Document:

EXHIBIT 10.19

                      SHARES AND WARRANT PURCHASE AGREEMENT

      SHARES  AND  WARRANT  PURCHASE  AGREEMENT  (this  "Agreement")  made as of
February ___, 2004 by and between  Xfone,  Inc a Nevada  corporation  having its
executive  offices  located at  Britannia  House,  960 High Road London N12 9RY,
United  Kingdom (the  "Company"),  and the  purchasers  identified  on Exhibit 1
hereto (each a "Purchaser" and together, the "Purchasers").

      WHEREAS,  each  of  the  Purchasers  has  agreed  (severally  and  not  in
connection  with the  purchase by the other  Purchasers)  to  purchase  from the
Company, and the Company has agreed to sell to each of the Purchasers, shares of
common stock of the Company (the "Shares") described herein; and

      WHEREAS, the Company has agreed to issue to each of the Purchasers certain
warrants to purchase  shares of common  stock of the  Company  (the  "Warrants")
described herein.

      NOW,  THEREFORE,  in  consideration  of the premises and mutual  covenants
herein contained and for other good and valuable consideration,  the receipt and
sufficiency  of which are hereby  acknowledged,  each of the  Purchasers and the
Company agree as follows:

      Section 1. Issuance of Shares and Warrants ("Securities").  Subject to the
terms and conditions of this Agreement,  each Purchaser  agrees,  simultaneously
with the execution and delivery of this Agreement,  to purchase from the Company
the amount of Shares  (the  Common  Shares)  set forth  opposite  to its name in
Exhibit 1 at a purchase price of U.S.  $3.00 per share ("the  purchase  price").
Simultaneously  with the  execution  and  delivery  of this  Agreement  (i) each
Purchaser  is paying the  Purchase  Price set forth on Exhibit 1 opposite to the
name of such  Purchaser by wire transfer of immediately  available  funds to the
Company in accordance with the wire transfer instructions set forth on Exhibit 2
hereto and is executing and  delivering to the Company an  Irrevocable  Proxy in
favor of Guy Nissenson, the President and Chief Executive Officer of the Company
in the form attached hereto as Exhibit 3; (ii) the Company is delivering to each
Purchaser a stock  certificate  evidencing  such  Purchaser's  ownership  of the
number of shares set forth in Exhibit 1 opposite to the name of such  Purchaser.
Simultaneously with the payment of the purchase price, the Company is issuing to
each  Purchaser  Warrants  to  purchase  the amount of Shares of the Company set
forth on Exhibit 1 opposite to the name of such  Purchaser,  such Warrants to be
in the forms  attached  hereto as  Exhibits 4 and 5 ALL OF THE  WARRANTS  SHOULD
CONTAIN THE  LIMITATION  THAT THEY CANNOT BE  EXERCISED  IF THE  EXERCISE  WOULD
CAUSSE  THE HOLDER TO HOLD OVER 4.9% OF THE  COMPANY'S  COMMON  STOCK,  NOT JUST
PLATINUM.  Each A Warrant shall be exercisable at a price of $5.50 per share and
Each  B  Warrant  shall  be   exercisable   at  a  price  of  $3.50  per  share.
Simultaneously  with the execution and delivery of this  Agreement,  the Company
and each Purchaser is executing and delivering a Registration  Rights  Agreement
(the  "Registration  Rights  Agreement")  substantially in the form of Exhibit 6
hereto.  As used herein the term  "Transaction  Documents" means this Agreement,
the  Warrants  and the  Registration  Rights  Agreement,  and  execution of this
agreement  and the  Registration  Rights  Agreement  by each  Purchaser  and the
Company and tender of the purchase price for the Securities by each Purchaser to
the Company is considered the "Closing  Date".  For purposes of this  Agreement,
the term securities  refers to the common shares,  warrants and shares of common
stock underlying the warrants.

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      Section 2. Company Representations and Warranties.  The Company represents
and warrants to each of the Purchasers severally that:

            (a) Due Incorporation. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the respective  jurisdictions of their  incorporation  and have the requisite
corporate  power to own their  properties  and to carry on their business as now
being conducted. The Company and each of its subsidiaries is duly qualified as a
foreign  corporation to do business and is in good standing in each jurisdiction
where the nature of the business  conducted  or property  owned by it makes such
qualification necessary,  other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business,  operations
or financial condition of the Company.

            (b) Outstanding  Stock. All issued and outstanding shares of capital
stock of the Company and each of its  subsidiaries  has been duly authorized and
validly issued and are fully paid and non-assessable.

            (c) Authority;  Enforceability.  This Agreement,  the Warrants,  the
Registration  Agreement and any other  agreements  delivered  together with this
Agreement or in  connection  herewith  have been duly  authorized,  executed and
delivered  by the Company and are valid and binding  agreements  enforceable  in
accordance  with their  terms,  subject to  bankruptcy,  insolvency,  fraudulent
transfer,  reorganization,  moratorium and similar laws of general applicability
relating to or affecting  creditors' rights generally and to general  principles
of equity;  and the Company has full corporate power and authority  necessary to
enter into this Agreement,  the Warrants,  the  Registration  Agreement and such
other  agreements and to perform its  obligations  hereunder and under all other
agreements entered into by the Company relating hereto.

            (d) Outstanding  Rights to Equity. In Schedule 2(d) is a list of the
outstanding rights,  warrants or options to acquire, or instruments  convertible
into or exchangeable  for, or agreements or  understandings  with respect to the
sale or issuance of any shares of common stock or equity of the Company.

            (e) Consents.  No consent,  approval,  authorization or order of any
court,  governmental  agency or body or arbitrator having  jurisdiction over the
Company,  or any of its  affiliates,  the  Amex,  the  National  Association  of
Securities  Dealers,  Inc., Nasdaq,  SmallCap Market, the OTC Bulletin Board nor
the Company's  Shareholders  is required for the execution and compliance by the
Company of its obligations  under this  Agreement,  except as stated herein this
Agreement, and all other agreements entered into by the Company relating hereto,
including,  without limitation, the issuance and sale of the Securities, and the
performance  of the  Company's  obligations  hereunder  and under all such other
agreements.

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            (f) No  Violation  or Conflict.  Assuming  the  representations  and
warranties of the Purchasers herein this Agreement are true and correct, neither
the  issuance and sale of the Shares and  Warrants  nor the  performance  of the
Company's obligations under this Agreement and all other agreements entered into
by the Company relating thereto by the Company will:

                  (i)  violate,  conflict  with,  result  in  a  breach  of,  or
constitute  a default  (or an event which with the giving of notice or the lapse
of time or both would be reasonably  likely to  constitute a default)  under (A)
the  articles of  incorporation,  charter or bylaws of the  Company,  (B) to the
Company's knowledge, any decree, judgment,  order, law, treaty, rule, regulation
or determination applicable to the Company of any court,  governmental agency or
body,  or  arbitrator  having  jurisdiction  over  the  Company  or  any  of its
subsidiaries  or over the  properties  or  assets of the  Company  or any of its
affiliates,  (C) the terms of any bond, debenture, note or any other evidence of
indebtedness,  or any agreement,  stock option or other similar plan, indenture,
lease,  mortgage,  deed of trust or other instrument to which the Company or any
of its  affiliates,  or  subsidiaries is a party, by which the Company or any of
its affiliates or  subsidiaries  is bound,  or to which any of the properties of
the Company or any of its  affiliates  or  subsidiaries  is subject,  or (D) the
terms of any  "lock-up"  or similar  provision  of any  underwriting  or similar
agreement to which the Company,  or any of its affiliates or  subsidiaries  is a
party except the violation, conflict, breach, or default of which would not have
a material adverse effect on the Company; or

                  (ii) result in the creation or imposition of any lien,  charge
or  encumbrance  upon the  Securities  or any of the assets of the Company,  its
subsidiaries or any of its affiliates.

            (g) The Shares and Warrants. The Securities upon issuance:

                  (i) are, or will be, free and clear of any security interests,
liens,  claims or other  encumbrances,  and will be subject to restrictions upon
transfer,  disposition  and resale under the  Securities Act of 1933, as amended
("the Securities Act") and any applicable state securities laws; and

                  (ii) have been, or will be, duly and validly authorized and on
the date of issuance, and upon exercise of the Warrants, the Warrant Shares will
be duly and validly  issued,  fully paid and  nonassessable  (and if  registered
pursuant to the Securities Act, and resold pursuant to an effective registration
statement  will be free trading and  unrestricted,  provided that each Purchaser
complies  with  state and  federal  securities  laws  including  the  prospectus
delivery requirements of the Securities Act and state securities laws); and

                  (iii) will not have been  issued or sold in  violation  of any
preemptive  or other  similar  rights of the  holders of any  securities  of the
Company; and

                  (iv)  will  not  subject  the  holders   thereof  to  personal
liability by reason of being such holders.

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<PAGE>

            (h) Litigation. There is no pending or, to the best knowledge of the
Company,  threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its  affiliates  that would affect the execution by the Company or the
performance  by the Company of its  obligations  under this  Agreement,  and all
other  agreements  entered  into by the  Company  relating  hereto.  There is no
pending or, to the best  knowledge  of the  Company,  threatened  action,  suit,
proceeding or investigation  before any court,  governmental  agency or body, or
arbitrator having  jurisdiction over the Company, or any of its affiliates which
litigation if adversely  determined  could have a material adverse effect on the
Company.

            (i)  Reporting  Company.  The  Company is  subject to the  reporting
requirements  of Section 15(d) of the Securities  Exchange Act (the "1934 Act").
The  Company  has  timely  filed all  reports  ("Reports")  and other  materials
required to be filed there under with the  Securities  and  Exchange  Commission
during the preceding twelve months.

            (j) No Market Manipulation.  The Company has not taken, and will not
take,  directly or indirectly,  any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the  common  stock  of the  Company  to  facilitate  the sale or  resale  of the
Securities or affect the price at which the Securities may be issued or resold.

            (k) Information Concerning Company. The Reports contain all material
information  relating to the Company and its operations and financial  condition
as of their  respective  dates which  information  is  required to be  disclosed
therein. Since the date of the financial statements included in the Reports, and
except as modified in the other written  information or in the Schedules hereto,
there has been no material adverse change in the Company's  business,  financial
condition or affairs not  disclosed  in the Reports.  The Reports do not contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in light of the circumstances when made.

            (l) Stop  Transfer.  The Shares and Warrants,  when issued,  will be
restricted  securities.  The Company will not issue any stop  transfer  order or
other order  impeding  the sale,  resale or  delivery of any of the  Securities,
except as may be required by any applicable  federal or state  securities  laws.
The Company will not issue any stop  transfer or other order  impeding the sale,
resale or  delivery  of the  Securities  unless  contemporaneous  notice of such
instruction is given to the Subscriber.

            (m)  Defaults.  The Company is not in  violation  of its articles of
incorporation or bylaws. The Company is (i) not in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its  properties  are bound or affected,  which default or violation
would have a material  adverse  effect on the Company,  (ii) not in default with
respect to any order of any court, arbitrator or governmental body or subject to
or party to any order of any court or governmental  authority arising out of any
action, suit or proceeding under any statute or other law respecting  antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii) to
its  knowledge  in  violation  of  any  statute,   rule  or  regulation  of  any
governmental  authority which violation would have a material  adverse effect on
the Company.

            (n) No  Integrated  Offering.  Except as disclosed in the  Company's
filings with the Securities and Exchange  Commission,  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 offer of the
Securities  pursuant to this Agreement to be integrated  with prior offerings by
the Company for purposes of the Securities Act. The Company will not conduct any
offering other than the transactions contemplated hereby that will be integrated
with the offer or issuance of the Securities.

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<PAGE>

            (o) No General  Solicitation.  Neither the  Company,  nor any of its
affiliates,  nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general  solicitation or general  advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or sale
of the Securities.

            (p)  Listing.  The  Company's  common  stock  is  quoted  on the OTC
Bulletin Board. The Company has not received any oral or written notice that its
common stock will be delisted  from the OTC  Bulletin  Board nor that its common
stock does not meet all  requirements for the continuation of such quotation and
the Company  satisfies the requirements for the continued  listing of its common
stock on the Bulletin Board.

            (q) No  Undisclosed  Liabilities.  The Company has no liabilities or
obligations which are material,  individually or in the aggregate, which are not
disclosed  in the  Reports  and Other  Written  Information,  other  than  those
incurred in the ordinary course of the Company's  businesses  since December 31,
2002 and which,  individually or in the aggregate,  would reasonably be expected
to have a material adverse effect on the Company's financial condition.

            (r) No Undisclosed Events or Circumstances. Since December 31, 2002,
no event or  circumstance  has occurred or exists with respect to the Company or
its  businesses,  properties,  operations or financial  condition,  that,  under
applicable law, rule or regulation,  requires public  disclosure or announcement
prior to the date  hereof by the  Company  but  which  has not been so  publicly
announced or disclosed in the Reports.

            (s) Capitalization.  The authorized and outstanding capital stock of
the Company as of the date of this  Agreement and the Closing Date are set forth
on  Schedule  2(s).  Except  as set  forth  in the  Reports  and  Other  Written
Information  and Schedule  2(d),  there are no options,  warrants,  or rights to
subscribe to, securities, rights or obligations convertible into or exchangeable
for or giving any right to  subscribe  for any  shares of  capital  stock of the
Company.  All of the outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and nonassessable.

            (t) Dilution.  The Company's  executive  officers and directors have
studied and fully  understand the nature of the Securities being sold hereby and
recognize that they have a potential  dilutive  effect on the interests of other
holders of the Company's  securities.  The board of directors of the Company has
concluded, in its good faith business judgment that such issuance is in the best
interests of the Company.

            (u) Correctness of Representations.  The Company represents that the
foregoing  representations  and  warranties  are true and correct as of the date
hereof in all material respects, will be true and correct as of the Closing Date
in all  material  respects,  and,  unless the  Company  otherwise  notifies  the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date.  The foregoing  representations  and warranties
shall survive the Closing Date for a period of three years.

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<PAGE>

      Section 3. Representations by the Purchasers

            Each of the Purchasers  (severally  and not jointly)  represents and
      warrants to the Company as follows:

            (a)  Investment  Purposes.  The Purchaser  represents to the Company
that the Purchaser is acquiring the Shares and the Warrants for its own account,
for the purpose of investment, and not with a view to the distribution or resale
of any  thereof,  and the  Purchaser  has no  present  plans to  enter  into any
contract,  undertaking,  agreement or arrangement  for any such  distribution or
resale.

            (b) Enforceability. This Agreement constitutes the Purchaser's valid
and legally binding obligation  enforceable in accordance with its terms, except
as  such  enforcement  may be  limited  by  applicable  bankruptcy,  insolvency,
reorganization,  moratorium or other  similar laws,  now or hereafter in effect,
relating to, or affecting the enforcement of, creditors' rights generally.

            (c) Sophistication.  Each Purchaser is a sophisticated investor, and
has such  knowledge and  experience  in financial and business  matters as to be
capable of evaluating the merits and risks of investing in the Company's  Shares
and  receiving  the  Warrants.  Without  limiting the  foregoing,  the Purchaser
represents and warrants that it, he, or she is an "accredited investor," as that
term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended (the "Securities  Act"). The Purchaser has the financial ability to bear
the economic risk of such  Purchaser's  investment  contemplated  hereby and has
adequate  net  worth  and  means  of  providing   for  its  current   needs  and
contingencies  to sustain a complete loss of its  investment and has no need for
liquidity in its investment in the Company.  Each Purchaser  represents  that he
has previously invested in restricted securities.

