Exhibit 10.52
 
REGISTRATION RIGHTS AGREEMENT
 
This Registration Rights Agreement (this “Agreement”) is made and entered into
as of September 27, 2005, by and between XFONE, INC., a Nevada corporation (the
“Company”), and Laurus Master Fund, Ltd. (the “Purchaser”).
 
This Agreement is made pursuant to the Securities Purchase Agreement, dated as
of the date hereof, by and between the Purchaser and the Company (as amended,
modified or supplemented from time to time, the “Securities Purchase Agreement”)
calling for the issuance by the Company of a convertible term note in the
aggregate principal amount of US$2,000,000 and warrants, and pursuant to the
Note and the Warrants referred to therein.
 
The Company and the Purchaser hereby agree as follows:
 
1.  Definitions. Capitalized terms used and not otherwise defined herein that
are defined in the Securities Purchase Agreement shall have the meanings given
such terms in the Securities Purchase Agreement. As used in this Agreement, the
following terms shall have the following meanings:
 
“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means shares of the Company’s common stock, par value $0.001 per
share.
 
“Effectiveness Date” means (i) with respect to the initial Registration
Statement required to be filed hereunder, a date no later than one hundred and
twenty (120) days following the date hereof and (ii) with respect to each
additional Registration Statement required to be filed hereunder, a date no
later than forty five (45) days following the applicable Filing Date.
 
“Effectiveness Period” has the meaning set forth in Section 2(a).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any
successor statute.
 
“Filing Date” means, with respect to (i) the Registration Statement required to
be filed hereunder in respect of the shares of Common Stock issuable upon
conversion of the Note, and (ii) the shares of Common Stock issuable upon
exercise of any Warrant, a date no later than forty five (45) days following the
date hereof, Shares of Common Stock issuable to the Holder as a result of
adjustments to the Fixed Conversion Price or Exercise Price, as the case may be,
made pursuant to the Note or the Warrant or otherwise, thirty (30) days after
the occurrence such event or the date of the adjustment of the Fixed Conversion
Price or Exercise Price, as the case may be, provided however, that unless the
shares of Common Stock issuable to the Holder as a result of adjustments to the
Fixed Conversion Price or Exercise Price exceed an aggregate of 65,000 shares,
the Holder shall have “piggyback’ registration rights in respect of such shares
as set forth in Section 7(e) hereof .
 
“Holder” or “Holders” means the Purchaser or any of its affiliates or
transferees to the extent any of them hold Registrable Securities, other than
those purchasing Registrable Securities in a market transaction.
 
“Indemnified Party” has the meaning set forth in Section 5(c).
 
“Indemnifying Party” has the meaning set forth in Section 5(c).
 
“Note” has the meaning set forth in the Securities Purchase Agreement.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
 
“Registrable Securities” means the shares of Common Stock issued upon the
conversion of the Note and issuable upon exercise of the Warrants ; provided
however that Registrable Securities shall not include (1) any shares of Common
Stock which have previously been registered or have been sold to the public
either pursuant to a registration statement or Rule 144, or (2) any shares held
by a Holder of Registrable Securities which would be permitted to be sold by
such Holder under Rule 144(k) or within the volume limitations of Rule 144
during any 90-day period, as applicable, or (3) any shares held by a Holder of
Registrable Securities which have been sold in a private transaction in which
the transferor's rights under this Agreement are not assigned.
 
“Registration Statement” means each registration statement required to be filed
hereunder, including the Prospectus therein, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“Securities Act” means the Securities Act of 1933, as amended, and any successor
statute.
 
“Securities Purchase Agreement” has the meaning given to such term in the
Preamble hereto.
 
“Trading Market” means any of the NASD Over The Counter Bulletin Board, NASDAQ
SmallCap Market, the NASDAQ National Markets System, the American Stock Exchange
or the New York Stock Exchange.
 
“Warrants” means the Common Stock purchase warrants issued in connection with
the Securities Purchase Agreement, whether on the date hereof or thereafter.
 
