ex10134.htm


    LOAN
AGREEMENT

    


    LOAN
AGREEMENT, dated as of December 10, 2009, between Swiftnet Limited (company
number 02469394) whose registered office is at Britannia House 960 High Road,
London N12 9RY (the "Borrower"), Xfone, Inc. whose
principal executive offices are at 5307 W Loop 289, Lubbock, TX 79414 US (the
“Guarantor”) and certain
subsidiaries of either the Borrower or the Guarantor each of which is registered
in England & Wales being Auracall Limited (company number 04308459, “Auracall”), Equitalk.co.uk
Limited (company number 03894765, “Equitalk”) and Story Telecom
Limited (company number 04551415) (the “UK Subsidiaries” and “UK Subsidiary” means any of
them as may be appropriate), and Iddo Keinan whose address is at Flat 2, 62
Fitzjohns avenue, Hampstead, London NW3 5LT, UK  (the "Lender").

    


    RECITALS

    


    WHEREAS,
the Lender is willing to extend to the Borrower a loan in an amount of
£860,044.58 (Eight Hundred and Sixty Thousand and Forty Four Pounds Sterling and
Fifty Eight Pence Only) on the terms and conditions set forth in this Loan
Agreement (“this Agreement”); and

     

    WHEREAS,
for the purpose of performance of his undertakings under this Agreement, the
Lender has obtained the funds for the Loan (as that term is defined below) in
the sum of £1,252,500 (the “Lender’s Loan”) from the Lender’s bank
and has and/or shall bear certain costs and expenses as specified in the
schedule of expenses attached to this Agreement as “Schedule A” (the “Lender’s Expenses”) in
connection with the Loan.

     

    NOW,
THEREFORE, the parties hereto agree as follows:

     

    
      	
              1.  

            	
              THE
      LOAN

            


    

     

    
      	
              (a)  

            	
              Subject
      to the terms and conditions set forth below, the Lender shall lend to the
      Borrower an amount of £860,044.58 (Eight Hundred and Sixty Thousand and
      Forty Four Pounds Sterling and Fifty Eight Pence) (the "Loan"), no later than
      December 10, 2009 (the "Drawdown Date"). The
      Loan shall be advanced by the Borrower to the Guarantor for the bridge
      funding of the payment of amounts due from the Guarantor under its Series
      A Bonds.

            


    

     

    
      	
              (b)  

            	
              Provided
      no event of default occurs as specified in Clause (k), the Loan shall be
      repaid to the Lender in full no later than May 30,
  2010.

            


    

     

    
      	
              (c)  

            	
              The
      Borrower shall pay to the Lender the following
  amounts:

            


    

     

    
      	
              (i)  

            	
              interest
      at an interest rate of 1.3% (One Point Three Per Cent) per month charged
      on the total amount of the Lender’s Loan, to be paid by the Borrower by
      way of standing order, less a monthly amount of £1,000 (One Thousand
      Pounds Sterling); and

            


    

     

    
      	
              (ii)  

            	
              the
      Lender’s Expenses; and

            


    

     

    
      	
              (iii)  

            	
              any
      costs that may arise in respect of the Loan either as a result of putting
      the Loan in place, during its tenor or in order to obtain repayment of the
      Loan.

            


    

     

    
      	
              (d)  

            	
              All
      payments are to be made by the Borrower without set off or counterclaim
      and free and clear of any and all deductions, including (without
      limitation) withholding taxes except to the extent required by
      law.  If the Borrower is compelled by law or regulations to
      deduct any such amount the amount payable will be automatically increased
      so that the net amount after allowing for such deduction would be equal to
      the amount which would have been payable if no such deduction had
      arisen.

            


    

     

    
      	
              (e)  

            	
              All
      payments are to be made by the Borrower to the Lender in Pounds Sterling
      for value on their due date.  If any payment is made by the
      Borrower to the Lender in any currency other than Pounds Sterling then the
      Borrower will indemnify the Lender for any shortfall that may occur as a
      result of the Lender having to convert such payment to Pounds
      Sterling.