            (d) Restrictions on Transferability.  The Purchaser  understands and
agrees that (i) the Shares,  the Warrants and the Shares  issuable upon exercise
of the Warrants (the "Securities") have not been registered under the Securities
Act by reason of their  issuance in a transaction  exempt from the  registration
requirements   of  the  Securities   Act,  (ii)  the  Securities  must  be  held
indefinitely  unless a subsequent  disposition  thereof is registered  under the
Securities Act or is exempt from such  registration,  (iii) the Securities  will
bear a legend to such  effect and (iv) the  Company  will make a notation on its
transfer  books  to  such  effect.  Any  such  transfer,   sale,  assignment  or
hypothecation  shall be conditioned upon receipt by the Company by an opinion of
counsel satisfactory to the Company and its counsel, stating that the transferee
is a permitted  transferee  under this Section and that such  transfer  does not
violate the Securities Act or any state securities laws.

            (e) Access to  Information.  The Purchaser had access to information
filed with the SEC.  The  Purchaser  and its  advisers  have been  afforded  the
opportunity   to  ask  questions  of  the  Company   concerning  the  investment
contemplated  hereby and to obtain any additional  information  they have deemed
necessary as a condition to making such investment.

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<PAGE>

      Section 4. Debt;  Issuances of Securities.  No provision of this Agreement
or of any other  document  executed and  delivered by the Company in  connection
with this Agreement restricts, or shall be construed to restrict, in any way the
ability of the Company to incur  indebtedness or to issue capital stock or other
equity  securities (or  securities  convertible  into equity  securities) of the
Company or to grant liens on its property and assets.

            SECTION 5. REISSUANCE OF SECURITIES.  (A)The  Securities may only be
      disposed of in  compliance  with state and  federal  securities  laws.  In
      connection  with any  transfer  of  Securities  other than  pursuant to an
      effective  registration  statement  or Rule 144,  to the  Company or to an
      Affiliate of a Purchaser or in connection with a pledge as contemplated in
      Section 5(b), the Company may require the transferor thereof to provide to
      the  Company  an  opinion  of  counsel  selected  by  the  transferor  and
      reasonably  acceptable  to the  Company,  the form and  substance of which
      opinion and shall be reasonably satisfactory to the Company, to the effect
      that such  transfer  does not  require  registration  of such  transferred
      Securities under the Securities Act. As a condition of transfer,  any such
      transferee  shall  agree  in  writing  to be  bound  by the  terms of this
      Agreement  and shall have the rights of a Purchaser  under this  Agreement
      and the Registration Rights Agreement.

            (b) The Purchasers  agree to the imprinting,  so long as is required
      by  this  Section  5(b),  of a  legend  on any of  the  Securities  in the
      following form:

            THESE  SECURITIES  HAVE NOT BEEN  REGISTERED WITH THE SECURITIES AND
      EXCHANGE COMMISSION OR THE SECURITIES  COMMISSION OF ANY STATE IN RELIANCE
      UPON AN EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED (THE "SECURITIES  ACT"), AND,  ACCORDINGLY,  MAY NOT BE OFFERED OR
      SOLD EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
      SECURITIES  ACT  OR  PURSUANT  TO AN  AVAILABLE  EXEMPTION  FROM,  OR IN A
      TRANSACTION  NOT  SUBJECT  TO,  THE   REGISTRATION   REQUIREMENTS  OF  THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE  STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,
      THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE COMPANY.
      THESE  SECURITIES  MAY BE PLEDGED IN  CONNECTION  WITH A BONA FIDE  MARGIN
      ACCOUNT  WITH A  REGISTERED  BROKER-DEALER  OR OTHER LOAN WITH A FINANCIAL
      INSTITUTION  THAT IS AN  "ACCREDITED  INVESTOR"  AS DEFINED IN RULE 501(a)
      UNDER THE SECURITIES ACT.

            The Company  acknowledges  and agrees that a Purchaser may from time
      to time pledge pursuant to a bona fide margin  agreement with a registered
      broker-dealer  or  grant  a  security  interest  in  some  or  all  of the
      Securities to a financial  institution that is an "accredited investor" as
      defined in Rule 501(a) under the Securities Act and who agrees to be bound
      by the provisions of this Agreement and the Registration  Rights Agreement
      and, if required under the terms of such  arrangement,  such Purchaser may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such a pledge or transfer  would not be subject to approval of the Company
      and no legal  opinion of legal  counsel of the pledgee,  secured  party or
      pledgor  shall be required in  connection  therewith.  Further,  no notice
      shall be required of such pledge. At the appropriate  Purchaser's expense,
      the Company will execute and deliver such  reasonable  documentation  as a
      pledgee  or  secured  party  of  Securities  may  reasonably   request  in
      connection with a pledge or transfer of the Securities,  including, if the
      Securities are subject to registration pursuant to the Registration Rights
      Agreement,   the  preparation  and  filing  of  any  required   prospectus
      supplement  under  Rule  424(b)(3)  under  the  Securities  Act  or  other
      applicable provision of the Securities Act to appropriately amend the list
      of Selling Stockholders thereunder.

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            (c) Certificates  evidencing the Shares and Warrant Shares shall not
      contain any legend  (including the legend set forth in Section 5(b)),  (i)
      while a  registration  statement  (including the  Registration  Statement)
      covering  the resale of such  security is effective  under the  Securities
      Act, or (ii) following any sale of such Shares or Warrant Shares  pursuant
      to Rule 144, or (iii) if such Shares or Warrant  Shares are  eligible  for
      sale under  Rule  144(k),  or (iv) if such  legend is not  required  under
      applicable   requirements  of  the  Securities  Act  (including   judicial
      interpretations and pronouncements issued by the Staff of the Commission).
      The  Company  shall  cause its  counsel  to issue a legal  opinion  to the
      Company's  transfer agent promptly after the Effective Date if required by
      the  Company's  transfer  agent  to  effect  the  removal  of  the  legend
      hereunder.  If all or any portion of a Warrant is exercised at a time when
      there is an  effective  registration  statement to cover the resale of the
      Warrant  Shares,  such Warrant Shares shall be issued free of all legends.
      The Company  agrees that  following the Effective  Date or at such time as
      such legend is no longer  required  under this Section  5(c),  it will, no
      later than three Trading Days following the delivery by a Purchaser to the
      Company or the  Company's  transfer  agent of a  certificate  representing
      Shares or Warrant  Shares,  as the case may be,  issued with a restrictive
      legend  (such date,  the "Legend  Removal  Date"),  deliver or cause to be
      delivered to such  Purchaser a certificate  representing  such  Securities
      that is free from all restrictive  and other legends.  The Company may not
      make any  notation on its  records or give  instructions  to any  transfer
      agent of the Company that enlarge the  restrictions  on transfer set forth
      in this Section.

            In  addition  to such  Purchaser's  other  available  remedies,  the
      Company shall pay to a Purchaser,  in cash, as partial  liquidated damages
      and not as a penalty,  for each $1,000 of Shares or Warrant  Shares (based
      on the  Closing  Price of the  Common  Stock on the Legend  Removal  Date)
      subject  to Section  5(c),  $10 per  Trading  Day  (increasing  to $20 per
      Trading Day five (5) Trading Days after such damages have begun to accrue)
      for each Trading Day after the Legend Removal Date until such  certificate
      is delivered.  Nothing herein shall limit such Purchaser's right to pursue
      actual  damages  for  the  Company's   failure  to  deliver   certificates
      representing any Securities as required by the Transaction Documents,  and
      such Purchaser shall have the right to pursue all remedies available to it
      at law or in equity including,  without  limitation,  a decree of specific
      performance  and/or  injunctive  relief.  In lieu of such daily liquidated
      damages, each Purchaser or assignee holding Securities subject to a Legend
      Removal Failure may, at its option, require the Company to purchase all or
      any portion of the Shares and Warrant  Shares  subject to a Legend Removal
      Failure  held by each  Purchaser or assignee at a price per share equal to
      130% of the  purchase  price of such  Shares and Warrant  Shares  within a
      period of up to twelve months from the Closing Date.

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            Each Purchaser, severally and not jointly with the other Purchasers,
agrees that the removal of the restrictive legend from certificates representing
Securities  as set forth in this  Section  5 is  predicated  upon the  Company's
reliance  that the  Purchaser  will sell any  Securities  pursuant to either the
registration  requirements  of the  Securities  Act,  including  any  applicable
prospectus delivery requirements, or an exemption therefrom.

            Section  6Blackout.  The Company undertakes and covenants that until
the first to occur of (i) the  registration  statement having been effective for
one hundred and eighty  (180)  business  days,  or (ii) until all the Shares and
Warrant Shares have been resold  pursuant to said  registration  statement,  the
Company  will  not  enter  into  any  acquisition,  merger,  exchange  or  other
transaction  that could have the effect of  delaying  the  effectiveness  of any
pending  registration  statement,  causing  an  already  effective  registration
statement to no longer be effective or current.

Section 7. Purchasers' Rights of Participation in Additional Financings From the
date hereof until 12 months after the Closing  Date,  upon any  financing by the
Company of its  Capital  Shares or Capital  Shares  Equivalents  (a  "Subsequent
Financing"),  each Purchaser shall have the right to participate in up to 20% of
such Subsequent Financing (the "Participation Maximum"). At least 5 Trading Days
prior to the closing of the Subsequent  Financing,  the Company shall deliver to
each  Purchaser  a  written  notice  of its  intention  to  effect a  Subsequent
Financing ("Pre-Notice"),  which Pre-Notice shall ask such Purchaser if it wants
to review the details of such financing (such  additional  notice, a "Subsequent
Financing Notice"). Upon the request of a Purchaser,  and only upon a request by
such Purchaser,  for a Subsequent  Financing Notice, the Company shall promptly,
but no later  than 1  Trading  Day after  such  request,  deliver  a  Subsequent
Financing  Notice to such  Purchaser.  The  Subsequent  Financing  Notice  shall
describe in reasonable  detail the proposed terms of such Subsequent  Financing,
the amount of proceeds  intended to be raised  thereunder,  the Person with whom
such  Subsequent  Financing  is proposed to be  effected,  and attached to which
shall be a term sheet or similar document relating thereto. If by 6:30 p.m. (New
York City  time) on the  second  Trading  Day after all of the  Purchasers  have
received the Pre-Notice, notifications by the Purchasers of their willingness to
participate  in  the  Subsequent  Financing  (or to  cause  their  designees  to
participate) is, in the aggregate,  less than the total amount of the Subsequent
Financing,  then the Company may effect the remaining portion of such Subsequent
Financing on the terms and to the Persons set forth in the Subsequent  Financing
Notice.  If the  Company  receives  no notice  from a  Purchaser  as of such 2nd
Trading Day, such Purchaser shall be deemed to have notified the Company that it
does not elect to  participate.  The Company must provide the Purchasers  with a
second Subsequent Financing Notice, and the Purchasers will again have the right
of  participation  set  forth  above in this  Section  7(a),  if the  Subsequent
Financing subject to the initial Subsequent  Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within
60 Trading Days after the date of the initial  Subsequent  Financing  Notice. In
the event the Company receives  responses to Subsequent  Financing  Notices from
Purchasers  seeking to purchase more than the aggregate amount of the Subsequent
Financing,  each such Purchaser  shall have the right to purchase their Pro Rata
Portion (as defined below) of the Participation  Maximum.  "Pro Rata Portion" is
the  ratio  of  (x)  the  Subscription  Amount  of  Securities  purchased  by  a
participating  Purchaser and (y) the sum of the aggregate Subscription Amount of
all participating  Purchasers.  Notwithstanding the foregoing, this Section 7(a)
shall not apply in respect  of the  issuance  of (a)  shares of Common  Stock or
options to employees, officers or directors of the Company pursuant to any stock
or option  plan duly  adopted by a majority of the  non-employee  members of the
Board of Directors of the Company or a majority of the members of a committee of
non-employee  directors  established for such purpose or (b) securities upon the
exercise of or conversion  of any  convertible  securities,  options or warrants
issued  and  outstanding  on the  date of this  Agreement,  provided  that  such
securities have not been amended since the date of this Agreement.

                                       9
<PAGE>

            (b) From the date  hereof  until the  earlier  of (a) such time as a
Purchaser no longer holds any Shares or (b) 12 months after the Closing Date, if
in connection with a Subsequent Financing, the Company or any subsidiary thereof
shall issue any Common Stock or Common Stock Equivalents entitling any person or
entity to acquire  shares of Common Stock at a price per share less than the Per
Share  Purchase  Price  (subject to  adjustment  for  reverse and forward  stock
splits,  stock dividends,  stock combinations and other similar  transactions of
the Common  Stock  that occur  after the date of this  Agreement),  the  Company
shall,  within 3 Trading Days of such  issuance,  issue to such  Purchaser  that
number of additional shares of Common Stock equal to (a) the Subscription Amount
paid by such Purchaser at the Closing divided by the Discounted  Purchase Price,
less (b) the Shares  issued to such  Purchaser  at the Closing  pursuant to this
Agreement and pursuant to this Section 7. The term  "Discounted  Purchase Price"
shall  mean the  amount  actually  paid by third  parties  for a share of Common
Stock. The sale of Common Stock  Equivalents shall be deemed to have occurred at
the time of the  issuance of the Common  Stock  Equivalents  and the  Discounted
Purchase  Price  covered  thereby  shall also  include  the actual  exercise  or
conversion  price thereof at the time of the conversion or exercise (in addition
to the  consideration  per share of Common  Stock  underlying  the Common  Stock
Equivalents  received  by the  Company  upon such sale or issuance of the Common
Stock  Equivalents).  In  the  case  of any  Subsequent  Financing  involving  a
"Variable Rate Transaction" or an "MFN Transaction" (each as defined below), the
Discounted  Purchase Price shall be deemed to be the lowest actual conversion or
exercise  price at which such  securities are converted or exercised in the case
of a Variable Rate Transaction, or the lowest adjustment price in the case of an
MFN Transaction.  If shares are issued for a consideration  other than cash, the
per  share  selling  price  shall be the fair  value  of such  consideration  as
determined  in good faith by the Board of  Directors  of the  Company.  The term
"Variable Rate Transaction" shall mean a transaction in which the Company issues
or sells any debt or equity securities that are convertible  into,  exchangeable
or exercisable for, or include the right to receive  additional shares of Common
Stock either (x) at a conversion,  exercise or exchange rate or other price that
is based upon and/or  varies with the trading  prices of or  quotations  for the
shares of Common  Stock at any time after the  initial  issuance of such debt or
equity securities, or (y) with a conversion,  exercise or exchange price that is
subject to being reset at some  future  date after the initial  issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly  related to the business of the Company or the market for
the Common Stock. The term "MFN  Transaction"  shall mean a transaction in which
the Company issues or sells any securities in a capital  raising  transaction or
series of related  transactions which grants to an investor the right to receive
additional  shares based upon future  transactions  of the Company on terms more
favorable  than those  granted to the such  investor in such  offering.  Nothing
herein  shall  limit a  Purchaser's  right  to  pursue  actual  damages  for the
Company's  failure to deliver Shares hereunder and such Purchaser shall have the
right to pursue  all  remedies  available  to it at law or in equity  including,
without limitation,  a decree of specific  performance and/or injunctive relief.
Notwithstanding  anything to the contrary herein, this Section 7 shall not apply
in  respect  of the  issuance  of (a)  shares  of  Common  Stock or  options  to
employees,  officers or directors of the Company pursuant to any stock or option
plan duly  adopted by a  majority  of the  non-employee  members of the Board of
Directors  of the  Company  or a  majority  of the  members  of a  committee  of
non-employee  directors  established  for such purpose,  (b) securities upon the
exercise of or conversion  of any  convertible  securities,  options or warrants
issued  and  outstanding  on the  date of this  Agreement,  provided  that  such
securities  have not been  amended  since  the  date of this  Agreement,  or (c)
securities in connection with acquisitions or strategic investments  (including,
without  limitation,  any licensing or distribution  arrangements),  the primary
purpose of which is not to raise  capital.  Additionally,  prior to any issuance
hereunder, a Purchaser shall have the right to continuously defer such issuances
to such Purchaser for up to periods of 75 days.