2.  Registration.
 
(a)  On or prior to the Filing Date the Company shall prepare and file with the
Commission a Registration Statement covering the Registrable Securities for a
selling stockholder resale offering to be made on a continuous basis pursuant to
Rule 415. The Registration Statement shall be on Form SB-2 , or any other
appropriate form in accordance herewith so as to permit the public offering and
resale of the Registrable Securities. The Company shall cause each Registration
Statement to become effective and remain effective as provided herein. The
Company shall use its reasonable commercial efforts to cause each Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event no later than the
Effectiveness Date. The Company shall use its reasonable commercial efforts to
keep each Registration Statement continuously effective under the Securities Act
until the date which is the earlier date of when (i) all Registrable Securities
have been sold or (ii) all Registrable Securities covered by such Registration
Statement may be sold immediately without registration under the Securities Act
and without volume restrictions pursuant to Rule 144(k), as determined by the
counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company’s transfer agent and the affected
Holders (the “Effectiveness Period”).
 
(b)  If: (i) any Registration Statement is not filed on or prior to the
applicable Filing Date; (ii) a Registration Statement filed hereunder is not
declared effective by the Commission by the applicable Effectiveness Date; (iii)
after a Registration Statement is filed with and declared effective by the
Commission, a Discontinuation Event (as hereafter defined) shall occur and be
continuing, or such Registration Statement ceases to be effective (by suspension
or otherwise) as to all Registrable Securities to which it is required to relate
at any time prior to the expiration of the Effectiveness Period (without being
succeeded immediately by an additional registration statement filed and declared
effective), for a period of time which shall exceed 30 days in the aggregate per
year or more than 20 consecutive calendar days (defined as a period of 365 days
commencing on the date the Registration Statement is declared effective); or
(iv) the Common Stock is not listed or quoted, or is suspended from trading on
any Trading Market for a period of three (3) consecutive Trading Days (provided
the Company shall not have been able to cure such trading suspension within 30
days of the notice thereof or list the Common Stock on another Trading Market);
(any such failure or breach being referred to as an “Event,” and for purposes of
clause (i) or (ii) the date on which such Event occurs, or for purposes of
clause (iii) the date which such 30 day or 20 consecutive day period (as the
case may be) is exceeded, or for purposes of clause (iv) the date on which such
three (3) Trading Day period is exceeded, being referred to as “Event Date”),
then as partial relief for the damages to the Purchaser by reason of the
occurrence of any such Event (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to the Purchaser
for each day that an Event has occurred and is continuing, as liquidated
damages, and not as a penalty, an amount in cash equal to one-thirtieth (1/30th)
of the product of: (A) the then outstanding principal amount of the Note
multiplied by (B)0.015. Notwithstanding the immediately foregoing, with effect
after September 27, 2007 (other than with respect to any then outstanding and
unpaid liquidated damages and the occurrence of each Discontinuation Event), no
additional liquidated damages shall accrue to the account of the Company.
 
(c)  Within three business days of the Effectiveness Date, the Company shall
cause its counsel to issue a blanket opinion in the form attached hereto as
Exhibit A, to the transfer agent stating that the shares are subject to an
effective registration statement and can be reissued free of restrictive legend
upon notice of a sale by the Purchaser and confirmation by the Purchaser that it
has complied with the prospectus delivery requirements, provided that the
Company has not advised the transfer agent orally or in writing that the opinion
has been withdrawn. Copies of the blanket opinion required by this Section 2(c)
shall be delivered to the Purchaser within the time frame set forth above.
 