            


    

     

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

    
      	
              (f)  

            	
              The
      Loan will not be made available by the Lender to the Borrower until the
      following conditions are satisfied:

            


    

     

    
      	
              (i)  

            	
              the
      Borrower confirms that the existing debentures granted by the Borrower
      and  Equitalk.co.uk Limited in favour of Barclays Bank PLC have
      been released;

            


    

     

    
      	
              (ii)  

            	
              a
      legal opinion from a lawyer in the same jurisdiction as the jurisdiction
      of incorporation of the Guarantor or any other party providing security in
      favour of the Lender but not incorporated in England & Wales
      confirming their good standing and power and authority to enter into this
      Agreement and any other documents specified
  herein;

            


    

    
       

      
        	
                (iii)  

              	
                      
                  this
      Agreement and the security documents specified at Clause (h) duly
      executed;

                

              


      

       

    

    
      	
              (iv)  

            	
              certified
      copies of board resolutions of the Borrower, the Guarantor and any
      security provider under this Agreement together with shareholder
      resolutions of the Borrower and the UK Subsidiaries in relation to the
      entering into of this Agreement and any other documents specified
      herein;

            


    

     

    
      	
              (g)  

            	
              Borrower
      shall have the right upon two (2) Business Days' prior written notice to
      Lender, to make a voluntary prepayment of the Loan, in whole or in part.
      If the Borrower elects to prepay the Loan, in whole or in part, pursuant
      to this Clause, no prepayment fees shall apply. Provided that, should the
      Borrower choose to prepay the Loan at any time within the first month
      following the Drawdown Date then an early repayment charge equal to the
      balance of the first month’s interest shall
  apply.

            


    

     

    
      	
              (h)  

            	
               For
      good consideration and
      as an inducement for the Lender, on the Drawdown Date and so long as
      Borrower’s obligations and undertaking under this Agreement are
      outstanding, the following shall be granted as security in favour of the
      Lender for the Borrower’s obligations under this Agreement (the “Security
      Documents”):

            


    

     

    
      	
              (a)  

            	
              A
      charge over 51% (Fifty One Per Cent) of the issued Class A shares of the
      Borrower and a charge over 51% (Fifty One Per Cent) of the issued Class B
      shares of the Borrower, a charge over 51% (Fifty One Per Cent) of the
      issued share capital of Equitalk and a charge over the entire issued share
      capital of the UK Subsidiaries (except Equitalk) together with (1) undated
      stock transfer forms in respect of the Borrower and each UK Subsidiary
      executed by the relevant shareholder with the identity of the Lender as
      the transferee (the “Stock Transfer Forms”);
      and (2) the original share certificates representing each shareholder’s
      holding in the Borrower and the relevant UK Subsidiary (the “Certificates”).

            


    

     

    Borrower
and Guarantor shall deliver to the person identified by both the Lender and
Guarantor as an agreed escrow agent for the Lender, Borrower and Guarantor (the
“Escrow Agent”) the
Stock Transfer Forms and the Certificates to be held by the Escrow
Agent until the earlier of (1) the Borrower has repaid the Loan in full, in
which case the Escrow Agent shall deliver the Stock Transfer Forms and the
Certificates to
Guarantor; or (2) the Lender exercises its rights pursuant to Clause (k) in
respect of the Borrower and the UK Subsidiaries in which case the Escrow Agent
shall deliver the Stock Transfer Forms and the Certificates to the
Lender.

     

    Should
the Loan not be repaid in full then the other security granted in favour of the
Lender pursuant to this Clause (h) shall continue in full force and effect until
all amounts due under this Agreement are repaid in full.

     

    In order
to grant and perfect the Lender’s security in respect of the shares in the
Borrower and the UK Subsidiaries the Borrower shall or shall procure that
appropriate UCC-1 Forms, together with any supporting documentation as may be
necessary, are filed with the Nevada Secretary of State.

     

    
      	
              (b)  

            	
              An
      intercompany guarantee between the Borrower, the Guarantor, the UK
      Subsidiaries and NTS Communications, Inc. (“NTS”), a company
      incorporated in Texas, US whose principal executive offices are at 5307 W
      Loop 289, Lubbock, TX 79414 US;

            


    

     

    
      	
              (c)  

            	
              Debentures
      over the entire assets of each of the Borrower and each UK
      Subsidiary.

            


    

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    
      	
              (i)  

            	
              For
      the duration of the Loan the Guarantor
shall:

            


    

     

    
      	
              (a)  

            	
              Preserve
      Mr. Abraham Keinan’s (“Mr. Keinan”) current
      positions in each of the Borrower and each UK Subsidiary (together the
      “Group”) and grant
      Mr. Keinan a veto right on any resolution in the board of directors of
      each member of the Group; and appoint Mr. Keinan as a signatory of each
      member of the Group, thereby Mr. Keinan’s signature shall be required for
      the undertaking of any payment and/or obligation in any amount. Without
      derogating from the generality of the above, Mr. Keinan shall not abuse
      his rights and/or positions as a director of any member of the Group and
      the Group’s affiliates in a manner that may hinder or prevent the Borrower
      from performing the Borrower’s obligations and undertakings under this
      Agreement; In the event Mr. Keinan abuses his foregoing veto right and/or
      positions as a director of any member of the Group and the Group’s
      affiliates in a manner that may hinder or prevent the Borrower from
      performing the Borrower’s obligations and undertakings under this
      Agreement, Mr. Keinan’s aforementioned veto right shall terminate and
      become void.