                                       10
<PAGE>

      Section 8. Covenants of the Company. The Company covenants and agrees with
the Subscribers as follows:

            (a) Stop Orders.  The Company will advise the Subscribers,  promptly
after it receives  notice of issuance by the  Commission,  any state  securities
commission or any other  regulatory  authority of any stop order or of any order
preventing or suspending  any offering of any  securities of the Company,  or of
the  suspension  of the  qualification  of the Common  Stock of the  Company for
offering or sale in any  jurisdiction,  or the  initiation of any proceeding for
any such purpose.

            (b) Listing.  The Company shall  promptly  secure the listing of the
shares of Common Stock to be  purchased  hereunder  and the Warrant  Shares upon
each  securities  exchange,  or quotation  system,  if any, upon which shares of
common stock are then listed  (subject to official notice of issuance) and shall
maintain such listing so long as any  Securities  are  outstanding.  The Company
will  maintain the listing of its Common Stock on the American  Stock  Exchange,
Nasdaq SmallCap  Market,  Nasdaq National Market System,  OTC Bulletin Board, or
New York Stock Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock (the "Principal  Market")),  and
will  comply in all  respects  with the  Company's  reporting,  filing and other
obligations  under the bylaws or rules of the Principal  Market,  as applicable.
The  Company  will  provide  the  Subscribers  copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any  Principal  Market.  As of the date of this  Agreement  and the Closing
Date, the Bulletin Board is and will be the Principal Market.

            (c) Market Regulations. The Company shall notify the Commission, the
Principal  Market and applicable  state  authorities,  in accordance  with their
requirements,  if any, of the transactions  contemplated by this Agreement,  and
shall take all other  necessary  action and  proceedings  as may be required and
permitted  by  applicable  law,  rule and  regulation,  for the  legal and valid
issuance of the  Securities  to the  Subscribers  and  promptly  provide  copies
thereof to Subscriber.

            (d) Reporting Requirements. From the Closing Date and until at least
two (2) years after the actual effective date of the Registration Statement, the
Company will (i) comply in all material  respects  with its reporting and filing
obligations under the 1934 Act, and (ii) comply with all requirements related to
any  registration  statement filed pursuant to this Agreement.  The Company will
use its best efforts not to take any action or file any document (whether or not
permitted  by the  Securities  Act or the 1934 Act or the rules there  under) to
terminate or suspend such  registration or to terminate or suspend its reporting
and filing  obligations under said acts until the earlier of two (2) years after
the actual effective date of the Registration Statement or until the registrable
securities have been sold. Until the earlier of the resale of the Shares and the
Warrant  Shares by each  Purchaser  or at least two (2) years after the Warrants
have been  exercised,  the Company  will use its best  efforts to  continue  the
quotation of its Common Stock on the OTC Bulletin Board,  and will comply in all
respects with the Company's  reporting,  filing and other  obligations under the
bylaws or rules of the OTC Bulletin Board.

                                       11
<PAGE>

            (e) Use of Proceeds.  The Purchase Price will be used by the Company
for working capital and/or  investment in equipment  and/or for acquisitions and
business  development,  and may not and will not be used for  accrued and unpaid
officer and director salaries,  payment of financing related debt, redemption of
redeemable notes or equity instruments of the Company nor non-trade  obligations
outstanding on the Closing Date.

            (f) Reservation of Common Stock.  The Company  undertakes to reserve
from its authorized but unissued common stock, at all times that Warrants remain
outstanding,  a number of common  shares  equal to the  amount of common  shares
issuable upon exercise of the Warrants.

            (g) Taxes. From the date of this Agreement until two (2) years after
the Closing Date,  the Company will promptly pay and  discharge,  or cause to be
paid and  discharged,  when due and payable,  all lawful taxes,  assessments and
governmental  charges or levies  imposed upon the income,  profits,  property or
business  of the  Company;  provided,  however,  that any such tax,  assessment,
charge or levy  need not be paid if the  validity  thereof  shall  currently  be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books  adequate  reserves with respect  thereto,  and provided,
further,  that the  Company  will pay all such  taxes,  assessments,  charges or
levies  forthwith  upon the  commencement  of  proceedings to foreclose any lien
which may have attached as security therefore.

            (h) Insurance.  From the date of this Agreement  until two (2) years
after  the  Closing  Date,  the  Company  will keep its  assets  which are of an
insurable  character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company's  line of business,  in amounts  sufficient to prevent
the Company from  becoming a  co-insurer  and not in any event less than 100% of
the insurable value of the property insured; and the Company will maintain, with
financially  sound and reputable  insurers,  insurance against other hazards and
risks and  liability  to persons  and  property  to the extent and in the manner
customary  for  companies in similar  businesses  similarly  situated and to the
extent available on commercially reasonable terms.

            (i) Books and Records. From the date of this Agreement until two (2)
years after the Closing  Date,  the Company  will keep true records and books of
account in which full,  true and correct entries will be made of all dealings or
transactions  in  relation  to its  business  and  affairs  in  accordance  with
generally accepted accounting principles applied on a consistent basis.

                                       12
<PAGE>

            (j) Governmental Authorities.  From the date of this Agreement until
two (2) years after the Closing Date, the Company shall duly observe and conform
in all material respects to all valid  requirements of governmental  authorities
relating to the conduct of its business or to its properties or assets.

            (k) Intellectual Property. From the date of this Agreement until two
(2) years after the Closing Date,  the Company shall  maintain in full force and
effect its corporate existence, rights and franchises and all licenses and other
rights to use  intellectual  property  owned or possessed  by it and  reasonably
deemed to be necessary to the conduct of its business.

            (l) Properties.  From the date of this Agreement until two (2) years
after the Closing  Date,  the Company will keep its  properties  in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements,  additions and
improvements  thereto;  and the  Company  will at all  times  comply  with  each
provision  of all  leases  to which it is a party  or  under  which it  occupies
property if the breach of such provision could  reasonably be expected to have a
material adverse effect.

            (m) Non-Public  Information.  The Company  covenants and agrees that
neither it nor any other Person  acting on its behalf will provide any Purchaser
or Purchasers  agents or counsel with any information  that the Company believes
constitutes   material  non-public   information,   unless  prior  thereto  such
Purchaser,  its  agents,  or  counsel  shall have  executed a written  agreement
regarding  the  confidentiality  and  use of  such  information.  The  Purchaser
understands  and  confirms  that the Company  shall be relying on the  foregoing
representations in effecting transactions in securities of the Company.

            (n) Securities  Laws  Disclosure;  Publicity.  The Company shall, by
8:30 a.m.  Eastern  time on the Trading Day  following  the Closing  Date file a
Current Report on Form 8-K  disclosing  the material  terms of the  transactions
contemplated hereby. Other than as set forth herein, neither the Company nor any
Purchaser  shall  issue any such  press  release  or  otherwise  make any public
disclosure or statement with respect to this agreement unless such disclosure is
required by law, in which case the disclosing  party shall promptly  provide the
other  party  with  prior  notice of such  public  statement  or  communication.
Notwithstanding the foregoing,  the Company shall not publicly disclose the name
of any  Purchaser,  or include the name of any  Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser,  except (i) as required by federal securities laws or
upon request by the  Securities  and Exchange  Commission  and (ii) OTC Bulletin
Board Regulations.  In connection therewith, the Purchasers agree to provide the
Company with articles of organization, minutes of meetings and shareholder lists
as requested by the Company and as required by federal securities laws or as the
Securities and Exchange Commission requests.

                                       13
<PAGE>

      Section  9.  Survival  of  covenants,   agreement,   representations   and
warranties.  All covenants,  agreements,  representations  and  warranties  made
herein and in certificates delivered pursuant hereto shall survive the execution
and delivery of this Agreement and the Warrants and shall continue in full force
and effect in accordance with applicable statutes of limitations.

      Section 10. Entire agreement;  Preamble,  Exhibits and Schedules;  no oral
change.  This  Agreement,  the  Registration  Rights  Agreement and the Warrants
embody the entire  agreement and  understanding  between the Company and each of
the Purchasers  (severally) relating to the subject matter hereof, and supersede
all prior  agreements and  understandings  relating to such subject matter.  The
preamble  to this  Agreement,  Exhibits  and  Schedules  attached  hereto  shall
constitute an integral part of this Agreement. This Agreement may not be changed
orally,  but only by an  agreement in writing  signed by the party  against whom
enforcement of any waiver, change, modification, or discharge is sought.

      Section  11.  Notices.  Any  notice  required  by the  provisions  of this
Agreement  will be  writing  and  will be  deemed  effectively  given:  (a) upon
personal  delivery  to the  party to be  notified;  (b) when  sent by  confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next  business  day; (c) seven (7) days after having been sent by registered
or certified mail, return receipt requested,  postage prepaid;  or (d) three (3)
days after deposit with a nationally  recognized  overnight courier,  specifying
next day delivery,  with written verification of receipt.  Notices shall be sent
to the  addresses  first set forth  above or to such  other  address  as a party
furnishes to other parties in writing.

      Section 12. Law Governing. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York with respect to contracts
executed and performed in the State of New York.

      Section  14.  JURISDICTION.   THE  COMPANY  AND  EACH  OF  THE  PURCHASERS
(SEVERALLY)  CONSENT  THAT ANY LEGAL  ACTION OR  PROCEEDING  AGAINST  IT OR THEM
UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT,  OR ANY OTHER
INSTRUMENT OR DOCUMENT EXECUTED AND DELIVERED IN CONNECTION  HEREWITH,  SHALL BE
BROUGHT  EXCLUSIVELY  IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK
COUNTY OR IN THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF NEW
YORK. THE COMPANY AND EACH OF THE PURCHASERS (SEVERALLY), BY THEIR EXECUTION AND
DELIVERY OF THIS AGREEMENT,  EXPRESSLY AND IRREVOCABLY CONSENT AND SUBMIT TO THE
PERSONAL  JURISDICTION  OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDINGS.
THE  COMPANY  AND  EACH  OF  THE  PURCHASERS  (SEVERALLY)  AGREE  THAT  PERSONAL
JURISDICTION  OVER THEM MAY BE  OBTAINED BY THE  DELIVERY OF A SUMMONS  (POSTAGE
PREPAID) IN  ACCORDANCE  WITH THE  PROVISIONS  OF SECTION 11 OF THIS  AGREEMENT.
ASSUMING DELIVERY OF THE SUMMONS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11
OF THIS  AGREEMENT,  THE COMPANY AND EACH OF THE PURCHASERS  (SEVERALLY)  HEREBY
EXPRESSLY  AND  IRREVOCABLY  WAIVE ANY ALLEGED  LACK OF  PERSONAL  JURISDICTION,
IMPROPER VENUE OF FORUM NON  CONVENIENS OR ANY SIMILAR BASIS.  EACH PARTY HERETO
EXPRESSLY  WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER
THIS  AGREEMENT,  AND AGREES THAT ANY SUCH ACTION OR  PROCEEDING  SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.

                                       14
<PAGE>

      Section 15.  Successors  and Assigns.  All the covenants and provisions of
this  Agreement  shall bind and inure to the  benefit of the  parties  and their
respective  successors and permitted assigns hereunder.  No party may assign any
rights or obligations  hereunder  without the prior written consent of the other
parties and any  purported  assignment  without such  consent  shall be null and
void.

      Section 16.  Amendments and Waivers.  The provisions of this Agreement may
not be amended,  modified or  supplemented,  and waiver or consents to departure
from the  provisions  hereof may not be given  without  the consent of the party
against whom such waiver or consent is sought.

      Section 17. Counterparts.  This Agreement may be executed in any number of
counterparts, and by the parties hereto in separate counterparts,  each of which
so executed  shall be deemed to be an original  and all of which taken  together
shall constitute one and the same agreement.

      Section  18.  Severability.  In the  event  that  any  one or  more of the
provisions contained herein, or the application thereof in any circumstances, is
held   invalid,   illegal  or   unenforceable,   the   validity,   legality  and
enforceability  of  any  such  provisions  in  every  other  respect  and of the
remaining provisions contained herein shall not be affected or impaired thereby.

      Section 19.  Lockup.  The  Purchasers and the insiders of the Company will
not sell shares for a price that is lower than the minimum  price  required  for
listing  on NASDAQ  Small Cap + US$1.00,  until the  Company is listed on NASDAQ
Small Cap or AMEX  exchange,  but for no longer than 120 days from the Effective
Date of the Registration Statement.

      Section  20.  Expenses;  Attorney's  Fees.  Each party  shall bear its own
expenses, including, without limitation, attorneys' fees, in connection with the
execution, delivery and performance of this Agreement.

      Section  21.  Agreement  is  Entire   Contract.   Except  as  specifically
referenced  herein,  this Agreement  constitutes the entire contract between the
parties hereto concerning the subject matter hereof and no party shall be liable
or bound to the  other  in any  manner  by any  warranties,  representations  or
covenants except as specifically set forth herein.  Any previous agreement among
the parties related to the transactions  described herein is superseded  hereby.
The terms and conditions of this Agreement  shall inure to the benefit of and be
binding  upon the  respective  successors  and  assigns of the  parties  hereto.
Nothing in this  Agreement,  express or implied,  is intended to confer upon any
party,  other than the  parties  hereto,  and their  respective  successors  and
assigns, any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided herein.

                                       15
<PAGE>

      Section 22. Independent Nature of Purchasers'  Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers  are in any way acting in concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Document.  Each
Purchaser  shall be  entitled to  independently  protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Purchaser  to be  joined  as an  additional  party  in any  proceeding  for such
purpose.  Each Purchaser has been  represented by its own separate legal counsel
in their review and  negotiation of the Transaction  Documents.  The Company has
elected to provide all Purchasers with the same terms and Transaction  Documents
for the  convenience of the Company and not because it was required or requested
to do so by the Purchasers.

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

----------------------------            ------------------------------
Xfone, Inc.            Date

By:
   ----------------------------
Title:
      -------------------------

                                     CRESTVIEW CAPITAL MASTER LLC

                                     By:
                                        ----------------------------
                                        Name: Richard Levy
                                        Title: Managing Partner

                                        Subscription Amount: $

Address for all notices:
Richard Levy
Crestview Capital Funds
95 Revere Drive,
Suite F Northbrook, IL 60062
Fax: 847-559-5807

                                       16
<PAGE>

                                                                       Exhibit 1

<TABLE>
<CAPTION>

Name and Address                     Name of          Share   Number of     Purchase    Number of    Number of
of Purchaser                    Shares Purchased      Price     Shares       Price      Warrant A    Warrant B
------------                    ----------------      -----     ------       -----      ---------    ---------
<S>                             <C>                   <C>       <C>        <C>          <C>          <C>
Crestview Capital Master LLC         Xfone             $3.00    500,000    $1,500,000     500,000     500,000
</TABLE>

                                       17
<PAGE>

                                                                       Exhibit 2

                           Wire Transfer Instructions

Barclays Bank U.K
Hampstead and Whetstone Business Centre
PO Box 12820
London N20 0WE
United Kingdom
Sort Code: 20-30-19
Account Number: 43691022
Account Name: Xfone, Inc.