3.  Registration Procedures. If and whenever the Company is required by the
provisions hereof to effect the registration of any Registrable Securities under
the Securities Act, the Company will, as expeditiously as possible:
 
(a)  prepare and file with the Commission a Registration Statement with respect
to such Registrable Securities, respond as promptly as possible to any comments
received from the Commission, and use its best efforts to cause the Registration
Statement to become and remain effective for the Effectiveness Period with
respect thereto;
 
(b)  prepare and file with the Commission such amendments and supplements to the
Registration Statement and the Prospectus used in connection therewith as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by such Registration
Statement and to keep such Registration Statement effective until the expiration
of the Effectiveness Period applicable to such Registration Statement;
 
(c)  furnish to the Purchaser such number of copies of the Registration
Statement and the Prospectus included therein (including each preliminary
Prospectus) as the Purchaser reasonably may request to facilitate the public
sale or disposition of the Registrable Securities covered by the Registration
Statement;
 
(d)  use its commercially reasonable efforts to register or qualify the
Purchaser’s Registrable Securities covered by such Registration Statement under
the securities or “blue sky” laws of such jurisdictions within the United States
as the Purchaser may reasonably request, provided, however, that the Company
shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction;
 
(e)  list the Registrable Securities covered by such Registration Statement with
any securities exchange on which the Common Stock of the Company is then listed;
 
(f)  immediately notify the Purchaser at any time when a Prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event of which the Company has knowledge as a result of which the
Prospectus contained in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing; and
 
(g)  make available for inspection by the Purchaser and any attorney, accountant
or other agent retained by the Purchaser, all publicly available,
non-confidential financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company’s officers, directors and
employees to supply all publicly available, non-confidential information
reasonably requested by the attorney, accountant or agent of the Purchaser.
 
(h)  The Purchaser covenants and agrees that it will cooperate with the Company
in all respects in connection with this Agreement, including timely supplying
all information reasonably requested by the Company (which shall include all
information regarding the Purchaser and proposed manner of sale of the
Registrable Securities required to be disclosed in any Registration Statement)
and executing and returning all documents reasonably requested in connection
with the registration and sale of the Registrable Securities and entering into
and performing its obligations under the Securities Purchase Agreement and/or
the Related Agreements (including this Agreement), if the offering is an
underwritten offering, in usual and customary form, with the managing
underwriter or underwriters of such underwritten offering.  Any delay or delays
caused by the Purchaser, or by any other purchaser of securities of the Company
having registration rights similar to those contained herein, by failure to
cooperate as required hereunder shall not constitute a breach or default of the
Company under the Securities Purchase Agreement or any Related Agreement
(including this Agreement).
 
(i)   With respect to any sale of Registrable Securities pursuant to the
Registration Statement, the Purchaser hereby covenants with the Company (i) not
to make any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Securities Act to be satisfied and
(ii) to notify the Company promptly upon disposition of all of the Registrable
Securities.
 
4.  Registration Expenses. All expenses relating to the Company’s compliance
with Sections 2 and 3 hereof, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or “blue sky” laws, fees of the NASD, transfer taxes, fees of
transfer agents and registrars, fees of, and disbursements incurred by, one
counsel for the Holders, are called “Registration Expenses”. All selling
commissions applicable to the sale of Registrable Securities, including any fees
and disbursements of any special counsel to the Holders beyond those included in
Registration Expenses, are called “Selling Expenses.” The Company shall only be
responsible for all Registration Expenses.
 
5.  Indemnification.
 
(a)  In the event of a registration of any Registrable Securities under the
Securities Act pursuant to this Agreement, the Company will indemnify and hold
harmless the Purchaser, and its officers, directors and each other person, if
any, who controls the Purchaser within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Purchaser, or such persons may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Securities were registered under the Securities Act
pursuant to this Agreement, any preliminary Prospectus or final Prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Purchaser, and each such person for any
reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case if and
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by or on
behalf of the Purchaser or any such person in writing specifically for use in
any such document. Notwithstanding the provisions of this paragraph, the Company
shall not be required to indemnify any person or entity in excess of the amount
of the Obligations (as defined in the Master Security Agreement).
 