            


    

     

    
      	
              (b)  

            	
              Provide
      sufficient funds to Lender on a monthly basis to ensure the timely
      payments of Borrower’s monthly interest payments on the Loan, in
      full.

            


    

     

    
      	
              (j)  

            	
              The
      Guarantor covenants that it will appoint an additional director to its
      Board of Directors no later than January 15 2010 and that such appointee
      shall be acceptable to Mr. Keinan.  Until such time as such an
      individual is appointed or until the Loan is repaid in full, Mr. Keinan
      shall have a veto right on any resolution put forth before the Guarantor’s
      Board of Directors. Mr. Keinan shall recommend an appropriate candidate
      (an “Appropriate Candidate”) for such appointment no later than January 2
      2010.  Without derogating from the generality of the above, Mr.
      Keinan shall not abuse his foregoing veto right and/or position as a
      director of the Guarantor in a manner that may hinder or prevent such an
      appointment. In the event Mr. Keinan fails to recommend an Appropriate
      Candidate until January 2 2010, Mr. Keinan’s aforementioned veto right
      shall terminate and become void on January 2 2010. In the event Mr. Keinan
      abuses his foregoing veto right and/or position as a director of the
      Guarantor in a manner that may hinder or prevent such an appointment, Mr.
      Keinan’s aforementioned veto right shall terminate and become void on
      January 15 2010.

            


    

     

    
      	
              (k)  

            	
              The
      occurrence of any of the following events shall constitute an event of
      default under this Agreement ("Event of
      Default"):

            


    

     

    
      	
              (a)  

            	
              the
      Borrower fails to pay on the due date the principal of the Loan (the
      “Principal”);
      or

            


    

     

    
      	
              (b)  

            	
              the
      Borrower fails to pay on the due date any amount, including interest but
      excluding the Principal, payable under this Agreement or the Security
      Documents, and such failure is not remedied to the reasonable satisfaction
      of the Lender within 5 Business Days;
or

            


    

     

    
      	
               
      

            	
              (iii)

            	
              the
      Group, Guarantor or NTS (together the “Obligors”) fails to
      comply with any provision of this Agreement or the Security Documents and
      where capable of remedy, such failure is not remedied to the reasonable
      satisfaction of the Lender within 10 Business Days of the Lender giving
      written notice to the applicable Obligor requiring such Obligor to remedy
      the same; or

            


    

     

    
      	
               
      

            	
              (iv)

            	
              Borrower,
      Auracall, Guarantor or NTS become insolvent;
or

            


    

     

    
      	
               
      

            	 	
              (v)

            	
              an
      administrative or other receiver, administrator, manager or similar
      officer is appointed for the Borrower, Auracall, Guarantor or
      NTS;

            


    

     

    
      	
               
      

            	
              (vi)

            	
              any
      order is made or any effective resolution is passed
  for:

            


    

     

    
      	
               
      

            	
              (a)

            	
              the
      winding up, dissolution or liquidation of the Borrower, Auracall,
      Guarantor or NTS other than for the purpose of a reconstruction or
      amalgamation the terms of which have previously been approved by the
      Lender in writing provided that the Lender’s consent will not be required
      should such a reconstruction or amalgamation be taking place in a
      non-insolvent situation; or

            


    

    
       

      
        	
                 
      

              	
                (b)

              	
                the
      making of an administration order against the Borrower, Auracall,
      Guarantor or NTS; or

              


      

       

    

    
      	
               
      

            	
              (c)

            	
              the
      notice of the appointment of an administrator in respect of the Borrower,
      Auracall, Guarantor or NTS;

            


    

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (vii)

            	
              analogous
      legal or statutory proceedings to those matters specified in Clauses (j)
      (iv) to (vi) (inclusive) under any applicable law in any other
      jurisdiction;

            


    

     

    Then in
any such case and at any time thereafter while such event is continuing the
Lender may by written notice to the Borrower with a copy to the Guarantor
declare the Loan, all interest accrued and all other sums payable by the
Borrower to the Lender under this Agreement to be immediately due and payable
and/or terminate the obligations of the Lender under this
Agreement.