                                       18
<PAGE>

                                                                       Exhibit 3

                                IRREVOCABLE PROXY

      KNOW ALL PERSONS BY THESE PRESENTS that the undersigned  does hereby make,
constitute and appoint Guy Nissenson,  its true and lawful attorney,  for it and
in its name,  place and  stead,  to act as its  proxy in  respect  of all of the
Shares of Xfone,  Inc. a Nevada based  company  (hereinafter  referred to as the
"Company"),  which  it now or  hereafter  may own or  hold,  including,  without
limitation,  the right, on its behalf,  to demand the call by any proper officer
of  the  Company  pursuant  to  the  provisions  of  its  by-laws,  articles  of
association,  memorandum of association or other organizational documents and as
permitted  by law  of a  meeting  of its  shareholders  and  at any  meeting  of
shareholders, annual, general or special, to vote for the transaction of any and
all business that may come before such meeting,  or at any adjournment  thereof,
including, without limitation, the right to vote for the sale of all or any part
of the assets of the  Company  and/or the  liquidation  and  dissolution  of the
Company; giving and granting to his said attorney full power and authority to do
and perform  each and every act and thing  whether  necessary or desirable to be
done in and about the  premises,  as fully as it might or could do if personally
present with full power of  substitution,  appointment  and  revocation,  hereby
ratifying and  confirming  all that its said  attorneys  shall do or cause to be
done by virtue hereof.

      This Proxy is given to Guy Nissenson in  consideration  of the performance
of the Shares and Warrant  Purchase  Agreement  dated  ____,  by and between the
undersigned  and other  Purchasers and the Company,  and this Proxy shall not be
revocable or revoked by the undersigned and shall be binding upon his successors
and assigns, provided, however, that this Proxy shall be null and void and shall
have no force and effect, in respect of such Shares (and no other securities) so
sold by the undersigned in an arm's length sale (in good faith) of the Shares to
a third party that is not an Affiliate  (as defined  below) or related  party of
the Lender.

      An "Affiliate"  means (A) an entity in which the  undersigned  owns or has
the right to own  directly or  indirectly  equity and voting  share or any other
kind of  interest or acts as an officer  thereof,  or has the right and power to
direct the policy and management of such company;  or (B) a trust or living will
or trust in which the undersigned is a beneficiary  thereof;  or (C) the spouse,
children,  parents,  and any other family  members up to a fourth  degree of the
undersigned;  or (D) any trustee of the undersigned;  or (E) any other person or
entity which will be subject to the undersigned  instructions in connection with
the ordinary shares so purchased by such person or entity.

      THE UNDERSIGNED  SHALL EXECUTE AND DELIVER SUCH  ADDITIONAL  DOCUMENTS AND
INSTRUMENTS AS THE CORPORATION OR GUY NISSENSON MAY REQUIRE TO CONFIRM THE GRANT
HEREBY, INCLUDING,  WITHOUT LIMITATION,  SUCH INSTRUMENTS AS MAY BE NECESSARY OR
APPROPRIATE UNDER ISRAELI LAW.

<PAGE>

      IN WITNESS WHEREOF,  the undersigned has executed this  Irrevocable  Proxy
this day of February ___, 2004.

                                    Name:
                                          --------------------------

                                    By:
                                          --------------------------
                                          Name:
                                          Title:

<PAGE>

                                                                       Exhibit 4

                                    WARRANT A

THE WARRANT  EVIDENCED OR CONSTITUTED  HEREBY,  AND ALL ORDINARY SHARES ISSUABLE
HEREUNDER,  HAVE  BEEN  AND  WILL  BE  ISSUED  WITHOUT  REGISTRATION  UNDER  THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD,  OFFERED FOR
SALE,  TRANSFERRED,  PLEDGED OR HYPOTHECATED  WITHOUT REGISTRATION UNDER THE ACT
UNLESS  EITHER (i) THE COMPANY HAS  RECEIVED AN OPINION OF COUNSEL,  IN FORM AND
SUBSTANCE   REASONABLY   SATISFACTORY  TO  THE  COMPANY,   TO  THE  EFFECT  THAT
REGISTRATION  IS NOT REQUIRED IN CONNECTION  WITH SUCH  DISPOSITION  OR (ii) THE
SALE OF SUCH SECURITIES HAS BEEN REGISTERED UNDER THE ACT.

                        WARRANT TO PURCHASE COMMON STOCK
                                 OF XFONE, INC.

NO. __

      THIS CERTIFIES  THAT, for value  received,  Crestview  Capital Master LLC,
(the  "HOLDER"),  is  entitled,  subject  to the  terms and  conditions  of this
Warrant, to purchase from Xfone, Inc. a Nevada corporation (the "COMPANY"), at a
price per share as specified  below up to 500,000  Shares,  subject to the terms
and  provisions  of this Warrant (and subject to  adjustment  for stock  splits,
recapitalization events and the like) (the "WARRANT SHARES").

      Terms  used  herein  and not  otherwise  defined  shall  have the  meaning
assigned thereto in the Shares and Warrants Purchase Agreement dated February 2,
2004  between  the  Holder  and the  Company  attached  hereto as Exhibit 1 (the
"AGREEMENT").

      All herein is subject to the  fulfillment  of the terms and  conditions by
the Holder are subject to the full payment of the Shares by the Purchaser in the
Agreement as described herein.

      1. CERTAIN DEFINITIONS.  As used in this Warrant the following terms shall
have the following respective meanings:

      "HSR ACT" means the Hart-Scott-Rodino  Antitrust Improvements Act of 1976,
as amended.

      "REGISTERED  HOLDER"  means any  Holder  in whose  name  this  Warrant  is
registered upon the books and records maintained by the Company.

      "WARRANT" as used herein,  includes this Warrant and any warrant delivered
in substitution or exchange therefore as provided herein.

<PAGE>

2.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      2.1 Due Authorization;  Consents.  All corporate action on the part of the
Company,   its   officers,   directors  and   shareholders   necessary  for  the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and the authorization, issuance, reservation
for  issuance and delivery of all of the Warrant  Shares,  has been taken.  This
Warrant  is a  valid  and  binding  obligation  of the  Company  enforceable  in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy,  insolvency,  moratorium,  reorganization and similar laws affecting
creditors' rights generally and to general equitable  principles.  All consents,
approvals and authorizations  of, and registrations,  qualifications and filings
with, any federal or state governmental agency,  authority or body, or any third
party,  required in connection  with the execution,  delivery and performance of
this Warrant and the consummation of the transactions  contemplated  hereby have
been obtained.

      2.2 Governmental Consents. All consents, approvals, orders, authorizations
or registrations, qualifications, designations, declarations or filings with any
governmental  authority on the part of Company  required in connection  with the
consummation of the transactions contemplated herein have been obtained.

      2.3  Compliance  with  Other  Instruments.  The  execution,  delivery  and
performance  of and  compliance  with this Warrant and the  consummation  of the
transactions  contemplated  hereby will not be in conflict  with or  constitute,
with or without  the  passage of time or the giving of notice or both,  either a
default under the  Memorandum of  Association,  Articles of  Association,  other
constitutive  document,  or any  agreement  or  contract  of the  Company,  or a
violation  of any  statutes,  laws,  regulations  or orders,  or an event  which
results in the creation of any lien, charge or encumbrance upon any asset of the
Company.

3.    EXERCISE OF WARRANT

      3.1.  Subject to compliance  with the terms and conditions of this Warrant
and applicable  securities  laws, this Warrant may be exercised,  in whole or in
part with respect to the  applicable  number of Warrant  Shares,  at an exercise
price (the "Exercise Price") of U.S. $5.50 per Warrant Share.

      3.2 Net Issue Exercise. In lieu of exercising this Warrant, the Holder may
elect to receive  Shares equal to the value of this Warrant if the  registration
statement is not effective after 12 months from the Closing Date (or the portion
thereof being canceled) by surrender of this Warrant at the principal  office of
the Company  together with notice of such  election,  in which event the Company
shall  issue to the  Holder a number of  Shares  computed  using  the  following
formula:

                        X = Y (A-B)

                            -------

                               A

              Where X    =    the  number  of the  Shares to be issued to the
                              Holder.

                    Y    =    the number of the Shares purchasable under this
                              Warrant.

                    A    =    the fair market  value of one Share on the date
                              of determination.

                                       2
<PAGE>

                    B    =    the per share  Exercise  Price (as  adjusted to
                              the date of such calculation).

                        (c) Fair Market  Value.  For purposes of this Section 1,
                          the per share fair  market  value of the Shares  shall
                          mean:

                               (i) If the  Company's  Common  Stock is  publicly
                          traded,  the per share fair market value of the Shares
                          shall be the  average  of the  closing  prices  of the
                          Common Stock as quoted on the Nasdaq  National  Market
                          or the principal exchange on which the Common Stock is
                          listed, or if not so listed then the fair market value
                          shall be the  average of the closing bid prices of the
                          Common Stock as published in The Wall Street  Journal,
                          in each case for the fifteen  trading days ending five
                          trading  days  prior to the date of  determination  of
                          fair market value;

                               (ii)  If the  Company's  Common  Stock  is not so
                          publicly  traded,  the per share fair market  value of
                          the  Shares  shall  be such  fair  market  value as is
                          determined  in good faith by the Board of Directors of
                          the Company after taking into consideration factors it
                          deems  appropriate,   including,  without  limitation,
                          recent sale and offer  prices of the capital  stock of
                          the  Company in  private  transactions  negotiated  at
                          arm's length.

      3.3. (i) The Holder may exercise this Warrant in respect of the applicable
number  of  Warrant  Shares,  at any time or from  time to time by the  delivery
(including, without limitation,  delivery by facsimile) of the form of Notice of
Exercise attached hereto as Exhibit 2 (the "NOTICE OF EXERCISE"),  duly executed
by  the  Holder,  at the  principal  office  of the  Company,  and  as  soon  as
practicable after such date, surrendering:

            (a) this Warrant at the principal office of the Company, and

            (b)  payment,  (i) in cash (by  check)  or by wire  transfer,  of an
amount  equal to the  product  obtained by  multiplying  the number of shares of
Warrant  Shares  being  purchased  upon  such  exercise  by the then  applicable
Exercise  Price,  (and the Warrant Shares shall be issued as soon as practicable
after  five (5) days  commencing  the  payment  day),  except  that if Holder is
subject to HSR Act Restrictions (as defined in Section 3.4 below),  the Exercise
Amount  shall  be paid to the  Company  within  five  (5)  business  days of the
termination of all HSR Act Restrictions  (and the Warrant Shares shall be issued
as soon as  practicable  after  five  (5)  days  commencing  the  payment  day).
Certificates  for shares  purchased  hereunder  shall be delivered to the Holder
within three (3) business  days after the date on which this Warrant  shall have
been exercised as aforesaid. This Warrant shall be deemed to have been exercised
and such  certificate or certificates  shall be deemed to have been issued,  and
the Holder or any other person so designated to be named therein shall be deemed
to have  become a holder of record of such  shares for all  purposes,  as of the
date the Warrant has been  exercised  by payment to the Company of the  Exercise
Price.  If  the  Company  fails  to  deliver  to the  Holder  a  certificate  or
certificates  representing the Warrant Shares pursuant to this Section 3.3(b) by
the close of business on the third business day after the date of exercise, then
the Holder will have the right to rescind such exercise.

                                       3
<PAGE>

            (ii) Provided,  however,  that under no circumstances may the Holder
exercise,  and in no event shall the Company be  obligated to honor any exercise
of this  Warrant  to the  extent the result of such  exercise  and  issuance  of
Warrant  Shares  pursuant  thereto  would result  (after  giving  effect to such
issuance)  in the Holder  owning 4.9% or more of the then  outstanding  Ordinary
Shares of the Company.  To the extent any such exercise is not honored  pursuant
to the foregoing  proviso,  the shares  withheld from such exercise shall remain
available for issuance upon subsequent exercise of this Warrant, subject to such
proviso.

      3.4.  Fractional  Shares. The Company shall pay the Holder cash in lieu of
any  fraction of a share equal to such  fraction  of the  Exercise  Price of one
whole  share of  Warrant  Shares.  No  fractional  shares or scrip  representing
fractional shares shall be issued upon an exercise of this Warrant.

      3.5.  HSR Act.  The  Company  hereby  acknowledges  that  exercise of this
Warrant  by Holder  may  subject  the  Company  and/or  the Holder to the filing
requirements  of the HSR Act and that Holder may be  prevented  from  exercising
this Warrant until the expiration or early  termination  of all waiting  periods
imposed by the HSR Act ("HSR ACT RESTRICTIONS").

      3.6. Partial Exercise;  Effective Date of Exercise. In case of any partial
exercise of this Warrant,  the Company shall cancel this Warrant upon  surrender
hereof and shall  execute  and  deliver a new Warrant of like tenor and date for
the balance of the shares of Warrant Shares purchasable hereunder.  This Warrant
shall be  deemed  to have  been  exercised  immediately  prior  to the  close of
business on the date of its surrender for exercise as provided  above.  However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have  been  exercised  on the  date  immediately  following  the  date of the
expiration  of all HSR Act  Restrictions.  The person  entitled  to receive  the
shares of Warrant Shares issuable upon exercise of this Warrant shall be treated
for all  purposes  as the  holder of  record  of such  shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.

      3.7 Expiration of Warrant.  This Warrant shall expire, with respect to the
applicable  number of Warrant  Shares only, on the earlier to occur of : (a) the
date  that  is  five  (5)  years  following  the  date  of  this  Warrant;   (b)
[intentionally omitted]; (c) The Company can call the Warrants before the end of
the 5 years,  if the  underlying  shares are registered and the closing price of
the Share in the  market  is $12 or  higher  for 20  consecutive  trading  days,
subject to there being an effective  registration  statement and 10 days written
notice to the Holder.

4. VALID ISSUANCE;  TAXES. All shares of Warrant Shares issued upon the exercise
of this Warrant shall be validly issued, fully paid and non-assessable,  and the
Company shall pay all taxes and other  governmental  charges that may be imposed
in respect of the issue or delivery  thereof.  The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer  involved
in the  issuance  of any  certificate  for shares of Warrant  Shares in any name
other than that of the Registered  Holder of this Warrant,  and in such case the
Company  shall not be  required  to issue or deliver  any stock  certificate  or
security  until  such  tax or  other  charge  has  been  paid,  or it  has  been
established to the Company's reasonable satisfaction that no tax or other charge
is due.

                                       4
<PAGE>

5.  ADJUSTMENT  OF  PURCHASE  PRICE AND NUMBER OF  SHARES.  In  addition  to any
adjustment to the Warrant Shares required by the terms of such Warrant Shares in
the Company's  Articles of  Association,  the number of shares of Warrant Shares
issuable  upon  exercise  of this  Warrant  (or any  shares  of  stock  or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Purchase  Price are subject to adjustment  upon  occurrence of the following
events:

      5.1.  Adjustment for Share Splits,  Share  Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Warrant  Shares  issuable  upon exercise of this Warrant
(or any shares of stock or other  securities  at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision  of the Company's  Warrant Shares or Ordinary  Shares.  The Purchase
Price of this Warrant shall be proportionally increased and the number of shares
of Warrant Shares issuable upon exercise of this Warrant (or any shares of stock
or other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Shares.