(b)  In the event of a registration of the Registrable Securities under the
Securities Act pursuant to this Agreement, the Purchaser will indemnify and hold
harmless the Company, and its officers, directors and each other person, if any,
who controls the Company within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact which was furnished in writing by the Purchaser
to the Company expressly for use in (and such information is contained in) the
Registration Statement under which such Registrable Securities were registered
under the Securities Act pursuant to this Agreement, any preliminary Prospectus
or final Prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
person for any reasonable legal or other expenses incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the Purchaser will be liable in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished in writing
to the Company by or on behalf of the Purchaser specifically for use in any such
document. Notwithstanding the provisions of this paragraph, the Purchaser shall
not be required to indemnify any person or entity in excess of the amount of the
aggregate net proceeds received by the Purchaser in respect of Registrable
Securities in connection with any such registration under the Securities Act.
 
(c)  Promptly after receipt by a party entitled to claim indemnification
hereunder (an “Indemnified Party”) of notice of the commencement of any action,
such Indemnified Party shall, if a claim for indemnification in respect thereof
is to be made against a party hereto obligated to indemnify such Indemnified
Party (an “Indemnifying Party”), notify the Indemnifying Party in writing
thereof, but the omission so to notify the Indemnifying Party shall not relieve
it from any liability which it may have to such Indemnified Party other than
under this Section 5(c) and shall only relieve it from any liability which it
may have to such Indemnified Party under this Section 5(c) if and to the extent
the Indemnifying Party is prejudiced by such omission. In case any such action
shall be brought against any Indemnified Party and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such Indemnified
Party, and, after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume and undertake the defense thereof, the Indemnifying
Party shall not be liable to such Indemnified Party under this Section 5(c) for
any legal expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof; if the Indemnified Party retains its own counsel, then
the Indemnified Party shall pay all fees, costs and expenses of such counsel,
provided, however, that, if the defendants in any such action include both the
Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the Indemnifying
Party or if the interests of the Indemnified Party reasonably may be deemed to
conflict with the interests of the Indemnifying Party, the Indemnified Party
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the Indemnifying Party as incurred.
 
(d)  In order to provide for just and equitable contribution in the event of
joint liability under the Securities Act in any case in which either (i) the
Purchaser, or any officer, director or controlling person of the Purchaser,
makes a claim for indemnification pursuant to this Section 5 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 5 provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
part of the Purchaser or such officer, director or controlling person of the
Purchaser in circumstances for which indemnification is provided under this
Section 5; then, and in each such case, the Company and the Purchaser will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that the
Purchaser is responsible only for the portion represented by the percentage that
the public offering price of its securities offered by the Registration
Statement bears to the public offering price of all securities offered by such
Registration Statement, provided, however, that, in any such case, (A) the
Purchaser will not be required to contribute any amount in excess of the public
offering price of all such securities offered by it pursuant to such
Registration Statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10(b) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
 
6.  Representations and Warranties.
 
(a)  The Common Stock is registered pursuant to Section 12(b) of the Exchange
Act and, except with respect to certain matters which the Company has disclosed
to the Purchaser on Schedule 4.21 to the Securities Purchase Agreement, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it under the Exchange Act. The Company has
filed (i) its Annual Report on Form 10-K for its fiscal year ended December 31,
2004 and (ii) its Quarterly Report on Form 10-Q for the fiscal quarters ended
March 31, 2005 and June 30, 2005 (collectively, the “SEC Reports”). Each SEC
Report was, at the time of its filing, in substantial compliance with the
requirements of its respective form and none of the SEC Reports, nor the
financial statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in
the SEC Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles (“GAAP”) applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed) and fairly present in
all material respects the financial condition, the results of operations and the
cash flows of the Company and its subsidiaries, on a consolidated basis, as of,
and for, the periods presented in each such SEC Report.
 
(b)  The Common Stock is listed for trading on the American Stock Exchange and
satisfies all requirements for the continuation of such listing, and the Company
shall do all things necessary for the continuation of such listing. The Company
has not received any notice that its Common Stock will be delisted from the
American Stock Exchange (except for prior notices which have been fully
remedied) or that the Common Stock does not meet all requirements for the
continuation of such listing.
 
