between Purchaser and any such employee of NTS or Purchaser; (C)
employ or otherwise engage as an employee, independent contractor or otherwise
any such employee of NTS or Purchaser at a time when such employee is an
employee of NTS anywhere or Purchaser within the Primary Market; (D) induce or
attempt to induce any supplier, licensee or other Person, other than customers,
to cease doing business with NTS or in any way interfere with the relationship
between any such supplier, licensee or other business entity and NTS, or (E)
except that no provision hereof shall limit the ability of the Current
Competitors to compete with NTS (other than through individual efforts of a TEC
Party), induce or attempt to induce any customer of NTS to cease doing business
with NTS or in any way interfere with the relationship between any such customer
and NTS.
 
(iv)            Each of the TEC Parties agree that they (or it) will not,
directly or indirectly, solicit the business of any Person who they know to be a
customer of NTS, whether or not the TEC Party had personal contact with such
Person prior to Closing; provided that such limitation shall not limit the
ability of the Current Competitors to compete with NTS other than through the
personal efforts of a TEC Party.
 
(b)            In the event of a breach by any of the TEC Parties of any
covenant set forth in Subsection 4(a) of this Agreement, the term of such
covenant will be extended by the period of the duration of such breach; and
 
(c)            Neither TEC nor any of the TEC Parties will, at any time during
or after the two year period, intentionally disparage Purchaser, NTS, or the
business conducted by Purchaser or any person known by TEC or such TEC Party,
respectively, to be a director or officer of NTS or Purchaser.
 
5.            REMEDIES
 
If any of the TEC Parties breaches the covenants set forth in Sections 3 or 4 of
this Agreement, Purchaser will be entitled to the following remedies:
 
(a)            Damages from TEC and the TEC Party who breached such covenants;
 
(b)            In addition to its right to damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of
Sections 3 and 4 of this Agreement, it being agreed that money damages alone
would be inadequate to compensate Purchaser and would be an inadequate remedy
for such breach.
 
(c)            Notwithstanding any provision hereof to the contrary, the
obligations of TEC and the TEC Parties hereunder are several and not joint;
provided that the foregoing shall not limitTEC’s liability, if any, for the
conduct of its directors, officers, employees and agents acting in such
capacity.
 

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(d)            The rights and remedies of the parties to this Agreement are
cumulative and not alternative.
 
6.            SUCCESSORS AND ASSIGNS
 
This Agreement will be binding upon Purchaser and each TEC Party and will inure
to the benefit of Purchaser and its successors.
 
7.            WAIVER
 
Neither the failure nor any delay by any party in exercising any right, power or
privilege under this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising out of this
Agreement can be discharged, in whole or in part, by a waiver or renunciation of
the claim or right except in writing; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party, or of the right of the party giving such notice or
demand to require the other party, to take further action without notice or
demand as provided in this Agreement.
 
8.            GOVERNING LAW
 
This Agreement will be governed by the laws of the State of Mississippi.
 
9.            JURISDICTION; SERVICE OF PROCESS
 
Any action or proceeding seeking to enforce any provision of, or based upon any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Mississippi, County of Rankin, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
 
10.            SEVERABILITY
 
Whenever possible, each provision and term of this Agreement will be interpreted
in a manner to be effective and valid, but if any provision or term of this
Agreement is held to be prohibited or invalid, then such provision or term will
be ineffective only to the extent of such prohibition or invalidity, without
invalidating or affecting in any manner whatsoever the remainder of such
provision or term or the remaining provisions or terms of this Agreement. If any
of the covenants set forth in Section 4 of this Agreement are held to be
unreasonable, arbitrary or against public policy, such covenants will be
considered divisible with respect toscope, time and geographic area, and in such
lesser scope, time and geographic area, will be effective, binding and
enforceable against the TEC Parties to the greatest extent permissible.
 

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11.            COUNTERPARTS
 
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
 
12.            SECTION HEADINGS, CONSTRUCTION
 
The headings of sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to “Section”
or “Sections” refer to the corresponding Section or Sections of this Agreement
unless otherwise specified. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word “Including” does not limit the preceding words or
terms.
 
13.            NOTICES
 
All notices, consents, waivers and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt); (b) sent by facsimile (with
written confirmation of receipt), provided that a copy is also promptly mailed
by registered mail, return receipt requested; or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
 
Joseph D. Fail
c/o Telephone Electronics Corporation
236 E. Capitol Street
Jackson, MS 39201
Telephone No:   (601) 354-9070
Facsimile No:      (601) 352-1394
Email:                                                                
 
with a copy to:
 

 
Jackson Walker L.L.P.
 
901 Main Street

 
Suite 6000

 
Dallas, TX 75202-3797

Attention: Jeffrey M. Sone
Telephone No:    (601) 354-9070
Facsimile No:       (601) 352-1394
Email:                     jsone@jw.com
 

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Chris Chelette
c/o Telephone Electronics Corporation
236 E. Capitol Street
Jackson, MS 39201
Telephone No:      (601) 354-9070
Facsimile No:         (601) 352-1394
Email:                      cchelette @communigroup.com

with a copy to:

 
Jackson Walker L.L.P.
 