      5.2.  Adjustment  for  Dividends  or  Distributions  of  Shares  or  Other
Securities or Property.  In case the Company shall make or issue, or shall fix a
record date for the  determination of eligible  holders  entitled to receive,  a
dividend or other distribution with respect to the Warrant Shares (or any shares
of stock or other  securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of retained  earnings),  then, in each such case, the
Holder of this  Warrant on exercise  hereof at any time after the  consummation,
effective  date or record  date of such  dividend or other  distribution,  shall
receive,  in  addition  to the shares of Warrant  Shares (or such other stock or
securities)  issuable  on such  exercise  prior to such date,  and  without  the
payment of  additional  consideration  therefor,  the  securities  or such other
assets of the Company to which such Holder  would have been  entitled  upon such
date if such  Holder  had  exercised  this  Warrant  on the date  hereof and had
thereafter,  during the period from the date hereof to and including the date of
such exercise,  retained such shares and/or all other additional stock available
by it as aforesaid  during such period giving effect to all  adjustments  called
for by this Section

      5.3.  Reclassification.  If the Company, by reclassification of securities
or otherwise,  shall change any of the  securities as to which  purchase  rights
under this Warrant  exist into the same or a different  number of  securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of  securities  as would have been  issuable as the
result of such change with  respect to the  securities  that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefore shall be  appropriately  adjusted,
all subject to further  adjustment  as provided in this Section 5. No adjustment
shall be made pursuant to this Section 5.3 upon any  conversion or redemption of
the Warrant Shares which is the subject of Section 5.5.

                                       5
<PAGE>

      5.4. Adjustment for Capital  Reorganization,  Merger or Consolidation.  In
case of any capital  reorganization  of the capital stock of the Company  (other
than  a  combination,  reclassification,   exchange  or  subdivision  of  shares
otherwise  provided for herein),  or any merger or  consolidation of the Company
with or into another  corporation,  or the sale of all or substantially  all the
assets  of  the  Company  then,  and in  each  such  case,  as a  part  of  such
reorganization,  merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this  Warrant  shall  thereafter  be  entitled  to
receive upon exercise of this Warrant,  during the period  specified  herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization,  merger,  consolidation,  sale or transfer  that a holder of the
shares  deliverable  upon  exercise of this Warrant  would have been entitled to
receive in such reorganization,  consolidation, merger, sale or transfer if this
Warrant  had been  exercised  immediately  before such  reorganization,  merger,
consolidation,  sale or transfer,  all subject to further adjustment as provided
in this Section 5. The foregoing  provisions of this Section 5.4 shall similarly
apply  to  successive  reorganizations,   consolidations,   mergers,  sales  and
transfers and to the stock or securities  of any other  corporation  that are at
the  time  receivable  upon  the  exercise  of this  Warrant.  If the  per-share
consideration  payable to the Holder  hereof for shares in  connection  with any
such transaction is in a form other than cash or marketable securities, then the
value of such  consideration  shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's  Board of Directors)  shall be made in the application of
the  provisions  of this Warrant with respect to the rights and interests of the
Holder after the  transaction,  to the end that the  provisions  of this Warrant
shall be applicable  after that event, as near as reasonably may be, in relation
to any shares or other  property  deliverable  after that event upon exercise of
this Warrant.

6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares  issuable upon exercise of this Warrant,  the
Chief  Financial  Officer  or  Controller  of the  Company  shall  compute  such
adjustment  in  accordance  with  the  terms  of  this  Warrant  and  prepare  a
certificate  setting forth such  adjustment and showing in detail the facts upon
which such adjustment is based,  including a statement of the adjusted  Purchase
Price.  The Company shall  promptly send (by facsimile and by either first class
mail, postage prepaid or overnight  delivery) a copy of each such certificate to
the Holder.

7. LOSS OR MUTILATION.  Upon receipt of evidence reasonably  satisfactory to the
Company of the ownership of and the loss,  theft,  destruction  or mutilation of
this Warrant, and of indemnity  reasonably  satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute  and  deliver in lieu  thereof a new  Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.

8. RESERVATION OF WARRANT SHARES. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery  upon exercise of this Warrant
such number of shares of Warrant  Shares or other shares of capital stock of the
Company as are from time to time  issuable  upon  exercise of this  Warrant and,
from time to time,  will  take all steps  necessary  to amend  its  Articles  of
Association to provide sufficient  reserves of shares of Warrant Shares issuable
upon exercise of this  Warrant.  All such shares shall be duly  authorized,  and
when  issued  upon  such  exercise,  shall be  validly  issued,  fully  paid and
non-assessable,  free and clear of all liens,  security  interests,  charges and
other  encumbrances or restrictions on sale and free and clear of all preemptive
rights,  except  encumbrances  or  restrictions  arising  under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing share certificates
to execute and issue the  necessary  certificates  for shares of Warrant  Shares
upon the exercise of this Warrant.

                                       6
<PAGE>

9.  RESTRICTIONS ON TRANSFER.  The Holder,  by acceptance  hereof,  agrees that,
absent  an  effective  registration  statement  filed  with  the SEC  under  the
Securities  Act of 1933 (the "ACT"),  covering the  disposition  or sale of this
Warrant or the Warrant  Shares issued or issuable  upon  exercise  hereof as the
case may be, and registration or qualification under applicable state securities
laws,  such Holder will not sell,  transfer,  pledge,  or hypothecate any or all
such Warrants or Warrant Shares, unless such transfer is performed in compliance
with the provisions of the Company's  Articles of Association and either (i) the
Company has  received an opinion of counsel,  in form and  substance  reasonably
satisfactory  to the  Company,  to the  effect  that  such  registration  is not
required in connection with such disposition or (ii) the sale of such securities
has been registered under the Act.

10.  COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant,  the Holder
hereby  represents,  warrants and covenants  that any shares of stock  purchased
upon exercise of this Warrant shall be acquired for investment only and not with
a view to, or for sale in connection  with, any distribution  thereof;  that the
Holder has had such  opportunity  as such  Holder has deemed  adequate to obtain
from  representatives  of the Company such information as is necessary to permit
the Holder to evaluate  the merits and risks of its  investment  in the Company;
that the Holder is able to bear the economic  risk of holding such shares as may
be acquired  pursuant to the exercise of this Warrant for an indefinite  period;
that the Holder  understands  that the shares of stock acquired  pursuant to the
exercise of this Warrant will not be registered under the Act (unless  otherwise
required pursuant to exercise by the Holder of the registration  rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within  the  meaning  of Rule 144  under  the Act and that  the  exemption  from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this  Warrant,  subject to any special  treatment by the SEC
for  exercise  of this  Warrant,  and even then will not be  available  unless a
public market then exists for the stock,  adequate  information  concerning  the
Company is then available to the public,  and other terms and conditions of Rule
144 are complied with; and that all stock  certificates  representing  shares of
stock  issued to the Holder  upon  exercise  of this  Warrant  may have  affixed
thereto a legend substantially in the following form:

         THE SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN REGISTERED  UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
         LAWS OF ANY STATE.  THESE  SECURITIES  ARE SUBJECT TO  RESTRICTIONS  ON
         TRANSFERABILITY  AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
         AS PERMITTED UNDER THE ACT AND THE APPLICABLE  STATE  SECURITIES  LAWS,
         PURSUANT TO REGISTRATION OR EXEMPTION  THEREFROM.  INVESTORS  SHOULD BE
         AWARE THAT THEY MAY BE  REQUIRED  TO BEAR THE  FINANCIAL  RISKS OF THIS
         INVESTMENT  FOR AN  INDEFINITE  PERIOD  OF TIME.  THE  ISSUER  OF THESE
         SECURITIES  MAY  REQUIRE AN  OPINION  OF COUNSEL IN FORM AND  SUBSTANCE
         SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED  TRANSFER OR
         RESALE  IS  IN  COMPLIANCE  WITH  THE  ACT  AND  ANY  APPLICABLE  STATE
         SECURITIES LAWS.

                                       7
<PAGE>

11. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company.  In
the absence of  affirmative  action by the Holder to purchase  Warrant Shares by
exercise of this  Warrant no  provisions  of this  Warrant,  and no  enumeration
herein of the rights or  privileges of the Holder hereof shall cause such Holder
hereof to be a shareholder of the Company for any purpose.

12.  REPRESENTATIONS  AND  WARRANTIES BY THE HOLDER.  The Holder  represents and
warrants to the Company as follows:

            (a) This Warrant and the Shares  issuable upon exercise  thereof are
being  acquired for its own account,  for  investment and not with a view to, or
for resale in connection  with,  any  distribution  or public  offering  thereof
within the meaning of the Securities  Act of 1933, as amended (the "Act").  Upon
exercise  __________ of  __________  this  __________  Warrant,  __________  the
__________ Holder shall, if so requested by the Company,  confirm in writing, in
a form satisfactory to the Company,  that the securities  issuable upon exercise
of this  Warrant are being  acquired for  investment  and not with a view toward
distribution or resale.

            (b) The Holder  understands that the Warrant and the Shares have not
been  registered  under  the Act by reason of their  issuance  in a  transaction
exempt from the  registration  and prospectus  delivery  requirements of the Act
pursuant  to  Section  4(2)  thereof,  and that they must be held by the  Holder
indefinitely,  and that the Holder must therefore bear the economic risk of such
investment  indefinitely,  unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration.

            (c) The Holder has such  knowledge  and  experience in financial and
business  matters that it is capable of  evaluating  the merits and risks of the
purchase  of this  Warrant and the Shares  purchasable  pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.

            (d) The Holder is able to bear the economic  risk of the purchase of
the Shares pursuant to the terms of this Warrant.

13. NOTICES. All notices and other communications  hereunder shall be in writing
and shall be given in person,  by registered mail (registered  international air
mail if mailed internationally), by an overnight courier service which obtains a
receipt to  evidence  delivery,  or by  facsimile  transmission  (provided  that
written confirmation of receipt is provided), addressed as set forth below:

If to the Company:        XFONE, Inc.
                          Brittania House
                          960 High Road
                          London N12 9RY
                          United Kingdom

                                       8
<PAGE>

If to the Holder: Attn:   Richard Levy
                          Crestview Capital Funds
                          95 Revere Drive, Suite F
                          Northbrook, IL 60062
                          Fax: 847-559-5807

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

Or such other address as any party may designate to the other in accordance with
the  aforesaid  procedure.  All notices and other  communications  delivered  in
person or by courier  service shall be deemed to have been given as of three (3)
business days after sending thereof, those given by facsimile transmission shall
be deemed given  twenty-four hours following  transmission,  and all notices and
other  communications  sent by  registered  mail (or air mail if the  posting in
international) shall be deemed given seven (7) days after posting.

14.  HEADINGS.  The headings in this Warrant are for purposes of  convenience in
reference only, and shall not be deemed to constitute a part hereof.

15.  GOVERNING  LAW;  JURISDICTION.  Any claim arising under or relating to this
Warrant,  shall be governed by the laws of the State of New York, without regard
to  principles  of conflict of laws.  Each party hereto  consents that any legal
action or proceeding against it under,  arising out of or in any manner relating
to this Warrant shall be brought  exclusively  in the courts of the State of New
York located in New York County or in the United States  District  Court for the
Southern District of New York. Each party hereto expressly waives any right to a
trial by jury in any action or proceeding  under this  Warrant,  and agrees that
any such  action or  proceeding  shall be tried  before a court and not before a
jury.

16. NO  IMPAIRMENT.  The Company  will at all times in good faith  assist in the
carrying  out of all such terms and in the  taking of all such  action as may be
necessary or appropriate in order to protect the rights of the Registered Holder
of this Warrant  against  impairment.  Without  limiting the  generality  of the
foregoing,  the  Company  (a) will not  increase  the par value of any shares of
stock  issuable  upon the  exercise  of this  Warrant  above the amount  payable
therefor  upon  such  exercise,  and (b) will  take all  such  action  as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  non-assessable  shares of Warrant  Shares upon  exercise of this
Warrant.

17. NOTICES OF RECORD DATE. In case:

      17.1. the Company shall take a record of the holders of its Warrant Shares
(or other stock or securities at the time  receivable  upon the exercise of this
Warrant),  for the purpose of  entitling  them to receive any  dividend or other
distribution,  or any right to subscribe  for or purchase any shares of stock of
any class or any other securities or to receive any other right; or

      17.2. of any  consolidation  or merger of the Company with or into another
corporation,  any capital reorganization of the Company, any reclassification of
the share capital of the Company,  or any conveyance of all or substantially all
of the  assets of the  Company to another  corporation  in which  holders of the
Company's  stock  are to  receive  stock,  securities  or  property  of  another
corporation; or

                                       9
<PAGE>

      17.3.  of any  voluntary  dissolution,  liquidation  or  winding-up of the
Company; or

      17.4. of any redemption or conversion of all  outstanding  Ordinary Shares
or Warrant Shares;

then, and in each such case, if applicable, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be,  (i) the date on which a record is to be taken for the  purpose  of such
dividend,  distribution or right, or (ii) the date on which such reorganization,
reclassification,  consolidation, merger, conveyance, dissolution,  liquidation,
winding-up,  redemption or conversion is to take place,  and the time, if any is
to be fixed,  as of which the  holders  of record of  Warrant  Shares,  Ordinary
Shares  or (such  stock or  securities  as at the time are  receivable  upon the
exercise of this Warrant), shall be entitled to exchange their shares of Warrant
Shares,  Ordinary Shares (or such other stock or securities),  for securities or
other  property   deliverable   upon  such   reorganization,   reclassification,
consolidation,  merger, conveyance, dissolution, liquidation or winding-up. Such
notice  shall be  delivered  at least  ten (10) days  prior to the date  therein
specified.

18.  SEVERABILITY.  If any term,  provision,  covenant  or  restriction  of this
Warrant is held by a court of  competent  jurisdiction  to be  invalid,  void or
unenforceable,   the   remainder  of  the  terms,   provisions,   covenants  and
restrictions  of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.

19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of  this  Warrant  may be  executed  by the  parties  hereto  and  delivered  by
facsimile,  and each such executed  counterpart shall be, and shall be deemed to
be, an original instrument.

20. NO  INCONSISTENT  AGREEMENTS.  The Company  will not on or after the date of
this  Warrant  enter into any  agreement  with respect to its  securities  which
prohibits the rights granted to the Holders of this Warrant.  The rights granted
to  the  Holders  hereunder  do not  in  any  way  conflict  with  and  are  not
inconsistent  with the rights  granted to  holders of the  Company's  securities
under any other agreements, except rights that have been waived or lapsed.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       10
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have executed this Warrant as of
____________, 2004.