(c)  Neither the Company, nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would cause the offering of the Securities pursuant to the Securities Purchase
Agreement to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Common Stock
pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its affiliates or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.
 
(d)  The Warrant, the Note and the shares of Common Stock which the Purchaser
may acquire pursuant to the Warrant and the Note are all restricted securities
under the Securities Act as of the date of this Agreement. The Company will not
issue any stop transfer order or other order impeding the sale and delivery of
any of the Registrable Securities at such time as the Registrable Securities are
registered for public sale or an exemption from registration is available,
except as required by federal or state securities laws.
 
(e)  The Company understands the nature of the Registrable Securities issuable
upon the conversion of the Note and the exercise of the Warrant and recognizes
that the issuance of such Registrable Securities may have a potential dilutive
effect. The Company specifically acknowledges that subject to applicable law,
its obligation to issue the Registrable Securities is binding upon the Company
and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
 
(f)  Except for agreements made in the ordinary course of business, there is no
agreement that has not been filed with the Commission as an exhibit to a
registration statement or to a form required to be filed by the Company under
the Exchange Act, the breach of which could reasonably be expected to have a
material and adverse effect on the Company and its subsidiaries, or would
prohibit or otherwise interfere with the ability of the Company to enter into
and perform any of its obligations under this Agreement in any material respect.
 
(g)  The Company will at all times have authorized and reserved a sufficient
number of shares of Common Stock for the full conversion of the Note and
exercise of the Warrants.
 
7.  Miscellaneous.
 
(a)  Remedies. In the event of a breach by the Company or by a Holder, of any of
their respective obligations under this Agreement, each Holder or the Company,
as the case may be, in addition to being entitled to exercise all rights granted
by law and under this Agreement, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement.
 
(b)  No Piggyback on Registrations. Except as and to the extent specified in
Schedule 7(b) hereto, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the
Company in any Registration Statement other than the Registrable Securities, and
the Company shall not after the date hereof enter into any agreement providing
any such right for inclusion of shares in the Registration Statement to any of
its security holders. Except as and to the extent specified in Schedule 7(b)
hereto, the Company has not previously entered into any agreement granting any
registration rights with respect to any of its securities to any person or
entity that have not been fully satisfied.
 
(c)  Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
 
(d)  Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of a Discontinuation Event (as defined below), such Holder will
forthwith discontinue disposition of such Registrable Securities under the
applicable Registration Statement until such Holder’s receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
Notwithstanding paragraph 6(d) above, the Company may provide appropriate stop
orders to enforce the provisions of this paragraph. For purposes of this
Agreement, a “Discontinuation Event” shall mean (i) when the Commission notifies
the Company whether there will be a “review” of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement (the
Company shall provide true and complete copies thereof and all written responses
thereto to each of the Holders); (ii) any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to such
Registration Statement or Prospectus or for additional information; (iii) the
issuance by the Commission of any stop order suspending the effectiveness of
such Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose; (iv) the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and/or (v) the occurrence of any event or passage of time that makes
the financial statements included in such Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
 
(e)  Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within seven (7) business days after receipt of such
notice, any such Holder shall so request in writing, the Company shall include
in such registration statement all or any part of such Registrable Securities
such Holder requests to be registered to the extent the Company may do so
without violating registration rights of others which exist as of the date of
this Agreement, subject to customary underwriter cutbacks applicable to all
holders of registration rights and subject to obtaining any required consent of
any selling stockholder(s) to such inclusion under such registration statement.
 