901 Main Street

 
Suite 6000

 
Dallas, TX 75202-3797

Attention: Jeffrey M. Sone
Telephone No:       (601) 354-9070
Facsimile No:          (601) 352-1394
Email:                       jsone@jw.com
 
Robert Healea
c/o Telephone Electronics Corporation
236 E. Capitol Street
Jackson, MS 39201
Telephone No:      (601) 354-9070
Facsimile No:         (601) 352-1394
Email:                      bhealea@tec.com
 
with a copy to:

 
Jackson Walker L.L.P.
 
901 Main Street

 
Suite 6000

 
Dallas, TX 75202-3797

Attention: Jeffrey M. Sone
Telephone No:       (601) 354-9070
Facsimile No:          (601) 352-1394
Email:                       jsone@jw.com
 
Joey Garner
c/o Telephone Electronics Corporation
236 E. Capitol Street
Jackson, MS 39201
Telephone No:       (601) 354-9070
Facsimile No:          (601) 352-1394
Email:                                                                
 
with a copy to:
 

 
Jackson Walker L.L.P.
 
901 Main Street

 
Suite 6000

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Dallas, TX 75202-3797

Attention: Jeffrey M. Sone
Telephone No:       601) 354-9070
Facsimile No:          (601) 352-1394
Email:                       jsone@jw.com
 
Walter Frank
c/o Telephone Electronics Corporation
236 E. Capitol Street
Jackson, MS 39201
Telephone No:        (601) 354-9070
Facsimile No:           (601) 352-1394
Email:                                                                
 
with a copy to:

 
Jackson Walker L.L.P.
 
901 Main Street

 
Suite 6000

 
Dallas, TX 75202-3797

Attention: Jeffrey M. Sone
Telephone No:        (601) 354-9070
Facsimile No:           (601) 352-1394
Email:                       jsone@jw.com
 
TEC:

Telephone Electronics Corporation
Attention: Joseph D. Fail
c/o Telephone Electronics Corporation
236 E. Capitol Street
Jackson, MS 39201
Telephone No:         (601) 354-9070
Facsimile No:            (601) 352-1394

with a copy to:

 
Jackson Walker L.L.P.
 
901 Main Street

 
Suite 6000

 
Dallas, TX 75202-3797

Attention: Jeffrey M. Sone
Telephone No:         (601) 354-9070
Facsimile No:            (601) 352-1394
Email:                          jsone@jw.com
 
Purchaser:                              Xfone, Inc.
Britannia House
960 High Road
London, N129RY
United Kingdom
Attention:                  Guy Nissenson
Telephone:                +44 208-446-9494

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Facsimile:                   +44 208-446-7010
Email:                          guy@Xfone.com

and

Xfone, Inc.
c/o Xfone USA, Inc.
2506 Lakeland Drive, Suite 100
Flowood, MS  39232
Attention:                Wade Spooner
Telephone:              (601) 664-1108
Facsimile:                 (601) 664-1190
Email:                       wspooner@expetel.com
 
with a mandatory copy to:

Watkins Ludlam Winter & Stennis, P.A.
633 North State Street (39202)
P. O. Box 427
Jackson, MS 39205-0427
Attention:                   Gina M. Jacobs
Telephone:                  601-949-4705
Facsimile:                      601-949-4804
Email:                             gjacobs@watkinsludlam.com

14.            ENTIRE AGREEMENT
 
This Agreement and the Stock Purchase Agreement, together with all exhibits and
schedules attached thereto, constitute the entire agreement between the parties
with respect to the subject matter of this Agreement and supersede all prior
written and oral agreements and understandings between the parties with respect
to the subject matter of this Agreement. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
 

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
[Signature Pages Follow]
 

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IN WITNESS WHEREOF, the undersigned, Guy Nissenson, has executed this Agreement
in his capacity indicated for and on behalf of Purchaser on this 26th day of
February, 2008.
 

 
PURCHASER:

XFONE, INC.

By:  /s/ Guy Nissenson
Printed Name:  Guy Nissenson,
Title:  President and CEO

   

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IN WITNESS WHEREOF, the undersigned, Joseph D. Fail, has executed and
delivered  this Agreement individually and in his capacity indicated for and on
behalf of TEC on this 26th day of Febraury, 2008.
 

 
TEC PARTIES:

TELEPHONE ELECTRONICS CORPORATION

By:  /s/ Joseph D. Fail
Printed Name:  Joseph D. Fail,
Title:  President and CEO

 
/s/ Joseph D. Fail
Joseph D. Fail,
Individually

   

 

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IN WITNESS WHEREOF, the undersigned, Chris Chelette, has executed and delivered
this Agreement on this 26th day of February, 2008.
 

 
TEC PARTY:

 
/s/ Chris Chelette
Chris Chelette,
Individually

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IN WITNESS WHEREOF, the undersigned, Robert Healea, has executed and delivered
this Agreement on this 26th day of Febraury, 2008.
 

 
TEC PARTY:

 
/s/ Robert Healea
Robert Healea,
Individually

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IN WITNESS WHEREOF, the undersigned, Joey Garner, has executed and delivered
this Agreement on this 26th day of February, 2008.
 

 
TEC PARTY:

 
/s/ Joey Garner
Joey Garner,
Individually

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IN WITNESS WHEREOF, the undersigned, Walter Frank, has executed and delivered
this Agreement on this 26th day of February, 2008.
 

 
TEC PARTY:

/s/ Walter Frank
Walter Frank,
Individually

 

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