HOLDER: CRESTVIEW CAPITAL MASTER LLC     XFONE, INC

By:                                      By:
    --------------------------               --------------------------

------------------------------           ------------------------------
Printed Name                             Printed Name

--------------------------               ------------------------------
Title                                    Title

                                       11
<PAGE>

                                    EXHIBIT 1

                                    AGREEMENT

                                       12
<PAGE>

                                    EXHIBIT 2

                               NOTICE OF EXERCISE

                    (To be executed upon exercise of Warrant)

XFONE, INC.                                                  WARRANT NO. __

The  undersigned  hereby  irrevocably  elects to exercise  the right of purchase
represented by the within Warrant  Certificate for, and to purchase  thereunder,
the  securities  of Xfone,  Inc.,  as  provided  for  therein,  and  (check  the
applicable box):

|_|   Tenders herewith payment of the exercise price in full in the form of cash
      or (by check) or by wire transfer in same-day funds in the amount of $ for
      such securities, pursuant to the Warrant.

|_|   Please issue a certificate or certificates for such securities in the name
      of,  and pay any cash for any  fractional  share to  (please  print  name,
      address and social security number):

Name:
                 ----------------------------------------------

Address:
                 ----------------------------------------------

Signature:
                 ----------------------------------------------

Note: The above signature should  correspond  exactly with the name on the first
page of the Warrant Certificate to which this notice is attached as Exhibit 2.

If said  number of  shares  shall not be all the  shares  purchasable  under the
within  Warrant  Certificate,  a new Warrant  Certificate is to be issued in the
name of said  undersigned  for the balance  remaining of the shares  purchasable
there under rounded up to the next higher whole number of shares.

                                       13
<PAGE>

                                                                       Exhibit 5

                                    WARRANT B

THE WARRANT  EVIDENCED OR CONSTITUTED  HEREBY,  AND ALL ORDINARY SHARES ISSUABLE
HEREUNDER,  HAVE  BEEN  AND  WILL  BE  ISSUED  WITHOUT  REGISTRATION  UNDER  THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD,  OFFERED FOR
SALE,  TRANSFERRED,  PLEDGED OR HYPOTHECATED  WITHOUT REGISTRATION UNDER THE ACT
UNLESS  EITHER (i) THE COMPANY HAS  RECEIVED AN OPINION OF COUNSEL,  IN FORM AND
SUBSTANCE   REASONABLY   SATISFACTORY  TO  THE  COMPANY,   TO  THE  EFFECT  THAT
REGISTRATION  IS NOT REQUIRED IN CONNECTION  WITH SUCH  DISPOSITION  OR (ii) THE
SALE OF SUCH SECURITIES HAS BEEN REGISTERED UNDER THE ACT.

                        WARRANT TO PURCHASE COMMON STOCK
                                 OF XFONE, INC.

NO. __

      THIS CERTIFIES  THAT, for value  received,  Crestview  Capital Master LLC,
(the  "HOLDER"),  is  entitled,  subject  to the  terms and  conditions  of this
Warrant, to purchase from Xfone, Inc. a Nevada corporation (the "COMPANY"), at a
price per share as specified  below up to 500,000  Shares,  subject to the terms
and  provisions  of this Warrant (and subject to  adjustment  for stock  splits,
recapitalization events and the like) (the "WARRANT SHARES").

      Terms  used  herein  and not  otherwise  defined  shall  have the  meaning
assigned thereto in the Shares and Warrants Purchase Agreement dated February 2,
2004  between  the  Holder  and the  Company  attached  hereto as Exhibit 1 (the
"AGREEMENT").

      All herein is subject to the  fulfillment  of the terms and  conditions by
the Holder are subject to the full payment of the Shares by the Purchaser in the
Agreement as described herein.

1. CERTAIN  DEFINITIONS.  As used in this Warrant the following terms shall have
the following respective meanings:

      "HSR ACT" means the Hart-Scott-Rodino  Antitrust Improvements Act of 1976,
as amended.

      "REGISTERED  HOLDER"  means any  Holder  in whose  name  this  Warrant  is
registered upon the books and records maintained by the Company.

      "WARRANT" as used herein,  includes this Warrant and any warrant delivered
in substitution or exchange therefore as provided herein.

<PAGE>

2.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      2.1 Due Authorization;  Consents.  All corporate action on the part of the
Company,   its   officers,   directors  and   shareholders   necessary  for  the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and the authorization, issuance, reservation
for  issuance and delivery of all of the Warrant  Shares,  has been taken.  This
Warrant  is a  valid  and  binding  obligation  of the  Company  enforceable  in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy,  insolvency,  moratorium,  reorganization and similar laws affecting
creditors' rights generally and to general equitable  principles.  All consents,
approvals and authorizations  of, and registrations,  qualifications and filings
with, any federal or state governmental agency,  authority or body, or any third
party,  required in connection  with the execution,  delivery and performance of
this Warrant and the consummation of the transactions  contemplated  hereby have
been obtained.

      2.2 Governmental Consents. All consents, approvals, orders, authorizations
or registrations, qualifications, designations, declarations or filings with any
governmental  authority on the part of Company  required in connection  with the
consummation of the transactions contemplated herein have been obtained.

      2.3  Compliance  with  Other  Instruments.  The  execution,  delivery  and
performance  of and  compliance  with this Warrant and the  consummation  of the
transactions  contemplated  hereby will not be in conflict  with or  constitute,
with or without  the  passage of time or the giving of notice or both,  either a
default under the  Memorandum of  Association,  Articles of  Association,  other
constitutive  document,  or any  agreement  or  contract  of the  Company,  or a
violation  of any  statutes,  laws,  regulations  or orders,  or an event  which
results in the creation of any lien, charge or encumbrance upon any asset of the
Company.

3.    EXERCISE OF WARRANT

      3.1.  Subject to compliance  with the terms and conditions of this Warrant
and applicable  securities  laws, this Warrant may be exercised,  in whole or in
part with respect to the  applicable  number of Warrant  Shares,  at an exercise
price (the "Exercise Price") of U.S. $3.50 per Warrant Share.

      3.2 Net Issue Exercise. In lieu of exercising this Warrant, the Holder may
elect to receive  Shares equal to the value of this Warrant if the  registration
statement is not effective after 12 months from the Closing Date (or the portion
thereof being canceled) by surrender of this Warrant at the principal  office of
the Company  together with notice of such  election,  in which event the Company
shall  issue to the  Holder a number of  Shares  computed  using  the  following
formula:

                        X = Y (A-B)

                            -------

                               A

              Where X    =    the  number  of the  Shares to be issued to the
                              Holder.

                    Y    =    the number of the Shares purchasable under this
                              Warrant.

                    A    =    the fair market  value of one Share on the date
                              of determination.

                                       2
<PAGE>

                    B    =    the per share  Exercise  Price (as  adjusted to
                              the date of such calculation).

                        (c) Fair Market  Value.  For purposes of this Section 1,
                          the per share fair  market  value of the Shares  shall
                          mean:

                               (i) If the  Company's  Common  Stock is  publicly
                          traded,  the per share fair market value of the Shares
                          shall be the  average  of the  closing  prices  of the
                          Common Stock as quoted on the Nasdaq  National  Market
                          or the principal exchange on which the Common Stock is
                          listed, or if not so listed then the fair market value
                          shall be the  average of the closing bid prices of the
                          Common Stock as published in The Wall Street  Journal,
                          in each case for the fifteen  trading days ending five
                          trading  days  prior to the date of  determination  of
                          fair market value;

                               (ii)  If the  Company's  Common  Stock  is not so
                          publicly  traded,  the per share fair market  value of
                          the  Shares  shall  be such  fair  market  value as is
                          determined  in good faith by the Board of Directors of
                          the Company after taking into consideration factors it
                          deems  appropriate,   including,  without  limitation,
                          recent sale and offer  prices of the capital  stock of
                          the  Company in  private  transactions  negotiated  at
                          arm's length.

      3.3. (i) The Holder may exercise this Warrant in respect of the applicable
number  of  Warrant  Shares,  at any time or from  time to time by the  delivery
(including, without limitation,  delivery by facsimile) of the form of Notice of
Exercise attached hereto as Exhibit 2 (the "NOTICE OF EXERCISE"),  duly executed
by  the  Holder,  at the  principal  office  of the  Company,  and  as  soon  as
practicable after such date, surrendering:

            (a) this Warrant at the principal office of the Company, and

            (b)  payment,  (i) in cash (by  check)  or by wire  transfer,  of an
amount  equal to the  product  obtained by  multiplying  the number of shares of
Warrant  Shares  being  purchased  upon  such  exercise  by the then  applicable
Exercise  Price,  (and the Warrant Shares shall be issued as soon as practicable
after  five (5) days  commencing  the  payment  day),  except  that if Holder is
subject to HSR Act Restrictions (as defined in Section 3.4 below),  the Exercise
Amount  shall  be paid to the  Company  within  five  (5)  business  days of the
termination of all HSR Act Restrictions  (and the Warrant Shares shall be issued
as soon as  practicable  after  five  (5)  days  commencing  the  payment  day).
Certificates  for shares  purchased  hereunder  shall be delivered to the Holder
within three (3) business  days after the date on which this Warrant  shall have
been exercised as aforesaid. This Warrant shall be deemed to have been exercised
and such  certificate or certificates  shall be deemed to have been issued,  and
the Holder or any other person so designated to be named therein shall be deemed
to have  become a holder of record of such  shares for all  purposes,  as of the
date the Warrant has been  exercised  by payment to the Company of the  Exercise
Price.  If  the  Company  fails  to  deliver  to the  Holder  a  certificate  or
certificates  representing the Warrant Shares pursuant to this Section 3.3(b) by
the close of business on the third business day after the date of exercise, then
the Holder will have the right to rescind such exercise.

                                       3
<PAGE>

            (ii) Provided,  however,  that under no circumstances may the Holder
exercise,  and in no event shall the Company be  obligated to honor any exercise
of,  this  Warrant to the extent the result of such  exercise  and  issuance  of
Warrant  Shares  pursuant  thereto  would result  (after  giving  effect to such
issuance)  in the Holder  owning 4.9% or more of the then  outstanding  Ordinary
Shares of the Company.  To the extent any such exercise is not honored  pursuant
to the foregoing  proviso,  the shares  withheld from such exercise shall remain
available for issuance upon subsequent exercise of this Warrant, subject to such
proviso.

      3.4  Fractional  Shares.  The Company shall pay the Holder cash in lieu of
any  fraction of a share equal to such  fraction  of the  Exercise  Price of one
whole  share of  Warrant  Shares.  No  fractional  shares or scrip  representing
fractional shares shall be issued upon an exercise of this Warrant.

      3.5.  HSR Act.  The  Company  hereby  acknowledges  that  exercise of this
Warrant  by Holder  may  subject  the  Company  and/or  the Holder to the filing
requirements  of the HSR Act and that Holder may be  prevented  from  exercising
this Warrant until the expiration or early  termination  of all waiting  periods
imposed by the HSR Act ("HSR ACT RESTRICTIONS").

      3.6. Partial Exercise;  Effective Date of Exercise. In case of any partial
exercise of this Warrant,  the Company shall cancel this Warrant upon  surrender
hereof and shall  execute  and  deliver a new Warrant of like tenor and date for
the balance of the shares of Warrant Shares purchasable hereunder.  This Warrant
shall be  deemed  to have  been  exercised  immediately  prior  to the  close of
business on the date of its surrender for exercise as provided  above.  However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have  been  exercised  on the  date  immediately  following  the  date of the
expiration  of all HSR Act  Restrictions.  The person  entitled  to receive  the
shares of Warrant Shares issuable upon exercise of this Warrant shall be treated
for all  purposes  as the  holder of  record  of such  shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.

      3.7 Expiration of Warrant.  This Warrant shall expire, with respect to the
applicable  number of Warrant  Shares  only,  on the earlier to occur of: (a) 10
days after the Company  provides notice to the Holder that the Company's  common
stock has been  approved for listing on NASDAQ  Small Cap or the American  Stock
Exchange or 10 days following  effectiveness of the registration statement to be
filed by the company pursuant to the Registration  Rights Agreement  between the
Holder  and the  Company  of even  date  hereof;  (b) the date  that is 375 days
following the date of this Warrant; (c) [intentionally omitted]; (d) The Company
can call the Warrants before the end of the180 days, if the closing price of the
Share in the market is $12 or higher for 20 consecutive trading days, subject to
there being an effective  registration  statement and 10 days written  notice to
the Holder.

4. VALID ISSUANCE;  TAXES. All shares of Warrant Shares issued upon the exercise
of this Warrant shall be validly issued, fully paid and non-assessable,  and the
Company shall pay all taxes and other  governmental  charges that may be imposed
in respect of the issue or delivery  thereof.  The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer  involved
in the  issuance  of any  certificate  for shares of Warrant  Shares in any name
other than that of the Registered  Holder of this Warrant,  and in such case the
Company  shall not be  required  to issue or deliver  any stock  certificate  or
security  until  such  tax or  other  charge  has  been  paid,  or it  has  been
established to the Company's reasonable satisfaction that no tax or other charge
is due.

                                       4
<PAGE>

5.  ADJUSTMENT  OF  PURCHASE  PRICE AND NUMBER OF  SHARES.  In  addition  to any
adjustment to the Warrant Shares required by the terms of such Warrant Shares in
the Company's  Articles of  Association,  the number of shares of Warrant Shares
issuable  upon  exercise  of this  Warrant  (or any  shares  of  stock  or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Purchase  Price are subject to adjustment  upon  occurrence of the following
events:

      5.1.  Adjustment for Share Splits,  Share  Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Warrant  Shares  issuable  upon exercise of this Warrant
(or any shares of stock or other  securities  at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision  of the Company's  Warrant Shares or Ordinary  Shares.  The Purchase
Price of this Warrant shall be proportionally increased and the number of shares
of Warrant Shares issuable upon exercise of this Warrant (or any shares of stock
or other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Shares.

      5.2.  Adjustment  for  Dividends  or  Distributions  of  Shares  or  Other
Securities or Property.  In case the Company shall make or issue, or shall fix a
record date for the  determination of eligible  holders  entitled to receive,  a
dividend or other distribution with respect to the Warrant Shares (or any shares
of stock or other  securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of retained  earnings),  then, in each such case, the
Holder of this  Warrant on exercise  hereof at any time after the  consummation,
effective  date or record  date of such  dividend or other  distribution,  shall
receive,  in  addition  to the shares of Warrant  Shares (or such other stock or
securities)  issuable  on such  exercise  prior to such date,  and  without  the
payment of  additional  consideration  therefor,  the  securities  or such other
assets of the Company to which such Holder  would have been  entitled  upon such
date if such  Holder  had  exercised  this  Warrant  on the date  hereof and had
thereafter,  during the period from the date hereof to and including the date of
such exercise,  retained such shares and/or all other additional stock available
by it as aforesaid  during such period giving effect to all  adjustments  called
for by this Section 5.

      5.3.  Reclassification.  If the Company, by reclassification of securities
or otherwise,  shall change any of the  securities as to which  purchase  rights
under this Warrant  exist into the same or a different  number of  securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of  securities  as would have been  issuable as the
result of such change with  respect to the  securities  that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefore shall be  appropriately  adjusted,
all subject to further  adjustment  as provided in this Section 5. No adjustment
shall be made pursuant to this Section 5.3 upon any  conversion or redemption of
the Warrant Shares which is the subject of Section 5.5.