(f)  Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
the then outstanding Registrable Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of certain Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
 
(g)  Notices. Any notice or request hereunder may be given to the Company or the
Purchaser at the respective addresses set forth below or as may hereafter be
specified in a notice designated as a change of address under this Section 7(g).
All notices of changes of address under this Section 7(g) shall be delivered to
the other party hereto at least ten (10) business days in advance of the
effective day of such change of address. Any notice or request hereunder shall
be given by registered or certified mail, return receipt requested, hand
delivery, overnight mail, Federal Express or other national overnight next day
carrier (collectively, “Courier”) or telecopy (confirmed by mail). Notices and
requests shall be, in the case of those by hand delivery, deemed to have been
given when delivered to any party to whom it is addressed, in the case of those
by mail or overnight mail, deemed to have been given three (3) business days
after the date when deposited in the mail having been sent by registered or
certified mail, return receipt requested, postage prepaid; or with the overnight
mail carrier, in the case of a Courier, the next business day following timely
delivery of the package with the Courier, and, in the case of a telecopy, when
sent by confirmed facsimile if sent during normal business hours of the
recipient, if not, then on the second business day. The address for such notices
and communications shall be as follows:

If to the Company:
to the address set forth in Section 11.8 of the Securities Purchase Agreement
   
If to a Purchaser:
To the address set forth under such Purchaser name on the signature pages
hereto.
   
If to any other Person who is
 
then the registered Holder:
To the address of such Holder as it appears in the stock transfer books of the
Company

 
or such other address as may be designated in writing hereafter in accordance
with this Section 7(g) by such Person.
 
(h)  Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and
shall inure to the benefit of each Holder. The Company may not assign its rights
or obligations hereunder without the prior written consent of each Holder.
Subject to compliance with applicable securities laws, each Holder may assign
their respective rights hereunder in the manner and to the persons and entities
as permitted under the Note and the Securities Purchase Agreement, but in no
event shall any such right be assigned to a direct competitor of the Company.
 
(i)  Execution and Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
 
(j)  Governing Law, Jurisdiction and Waiver of Jury Trial. THIS AGREEMENT 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 PRINCIPLES OF CONFLICTS OF LAW. The Company hereby consents
and agrees that the state or federal courts located in the County of New York,
State of New York shall have exclusion jurisdiction to hear and determine any
Proceeding between the Company, on the one hand, and the Purchaser, on the other
hand, pertaining to this Agreement or to any matter arising out of or related to
this Agreement; provided, that the Purchaser and the Company acknowledge that
any appeals from those courts may have to be heard by a court located outside of
the County of New York, State of New York, and further provided, that nothing in
this Agreement shall be deemed or operate to preclude the Purchaser from
bringing a Proceeding 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 the Purchaser. The Company
expressly submits and consents in advance to such jurisdiction in any Proceeding
commenced in any such court, and the Company hereby waives any objection which
it may have based upon lack of personal jurisdiction, improper venue or forum
non conveniens. The Company hereby waives personal service of the summons,
complaint and other process issued in any such Proceeding and agrees that
service of such summons, complaint and other process may be made by registered
or certified mail addressed to the Company at the address set forth in Section
7(g) and that service so made shall be deemed completed upon the earlier of the
Company’s actual receipt thereof or three (3) days after deposit in the U.S.
mails, proper postage prepaid. The parties hereto desire that their disputes be
resolved by a judge applying such applicable laws. Therefore, to achieve the
best combination of the benefits of the judicial system and of arbitration, the
parties hereto waive all rights to trial by jury in any Proceeding brought to
resolve any dispute, whether arising in contract, tort, or otherwise between the
Purchaser and/or the Company arising out of, connected with, related or
incidental to the relationship established between then in connection with this
Agreement. If either party hereto shall commence a Proceeding to enforce any
provisions of this Agreement, the Securities Purchase Agreement or any other
Related Agreement, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such Proceeding.
 
(k)  Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
 
(l)  Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
 
(m)  Headings. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
 
[Balance of page intentionally left blank;
 
signature page follows]

 
 

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.
 

XFONE, INC.
LAURUS MASTER FUND, LTD.
       