     

    Upon the
occurrence of an Event of Default, Lender may exercise his rights under the
Security Documents with respect to any Obligor at the Lender’s sole
discretion.

     

    
      	
              (l)  

            	
              In
      the event Lender becomes a shareholder of the Borrower or any UK
      Subsidiary, (the “Exercised
      Subsidiaries” and “Exercised Subsidiary”
      means any of them as may be appropriate), then for a period of 3 (Three)
      months (the “Buy Back
      Period”), the Guarantor shall have an irrevocable right to purchase
      back the shares of the Exercised Subsidiaries from the Lender at a
      purchase price equal to the aggregate amount of the outstanding principal,
      interest and any other expenses and costs born by Lender in connection
      with the Loan. During the Buy Back Period the Lender shall operate the
      business of the Exercised Subsidiary in such manner as is consistent with
      its current operations and shall not, without the consent of the Borrower,
      take any extraordinary actions which could reasonably be expected to have
      a materially adverse effect on the business or value of the Exercised
      Subsidiaries.

            


    

     

    
      	
              (m)  

            	
              Once
      the Buy Back Period has ended without the Guarantor exercising his right
      to buy back the shares of the Exercised Subsidiaries, (i) the legal and
      beneficial ownership in the shares of the Exercised Subsidiaries shall
      pass to the Lender and such shares/stock shall be transferred to the
      Lender with full title guarantee (and any rights of pre-emption in respect
      of such shares/stock are hereby waived by the Borrower); (ii) the Lender
      shall be entitled to date and otherwise complete the Stock Transfer Forms
      and take any steps necessary to perfect his title to the shares in the
      relevant Exercised Subsidiary; and (iii) the Guarantor and the Lender
      shall appoint an agreed independent appraiser to perform a valuation of
      the Exercised Subsidies (the “Valuation”).  Any
      positive balance between the value of Lender's shares of the Exercised
      Subsidiaries (to be calculated and determined in accordance with the
      Valuation) and amounts unpaid to the Lender under this Agreement, shall,
      if the relevant Exercised Subsidiary is able do so by way of declaration
      of dividend, be paid to the Borrower annually out of the Exercised
      Subsidiary’s net annual profits.  Such annual payments to the
      Borrower shall not exceed 50% of the Exercised Subsidiary’s net profits
      for that applicable year.  The obligation of the Lender to repay
      any such positive balance shall be reflected by an eight year promissory
      note bearing interest at the London Interbank Offer Rate plus 1% (One Per
      Cent) (the “Promissory
      Note”). Such Promissory Note shall be pre-payable out of any sale
      of the Exercised Subsidiaries or in the event that the Exercised
      Subsidiaries sell any equity to an outside party. Upon the execution of
      the Promissory Note, any obligations that the Lender has to the Borrower
      whether under or in connection with, this Agreement, or the Security
      Documents in respect of amounts over and above amounts due to the Lender
      under this Agreement shall no longer apply and instead be replaced by the
      obligations of the Lender to the Borrower as specified in the Promissory
      Note.

            


    

     

    
      	
              (n)  

            	
              In
      consideration of the Lender entering in to this Agreement at the request
      of the Guarantor, and without derogating from the Borrower’s rights under
      the Promissory Note, the Guarantor hereby grants the Lender an option to
      purchase its entire holding of shares or stock in the Exercised
      Subsidiaries on the following terms (“
Option”):

            


    

     

    
      	
              (a)  

            	
              Exercisable
      at any time after the Buy Back Period and for a period of 24 months
      thereafter;

            


    

     

    
      	
              (b)  

            	
              by
      notice in writing , electronic means or fax to the Guarantor with copy to
      Guarantor's General Counsel;

            


    

     

    
      	
              (c)  

            	
              at
      a purchase price to be calculated and determined in accordance with the
      Valuation which shall apply to the Option mutatis
  mutandis;

            


    

     

    
      	
              (d)  

            	
              subject
      to regulatory and legal requirement under the laws of Nevada, the laws of
      England & Wales and any other applicable law (including, if
      applicable, obtaining the approval of the shareholders of the Guarantor,
      which approval the Guarantor shall use its best endeavors to obtain as
      soon as possible following exercise of the
  Option);

            


    

     

    
      	
              (e)  

            	
              may
      be exercised in respect of some or all of the Exercised Subsidiaries, at
      Lender’s sole discretion;

            


    

     

    
      	
              (f)  

            	
              completion
      of any purchase under the Option shall take place within 48 hours of the
      satisfaction of Clause 1(n)(d) above, on which date the Guarantor shall
      deliver to the Lender duly executed stock transfer forms, or their
      equivalent in the relevant jurisdiction, of the shares the subject of the
      Option, in favour of the Lender or as he may direct, together with the
      relevant share certificates; and the Lender shall deliver to the Guarantor
      the full payment in respect of the purchase of the same calculated as
      specified in Clause 1(n)(c) above.