                                       5
<PAGE>

      5.4. Adjustment for Capital  Reorganization,  Merger or Consolidation.  In
case of any capital  reorganization  of the capital stock of the Company  (other
than  a  combination,  reclassification,   exchange  or  subdivision  of  shares
otherwise  provided for herein),  or any merger or  consolidation of the Company
with or into another  corporation,  or the sale of all or substantially  all the
assets  of  the  Company  then,  and in  each  such  case,  as a  part  of  such
reorganization,  merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this  Warrant  shall  thereafter  be  entitled  to
receive upon exercise of this Warrant,  during the period  specified  herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization,  merger,  consolidation,  sale or transfer  that a holder of the
shares  deliverable  upon  exercise of this Warrant  would have been entitled to
receive in such reorganization,  consolidation, merger, sale or transfer if this
Warrant  had been  exercised  immediately  before such  reorganization,  merger,
consolidation,  sale or transfer,  all subject to further adjustment as provided
in this Section 5. The foregoing  provisions of this Section 5.4 shall similarly
apply  to  successive  reorganizations,   consolidations,   mergers,  sales  and
transfers and to the stock or securities  of any other  corporation  that are at
the  time  receivable  upon  the  exercise  of this  Warrant.  If the  per-share
consideration  payable to the Holder  hereof for shares in  connection  with any
such transaction is in a form other than cash or marketable securities, then the
value of such  consideration  shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's  Board of Directors)  shall be made in the application of
the  provisions  of this Warrant with respect to the rights and interests of the
Holder after the  transaction,  to the end that the  provisions  of this Warrant
shall be applicable  after that event, as near as reasonably may be, in relation
to any shares or other  property  deliverable  after that event upon exercise of
this Warrant.

6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares  issuable upon exercise of this Warrant,  the
Chief  Financial  Officer  or  Controller  of the  Company  shall  compute  such
adjustment  in  accordance  with  the  terms  of  this  Warrant  and  prepare  a
certificate  setting forth such  adjustment and showing in detail the facts upon
which such adjustment is based,  including a statement of the adjusted  Purchase
Price.  The Company shall  promptly send (by facsimile and by either first class
mail, postage prepaid or overnight  delivery) a copy of each such certificate to
the Holder.

7. LOSS OR MUTILATION.  Upon receipt of evidence reasonably  satisfactory to the
Company of the ownership of and the loss,  theft,  destruction  or mutilation of
this Warrant, and of indemnity  reasonably  satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute  and  deliver in lieu  thereof a new  Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.

8. RESERVATION OF WARRANT SHARES. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery  upon exercise of this Warrant
such number of shares of Warrant  Shares or other shares of capital stock of the
Company as are from time to time  issuable  upon  exercise of this  Warrant and,
from time to time,  will  take all steps  necessary  to amend  its  Articles  of
Association to provide sufficient  reserves of shares of Warrant Shares issuable
upon exercise of this  Warrant.  All such shares shall be duly  authorized,  and
when  issued  upon  such  exercise,  shall be  validly  issued,  fully  paid and
non-assessable,  free and clear of all liens,  security  interests,  charges and
other  encumbrances or restrictions on sale and free and clear of all preemptive
rights,  except  encumbrances  or  restrictions  arising  under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing share certificates
to execute and issue the  necessary  certificates  for shares of Warrant  Shares
upon the exercise of this Warrant.

                                       6
<PAGE>

9.  RESTRICTIONS ON TRANSFER.  The Holder,  by acceptance  hereof,  agrees that,
absent  an  effective  registration  statement  filed  with  the SEC  under  the
Securities  Act of 1933 (the "ACT"),  covering the  disposition  or sale of this
Warrant or the Warrant  Shares issued or issuable  upon  exercise  hereof as the
case may be, and registration or qualification under applicable state securities
laws,  such Holder will not sell,  transfer,  pledge,  or hypothecate any or all
such Warrants or Warrant Shares, unless such transfer is performed in compliance
with the provisions of the Company's  Articles of Association and either (i) the
Company has  received an opinion of counsel,  in form and  substance  reasonably
satisfactory  to the  Company,  to the  effect  that  such  registration  is not
required in connection with such disposition or (ii) the sale of such securities
has been registered under the Act.

10.  COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant,  the Holder
hereby  represents,  warrants and covenants  that any shares of stock  purchased
upon exercise of this Warrant shall be acquired for investment only and not with
a view to, or for sale in connection  with, any distribution  thereof;  that the
Holder has had such  opportunity  as such  Holder has deemed  adequate to obtain
from  representatives  of the Company such information as is necessary to permit
the Holder to evaluate  the merits and risks of its  investment  in the Company;
that the Holder is able to bear the economic  risk of holding such shares as may
be acquired  pursuant to the exercise of this Warrant for an indefinite  period;
that the Holder  understands  that the shares of stock acquired  pursuant to the
exercise of this Warrant will not be registered under the Act (unless  otherwise
required pursuant to exercise by the Holder of the registration  rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within  the  meaning  of Rule 144  under  the Act and that  the  exemption  from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this  Warrant,  subject to any special  treatment by the SEC
for  exercise  of this  Warrant,  and even then will not be  available  unless a
public market then exists for the stock,  adequate  information  concerning  the
Company is then available to the public,  and other terms and conditions of Rule
144 are complied with; and that all stock  certificates  representing  shares of
stock  issued to the Holder  upon  exercise  of this  Warrant  may have  affixed
thereto a legend substantially in the following form:

         THE SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN REGISTERED  UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
         LAWS OF ANY STATE.  THESE  SECURITIES  ARE SUBJECT TO  RESTRICTIONS  ON
         TRANSFERABILITY  AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
         AS PERMITTED UNDER THE ACT AND THE APPLICABLE  STATE  SECURITIES  LAWS,
         PURSUANT TO REGISTRATION OR EXEMPTION  THEREFROM.  INVESTORS  SHOULD BE
         AWARE THAT THEY MAY BE  REQUIRED  TO BEAR THE  FINANCIAL  RISKS OF THIS
         INVESTMENT  FOR AN  INDEFINITE  PERIOD  OF TIME.  THE  ISSUER  OF THESE
         SECURITIES  MAY  REQUIRE AN  OPINION  OF COUNSEL IN FORM AND  SUBSTANCE
         SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED  TRANSFER OR
         RESALE  IS  IN  COMPLIANCE  WITH  THE  ACT  AND  ANY  APPLICABLE  STATE
         SECURITIES LAWS.

                                       7
<PAGE>

11. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company.  In
the absence of  affirmative  action by the Holder to purchase  Warrant Shares by
exercise of this  Warrant no  provisions  of this  Warrant,  and no  enumeration
herein of the rights or  privileges of the Holder hereof shall cause such Holder
hereof to be a shareholder of the Company for any purpose.

12.  REPRESENTATIONS  AND  WARRANTIES BY THE HOLDER.  The Holder  represents and
warrants to the Company as follows:

            (a) This Warrant and the Shares  issuable upon exercise  thereof are
being  acquired for its own account,  for  investment and not with a view to, or
for resale in connection  with,  any  distribution  or public  offering  thereof
within the meaning of the Securities  Act of 1933, as amended (the "Act").  Upon
exercise ______ of ____________ this  _____________  Warrant,  _____________ the
____________  Holder shall, if so requested by the Company,  confirm in writing,
in a form  satisfactory  to the  Company,  that  the  securities  issuable  upon
exercise of this Warrant are being  acquired for  investment and not with a view
toward distribution or resale.

            (b) The Holder  understands that the Warrant and the Shares have not
been  registered  under  the Act by reason of their  issuance  in a  transaction
exempt from the  registration  and prospectus  delivery  requirements of the Act
pursuant  to  Section  4(2)  thereof,  and that they must be held by the  Holder
indefinitely,  and that the Holder must therefore bear the economic risk of such
investment  indefinitely,  unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration.

            (c) The Holder has such  knowledge  and  experience in financial and
business  matters that it is capable of  evaluating  the merits and risks of the
purchase  of this  Warrant and the Shares  purchasable  pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.

            (d) The Holder is able to bear the economic  risk of the purchase of
the Shares pursuant to the terms of this Warrant.

13. NOTICES. All notices and other communications  hereunder shall be in writing
and shall be given in person,  by registered mail (registered  international air
mail if mailed internationally), by an overnight courier service which obtains a
receipt to  evidence  delivery,  or by  facsimile  transmission  (provided  that
written confirmation of receipt is provided), addressed as set forth below:

If to the Company:        XFONE, Inc.
                          Britannia House
                          960 High Road
                          London N12 9RY
                          United Kingdom

                                       8
<PAGE>

If to Holder:
                           Attn: Richard Levy
                           Crestview Capital Funds
                           95 Revere Drive, Suite F
                           Northbrook, IL 60062
                           Fax: 847-559-5807

Or such other address as any party may designate to the other in accordance with
the  aforesaid  procedure.  All notices and other  communications  delivered  in
person or by courier  service shall be deemed to have been given as of three (3)
business days after sending thereof, those given by facsimile transmission shall
be deemed given  twenty-four hours following  transmission,  and all notices and
other  communications  sent by  registered  mail (or air mail if the  posting in
international) shall be deemed given seven (7) days after posting.

14.  HEADINGS.  The headings in this Warrant are for purposes of  convenience in
reference only, and shall not be deemed to constitute a part hereof.

15.  GOVERNING  LAW;  JURISDICTION.  Any claim arising under or relating to this
Warrant,  shall be governed by the laws of the State of New York, without regard
to  principles  of conflict of laws.  Each party hereto  consents that any legal
action or proceeding against it under,  arising out of or in any manner relating
to this Warrant shall be brought  exclusively  in the courts of the State of New
York located in New York County or in the United States  District  Court for the
Southern District of New York. Each party hereto expressly waives any right to a
trial by jury in any action or proceeding  under this  Warrant,  and agrees that
any such  action or  proceeding  shall be tried  before a court and not before a
jury.

16. NO  IMPAIRMENT.  The Company  will at all times in good faith  assist in the
carrying  out of all such terms and in the  taking of all such  action as may be
necessary or appropriate in order to protect the rights of the Registered Holder
of this Warrant  against  impairment.  Without  limiting the  generality  of the
foregoing,  the  Company  (a) will not  increase  the par value of any shares of
stock  issuable  upon the  exercise  of this  Warrant  above the amount  payable
therefore  upon  such  exercise,  and (b) will  take all such  action  as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  non-assessable  shares of Warrant  Shares upon  exercise of this
Warrant.

17.   NOTICES OF RECORD DATE. In case:

      17.1. the Company shall take a record of the holders of its Warrant Shares
(or other stock or securities at the time  receivable  upon the exercise of this
Warrant),  for the purpose of  entitling  them to receive any  dividend or other
distribution,  or any right to subscribe  for or purchase any shares of stock of
any class or any other securities or to receive any other right; or

      17.2. of any  consolidation  or merger of the Company with or into another
corporation,  any capital reorganization of the Company, any reclassification of
the share capital of the Company,  or any conveyance of all or substantially all
of the  assets of the  Company to another  corporation  in which  holders of the
Company's  stock  are to  receive  stock,  securities  or  property  of  another
corporation; or

                                       9
<PAGE>

      17.3.  of any  voluntary  dissolution,  liquidation  or  winding-up of the
Company; or

      17.4. of any redemption or conversion of all  outstanding  Ordinary Shares
or Warrant Shares;

then, and in each such case, if applicable, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be,  (i) the date on which a record is to be taken for the  purpose  of such
dividend,  distribution or right, or (ii) the date on which such reorganization,
reclassification,  consolidation, merger, conveyance, dissolution,  liquidation,
winding-up,  redemption or conversion is to take place,  and the time, if any is
to be fixed,  as of which the  holders  of record of  Warrant  Shares,  Ordinary
Shares  or (such  stock or  securities  as at the time are  receivable  upon the
exercise of this Warrant), shall be entitled to exchange their shares of Warrant
Shares,  Ordinary Shares (or such other stock or securities),  for securities or
other  property   deliverable   upon  such   reorganization,   reclassification,
consolidation,  merger, conveyance, dissolution, liquidation or winding-up. Such
notice  shall be  delivered  at least  ten (10) days  prior to the date  therein
specified.

18.  SEVERABILITY.  If any term,  provision,  covenant  or  restriction  of this
Warrant is held by a court of  competent  jurisdiction  to be  invalid,  void or
unenforceable,   the   remainder  of  the  terms,   provisions,   covenants  and
restrictions  of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.

19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of  this  Warrant  may be  executed  by the  parties  hereto  and  delivered  by
facsimile,  and each such executed  counterpart shall be, and shall be deemed to
be, an original instrument.

20. NO  INCONSISTENT  AGREEMENTS.  The Company  will not on or after the date of
this  Warrant  enter into any  agreement  with respect to its  securities  which
prohibits the rights granted to the Holders of this Warrant.  The rights granted
to  the  Holders  hereunder  do not  in  any  way  conflict  with  and  are  not
inconsistent  with the rights  granted to  holders of the  Company's  securities
under any other agreements, except rights that have been waived or lapsed.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       10
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have executed this Warrant as of
____, 2004.

HOLDER: CRESTVIEW CAPITAL MASTER LLC     XFONE, INC

By:                                      By:
    --------------------------               --------------------------

------------------------------           ------------------------------
Printed Name                             Printed Name

--------------------------               ------------------------------
Title                                    Title

                                       11
<PAGE>

                                    EXHIBIT 1

                                    AGREEMENT

                                       12
<PAGE>

                                    EXHIBIT 2

                               NOTICE OF EXERCISE

                    (To be executed upon exercise of Warrant)

XFONE, INC.                                                  WARRANT B NO.  _

The  undersigned  hereby  irrevocably  elects to exercise  the right of purchase
represented by the within Warrant  Certificate for, and to purchase  thereunder,
the  securities  of Xfone,  Inc.,  as  provided  for  therein,  and  (check  the
applicable box):

|_|   Tenders herewith payment of the exercise price in full in the form of cash
      or (by  check) or by wire  transfer  in  same-day  funds in the  amount of
      $____________ for _________ such securities, pursuant to the Warrant.

|_|   Please issue a certificate or certificates for such securities in the name
      of,  and pay any cash for any  fractional  share to  (please  print  name,
      address and social security number):

Name:
                 ----------------------------------------------

Address:
                 ----------------------------------------------

Signature:
                 ----------------------------------------------

Note: The above signature should  correspond  exactly with the name on the first
page of the Warrant Certificate to which this notice is attached as Exhibit 2.

If said  number of  shares  shall not be all the  shares  purchasable  under the
within  Warrant  Certificate,  a new Warrant  Certificate is to be issued in the
name of said  undersigned  for the balance  remaining of the shares  purchasable
there under rounded up to the next higher whole number of shares.

                                       13
<PAGE>

                                                                       EXHIBIT 6

                          REGISTRATION RIGHTS AGREEMENT

      This Registration  Rights Agreement (this "Agreement") is made and entered
into as of February ___,  2004 by and between  Xfone,  Inc a Nevada  corporation
having its executive  offices located at Britannia  House,  960 High Road London
N12 9RY,  United  Kingdom (the  "Company"),  and the  purchasers  identified  on
Exhibit 1 hereto (each a "Purchaser" and together, the "Purchasers").

      This  Agreement  is made  pursuant  to the  Shares and  Warrants  Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").

      The Company and the Purchasers hereby agree as follows:

      1.  Definitions.  Capitalized  terms used and not otherwise defined herein
that are defined in the Purchase  Agreement  shall have the meanings  given such
terms in the Purchase Agreement. As used in this Agreement,  the following terms
shall have the following meanings:

            "Effectiveness   Date"  means,  with  respect  to  the  Registration
      Statement  required  to be filed  hereunder,  the earlier of (a) the 120th
      calendar  day  following  the  Closing  Date as  defined  in the  Purchase
      Agreement.  and (b) the tenth  Trading Day following the date on which the
      Company is notified by the Commission that the Registration Statement will
      not be reviewed or is no longer subject to further review and comments.