By:       
By:                                                         
Name: Guy Nissenson
Name:                                                    
Title: President & CEO
Title:                                                      
     
Address for Notices:
     
825 Third Avenue, 14th Floor
 
New York, NY 10022
 
Attention: David Grin
 
Facsimile: 212-541-4434

 

 

 
 

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EXHIBIT A
 
[__________ __, 200__]
 
[Continental Stock Transfer
& Trust Company
Two Broadway
New York, NY 10004
Attn: William Seegraber]
 
Re: XFONE, INC.. Registration Statement on Form [S-3]
 
Ladies and Gentlemen:
 
As counsel to XFONE, INC., a __________ corporation (the “Company”), we have
been requested to render our opinion to you in connection with the resale by the
individuals or entitles listed on Schedule A attached hereto (the “Selling
Stockholders”), of an aggregate of __________ shares (the “Shares”) of the
Company’s Common Stock.
 
A Registration Statement on Form [S-3] under the Securities Act of 1933, as
amended (the “Act”), with respect to the resale of the Shares was declared
effective by the Securities and Exchange Commission on [date]. Enclosed is the
Prospectus dated [date]. We understand that the Shares are to be offered and
sold in the manner described in the Prospectus.
 
Based upon the foregoing, upon request by the Selling Stockholders at any time
while the registration statement remains effective, it is our opinion that the
Shares have been registered for resale under the Act and new certificates
evidencing the Shares upon their transfer or re-registration by the Selling
Stockholders may be issued without restrictive legend. We will advise you if the
registration statement is not available or effective at any point in the future.
 
Very truly yours,
 
[Company counsel]
 

 
 

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

 

 
Schedule A to Exhibit A
 
Selling Stockholder
 
Shares
Being Offered
   

 

 
 

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

 

 
SCHEDULE 7(b)
 

·  
5,500,000 shares underlying the 5,500,000 options under The Company's 2004 SOP.

·  
Up to 125,000 shares plus up to 750,000 shares underlying 750,000 warrants in
connection with the Finders Agreement and the Financial Consulting Agreement
between the Company and Oberon Securities, LLC (as each may be amended,
modified, restated and/or supplemented from time to time).

·  
Up to 125,000 shares underlying 125,000 warrants in connection with the Public
Relations Agreement between the Company and Elite Financial Communications
Group, LLC.

·  
Shares underlying warrants valued in the aggregate amount of up to $50,000 in
connection with a Legal Services Agreement between the Company and Mr. Yitzhak
Rosenbaum.

·  
3,150 shares issued to Mr. Simon Langbart.

·  
Up to 2,700,000 shares and/or warrants which will be issued and/or granted in
connection with that certain Agreement and Plan of Merger by and among the
Company, Xfone USA, Inc., I-55 Internet Services, Inc. and the Principals (as
defined therein) dated August 18, 2005, as may be amended, modified, restated or
supplemented from time to time (though no more than 2,700,000 shares and/or
warrants may be issued and/or granted without prior written approval by
Purchaser), and the acquisition of I-55 Internet Services, including any
issuance and/or grant of shares and/or warrants to creditors and/or debt holders
of I-55 Internet Services and/or to MCG Capital Corporation.

·  
Up to 900,000 shares and/or warrants which may be issued and/or granted in
connection with that certain Agreement and Plan of Merger by and among the
Company, Xfone USA, Inc., I-55 Telecommunications, LLC and the Principal (as
defined therein) dated August 26, 2005, as may be amended, modified, restated or
supplemented from time to time (though no more than 900,000 shares and/or
warrants may be issued and/or granted without prior written approval by
Purchaser), and the acquisition of I-55 Telecommunications, including any
issuance and/or grant of shares and/or warrants to creditors and/or debt holders
of I-55 Telecommunications.

·  
Up to 550,000 shares and/or warrants which will be issued and/or granted to the
Purchaser in connection with the Purchaser's $1,500,000 incremental funding.

·  
Shares and/or warrants which will be issued, issuable and/or granted by the
Company in connection with additional financing transactions between the Company
and investors other than the Purchaser, in an aggregate amount not to exceed
$5,000,000, to be completed on or before March 1, 2006, together with any
additional shares and/or warrants to be issued, issuable and/or granted to such
investors as a result of an adjustment to the Fixed Conversion Price (as defined
in the Note).

·  
As disclosed in the Exchange Act Filings and in the SEC Reports.