            


    

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    
      	
              (o)  

            	
              Following
      repayment of the liabilities of the Borrower under this Agreement to the
      Lender in full then the Lender shall, at the request and cost of the
      Borrower execute any such documents as may be necessary for the release or
      reassignment as may be appropriate of any security granted in favour of
      the Lender by any Obligor.

            


    

     

    
      	
              (p)  

            	
              The
      Guarantor confirms that it has obtained a credit facility from Bank Leumi
      (UK) Plc of up to £150,000 (One Hundred and Fifty Thousand Pounds
      Sterling), for general working capital purposes (the “Credit
      Facility”).  The Credit Facility is secured by a bank
      guarantee given to Bank Leumi (UK) by FIBI London. The guarantee has been
      issued by FIBI London on the basis of a deposit in an equivalent amount
      lodged by the Lender with FIBI London (“Lender’s
      Deposit”).  The Guarantor covenants with the Lender to
      repay the Credit Facility no later than May 30 2010 so that the Lender’s
      Deposit can be released to the Lender.  A failure to comply with
      this Clause (po) will constitute an event of
  default.

            


    

     

    
      	
              (q)  

            	
              The
      Guarantor hereby grants the Lender a security interest in the proceeds of
      any sale of its working interest in the capital stock of Xfone 018 Ltd
      (“Xfone 018”) in
      an amount at least equal to the Loan. The Guarantor agrees to file a UCC-1
      Form together with any supporting documentation as may be necessary, in
      favour of the Lender to secure such interest. In addition, Guarantor shall
      or shall procure that appropriate UCC-1 Form, together with any supporting
      documentation as may be necessary, covering any such proceeds, will be
      filed with the Nevada Secretary of State within 3 (Three) days of such
      sale.  The Guarantor further agrees to immediately notify the
      Lender in the event of the sale of its interest in Xfone
    018.

            


    

     

    
      	
              2.  

            	
              MISCELLANEOUS

            


    

     

    
      	
              (a)  

            	
              This
      Agreement shall be binding upon and inure to the benefit of the Borrower
      and the Lender and their respective successors and assigns, except that
      neither party may assign any of its rights or obligations hereunder
      without the prior written consent of the other
  party.

            


    

     

    
      	
              (b)  

            	
              Any
      provision of this Agreement may be amended or waived only if such
      amendment or waiver is in writing and is signed by all
      parties.

            


    

     

    
      	
              (c)  

            	
              No
      failure on the part of the Lender to exercise, and no delay in exercising,
      any right will be deemed as a waiver thereof, nor will any single or
      partial exercise by the Lender of any right preclude any other or future
      exercise thereof or the exercise of any other
  right.

            


    

     

    
      	
              (d)  

            	
              In
      case any of the provisions contained in  this Agreement shall be
      found to be invalid, illegal or unenforceable in any respect under any
      applicable law, the validity, legality and enforceability of the remaining
      provisions contained herein shall not in any way be affected or impaired
      thereby.

            


    

     

    
      	
              (e)  

            	
              This
      Agreement is governed by the laws of the England & Wales and the
      parties submit to the exclusive jurisdiction of the High Court of England
      & Wales.

            


    

     

    


    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly
executed as of the date first above written.

    


    


    Xfone,
Inc.

    


    By: /s/ Itzhak Almog,
Director

    


    


    Swiftnet
Limited

    


    By: /s/ John Burton,
Director

    


    


    Auracall
Limited.

    


    By: /s/ John Burton,
Director

    


    


    Equitalk.co.uk
Limited.

    


    By: /s/ John Burton,
Director

    


    


    Story
Telecom Limited.

    


    By: /s/ John Burton,
Director

    


    


    Iddo
Keinan

    


    By: /s/ Iddo
Keinan

    


    I hereby
confirm my obligations pursuant to Clauses (i) and (j) of this
Agreement.

    


    Abraham
Keinan

    


    By: /s/ Abraham
Keinan

    


    
      
         

      

      
        -6-