            "Effectiveness  Period"  shall have the meaning set forth in Section
      2(a).

            "Exchange  Act" means the  Securities  and Exchange Act of 1934,  as
      amended.

            "Filing  Date"  means,  with respect to the  Registration  Statement
      required  to be filed  hereunder,  the 45th  calendar  day  following  the
      Closing Date as defined in the Purchase Agreement.

            "Holder" or "Holders" means the holder or holders or Purchasers,  as
      the case may be, from time to time of Registrable Securities.

            "Indemnified  Party"  shall  have the  meaning  set forth in Section
      5(c).

            "Indemnifying  Party"  shall have the  meaning  set forth in Section
      5(c).

            "Losses" shall have the meaning set forth in Section 5(a).

            "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.

<PAGE>

            "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 and the Warrant  Shares,
      together with any shares of Common Stock issued or issuable upon any stock
      split,  dividend or other distribution,  recapitalization or similar event
      with respect to the foregoing.

            "Registration  Statement" means the registration statements required
      to be filed hereunder, including (in each case) the Prospectus, amendments
      and  supplements to the  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 the
      registration statement.

            "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.

            "Rule 424" means Rule 424 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.

      2.    Registration.

            (a) On or prior to the Filing Date,  the Company  shall use its best
efforts to  prepare  and file with the  Commission  the  Registration  Statement
covering the resale of all of the  Registrable  Securities for an offering to be
made on a  continuous  basis  pursuant to Rule 415. The  Registration  Statement
required  hereunder  shall be on Form SB-2 and shall  register the resale of the
Shares and the Warrant  Shares.  The Company shall use its best efforts to cause
the Registration  Statement to become effective and remain effective as provided
herein.  The Company shall use its commercially  reasonable efforts to cause the
Registration  Statement to be declared  effective  under the  Securities  Act as
promptly as possible after the filing  thereof,  but in any event not later than
the  Effectiveness  Date, and shall use its commercially  reasonable  efforts to
keep the Registration  Statement continuously effective under the Securities Act
until the  earlier of the date when all  Registrable  Securities  covered by the
Registration  Statement (a) have been sold,  transferred or disposed of pursuant
to the Registration Statement or an exemption from the registration requirements
of the  Securities  Act or (b)  may be  sold by  non-affiliates  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 (the "Effectiveness Period").

                                       2
<PAGE>

            (b) If: a Registration Statement is (i) not filed on or prior to its
Filing  Date the  Company  shall pay to each  Holder an  amount  in  shares,  as
liquidated  damages and not as a penalty,  equal to 1% of the  aggregate  Shares
purchased by such Holder pursuant to the Purchase  Agreement for any Registrable
Securities then held by such Holder;  and if (ii) the Registration  Statement is
not declared effective by the Commission on or before the Effectiveness Date, or
(iii)  after  a  Registration  Statement  is  first  declared  effective  by the
Commission,  it ceases for any reason to remain continuously effective as to all
Registrable  Securities  not sold,  disposed of or  transferred  for which it is
required  to be  effective,  or the  Holders  are not  permitted  to utilize the
Prospectus  therein to resell such  Registrable  Securities  through no fault of
their  own,  for in any  such  cases  twenty  Trading  Days  (which  need not be
consecutive  days) in the aggregate during any 12-month period (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 (ii) the
date which such Trading Day period is exceeded,  or for purposes of clause (iii)
the date on which such twenty Trading Day period is exceeded,  being referred to
as "Event  Date"),  then in  addition  to any other  rights the Holders may have
hereunder  or under  applicable  law: on each monthly  anniversary  of each such
Event  Date (if the  applicable  Event  shall not have been  cured by such date)
until the  applicable  Event is cured or no more  than a total of twelve  months
from the Closing Date, the Company shall pay to each Holder an amount in shares,
as liquidated damages and not as a penalty,  equal to 2% of the aggregate Shares
owned by such Holder  pursuant to the  Purchase  Agreement  for any  Registrable
Securities  then held by such Holder no more than a total of twelve  months from
the Closing  date.  In no way will the Company pay more than 2% per month if the
Company misses both the Filing Date and Effective  Date. The liquidated  damages
pursuant to the terms hereof shall apply on a pro-rata  basis for any portion of
a month prior to the cure of an Event.

      3.    Registration Procedures

            i.  In  connection  with  the  Company's  registration   obligations
            hereunder, the Company shall:

            (a) Not less  than  five  Trading  Days  prior to the  filing of the
Registration  Statement or any related Prospectus or any amendment or supplement
thereto, and subject to the Purchase Agreement (i) furnish to the Holders copies
of all such documents proposed to be filed (including documents  incorporated or
deemed  incorporated by reference to the extent requested by such Person and not
available on the EDGAR system),  which documents will be provided for the review
of such  Holders,  and (ii)  cause  its  officers  and  directors,  counsel  and
independent  certified public  accountants to respond to such inquiries as shall
be necessary,  in the reasonable opinion of respective counsel of the Company to
conduct a reasonable investigation within the meaning of the Securities Act. The
Company shall not file the Registration  Statement or any such Prospectus or any
amendments  or  supplements  thereto to which the  Holders of a majority  of the
Registrable  Securities  shall reasonably  object in good faith.  Should Holders
object,  all  liquidated  damages  and/or  penalties  set forth  herein shall be
waived.  For purposes of this  paragraph  objection by Holders of any disclosure
required to be made under  Federal  Securities  laws as  determined by Company's
counsel shall not be deemed to be in good faith.

                                       3
<PAGE>

            (b) (i)  Prepare  and file  with  the  Commission  such  amendments,
including  post-effective  amendments,  to the  Registration  Statement  and the
Prospectus  used  in  connection  therewith  as may be  necessary  to  keep  the
Registration  Statement  continuously effective as to the applicable Registrable
Securities for the Effectiveness Period; (ii) cause the related Prospectus to be
amended  or  supplemented  by  any  required  Prospectus  supplement,  and as so
supplemented  or  amended to be filed  pursuant  to Rule 424;  (iii)  respond as
promptly as reasonably possible, and attempt in good faith to respond within ten
Trading Days, to any comments  received from the Commission  with respect to the
Registration  Statement or any amendment  thereto and, as promptly as reasonably
possible,  upon  request,  provide its counsel true and  complete  copies of all
correspondence   from  and  to  the  Commission  relating  to  the  Registration
Statement;  and (iv) comply in all material  respects with the provisions of the
Securities Act and the Exchange Act with respect to the Registration Statement.

            (c) Notify the  Holders of  Registrable  Securities  as  promptly as
reasonably  possible  (and,  in the case of  (i)(A)  below,  not less  than five
trading Days prior to such filing) and (if requested by any such Person) confirm
such notice in writing  promptly  following  the day (i)(A) when a Prospectus or
any  Prospectus  supplement  or  post-effective  amendment  to the  Registration
Statement is proposed to be filed; (B) when the Commission  notifies the Company
whether there will be a "review" of the Registration  Statement and whenever the
Commission comments in writing on the Registration  Statement (the Company shall
upon request provide true and complete copies thereof and all written  responses
thereto  to each of the  Holders);  and (C)  with  respect  to the  Registration
Statement or any post-effective  amendment,  when the same has become effective;
(ii) of any request by the Commission or any other Federal or state governmental
authority during the period of  effectiveness of the Registration  Statement for
amendments or  supplements  to the  Registration  Statement or Prospectus or for
additional  information;  (iii) of the issuance by the  Commission  or any other
federal  or state  governmental  authority  of any  stop  order  suspending  the
effectiveness  of  the  Registration  Statement  covering  any  or  all  of  the
Registrable  Securities or the initiation of any  Proceedings  for that purpose;
(iv) of 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 (v) of the occurrence of any
event or passage of time that makes the  financial  statements  included  in the
Registration Statement ineligible for inclusion therein or any statement made in
the 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 the  Registration  Statement,  Prospectus  or other
documents so that, in the case of the Registration  Statement or the 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.

                                       4
<PAGE>

            (d) Use its  commercially  reasonable  efforts to avoid the issuance
of,  or, if  issued,  obtain  the  withdrawal  of (i) any order  suspending  the
effectiveness  of the  Registration  Statement,  or (ii) any  suspension  of the
qualification  (or  exemption  from  qualification)  of any  of the  Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.

            (e) Furnish to each Holder upon request,  without  charge,  at least
one conformed copy of the  Registration  Statement and each  amendment  thereto,
including  financial  statements and schedules,  all documents  incorporated  or
deemed to be incorporated  therein by reference to the extent  requested by such
Holder, and all exhibits to the extent requested by such Holder (including those
previously  furnished or incorporated by reference) promptly after the filing of
such documents with the Commission.

            (f) Promptly deliver to each Holder,  without charge, the Prospectus
or  Prospectuses  (including  each form of  prospectus)  and each  amendment  or
supplement  thereto as such Holder may  reasonably  request in  connection  with
resales by the Holder of Registrable Securities.  The Company hereby consents to
the use of such  Prospectus and each amendment or supplement  thereto by each of
the selling  Holders in connection with the offering and sale of the Registrable
Securities  covered by such Prospectus and any amendment or supplement  thereto,
except after the giving of any notice pursuant to Section 3(c).

            (g) Prior to any resale of Registrable  Securities by a Holder,  use
its commercially reasonable efforts to register or qualify or cooperate with the
selling  Holders  in  connection  with the  registration  or  qualification  (or
exemption from the registration or qualification) of such Registrable Securities
for the  resale  by the  Holder  under the  securities  or Blue Sky laws of such
jurisdictions  within the United  States as any Holder  reasonably  requests  in
writing,   to  keep  each  such  registration  or  qualification  (or  exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts  or  things  reasonably   necessary  to  enable  the  disposition  in  such
jurisdictions  of  the  Registrable   Securities  covered  by  the  Registration
Statement; provided, that the Company shall not be required to qualify generally
to do business in any jurisdiction  (i) where it is not then so qualified,  (ii)
that would  subject the  Company to any  material  tax in any such  jurisdiction
where it is not then so subject or (iii) that would  require the Company to file
a general consent to service of process in any such jurisdiction.

            (h) If  requested  by the  Holders,  cooperate  with the  Holders to
facilitate  the timely  preparation  and delivery of  certificates  representing
Registrable  Securities  to  be  delivered  to  a  transferee  pursuant  to  the
Registration  Statement,  which  certificates  shall  be  free,  to  the  extent
permitted by the Purchase Agreement,  of all restrictive  legends, and to enable
such Registrable  Securities to be in such  denominations and registered in such
names  as any  such  Holders  may  request  so  long as  such  transfers  are in
compliance with federal and state securities laws.

                                       5
<PAGE>

            (i)  Upon  the  occurrence  of any  event  contemplated  by  Section
3(c)(v), as promptly as reasonably possible,  prepare a supplement or amendment,
including  a  post-effective  amendment,  to  the  Registration  Statement  or a
supplement to the related  Prospectus or any document  incorporated or deemed to
be incorporated  therein by reference,  and file any other required  document so
that,  as  thereafter  delivered,  neither the  Registration  Statement nor such
Prospectus will contain an untrue  statement of a material fact or omit 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.  If the Company  notifies the Holders in accordance with clauses
(ii)  through  (v) of Section  3(c) above to suspend  the use of any  Prospectus
until the requisite  changes to such Prospectus have been made, then the Holders
shall  suspend  use of  such  Prospectus.  The  Company  will  use  commercially
reasonable  efforts to ensure that the use of the  Prospectus  may be resumed as
promptly as is practicable.  The Company shall be entitled to exercise its right
under this Section 3(i) to suspend the availability of a Registration  Statement
and Prospectus, subject to the payment of liquidated damages pursuant to Section
2(b), for a period not to exceed 60 days (which need not be consecutive days).

            (j)  Comply  with  all  applicable  rules  and  regulations  of  the
Commission.

            (k) The Company may require  each  selling  Holder to furnish to the
Company a  certified  statement  as to the  number  of  shares  of Common  Stock
beneficially  owned by such Holder and,  the Person  thereof that has voting and
dispositive  control over the Shares.  It shall be a condition  precedent to the
obligations of the Company to take any action pursuant to this  agreement,  that
each of the Holders shall furnish to the Company the information  regarding them
specified  immediately  above,  and  as to  the  Registrable  Securities  of any
particular  Holder,  that such Holder respond to any specific  written  comments
from the SEC with respect to such Holder.

            4.  Registration  Expenses.  All fees and  expenses  incident to the
performance  of or compliance  with this Agreement by the Company shall be borne
by the Company whether or not any Registrable  Securities are sold,  disposed of
or transferred  pursuant to the  Registration  Statement.  The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including,  without limitation,  fees and expenses
(A) with respect to filings required to be made with the Trading Market on which
the  Common  Stock  is then  listed  for  trading,  and (B) in  compliance  with
applicable  state  securities  or  Blue  Sky  laws),   (ii)  printing   expenses
(including,   without   limitation,   expenses  of  printing   certificates  for
Registrable   Securities  and  of  printing  prospectuses  if  the  printing  of
prospectuses  is  reasonably  requested  by the  holders  of a  majority  of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses,  (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance,  if the Company so desires such
insurance,  and (vi) fees and  expenses  of all other  Persons  retained  by the
Company in connection with the consummation of the transactions  contemplated by
this  Agreement.  In addition,  the Company shall be responsible  for all of its
internal   expenses   incurred  in  connection  with  the  consummation  of  the
transactions contemplated by this Agreement (including,  without limitation, all
salaries  and  expenses  of its  officers  and  employees  performing  legal  or
accounting  duties),  the expense of any annual  audit and the fees and expenses
incurred in  connection  with the listing of the  Registrable  Securities on any
securities  exchange as required  hereunder.  All selling  expenses  relating to
securities  registered  by the  Holders  shall be borne by the  Holders  of such
securities.

                                       6
<PAGE>

      5.    Indemnification

            (a)   Indemnification   by   the   Company.   The   Company   shall,
      notwithstanding  any  termination  of this  Agreement,  indemnify and hold
      harmless  each Holder,  the officers,  directors,  agents and employees of
      each of them, each Person who controls any such Holder (within the meaning
      of Section 15 of the Securities Act or Section 20 of the Exchange Act) and
      the officers,  directors,  agents and  employees of each such  controlling
      Person,  to the fullest  extent  permitted  by  applicable  law,  from and
      against  any  and  all  losses,  claims,   damages,   liabilities,   costs
      (including,  without limitation,  reasonable attorneys' fees) and expenses
      (collectively,  "Losses"),  as incurred,  to the extent  arising out of or
      relating  to any untrue or alleged  untrue  statement  of a material  fact
      contained in the  Registration  Statement,  any  Prospectus or any form of
      prospectus or in any amendment or supplement thereto or in any preliminary
      prospectus,  or arising  out of or  relating  to any  omission  or alleged
      omission of a material fact required to be stated  therein or necessary to
      make the  statements  therein  (in the case of any  Prospectus  or form of
      prospectus  or supplement  thereto,  in light of the  circumstances  under
      which  they  were   made)  not   misleading,   except  in  the   following
      circumstances:  The Company  shall not  indemnify  or hold  harmless  each
      Holder if (1) such untrue or alleged  untrue  statements  or omissions are
      based upon  information  regarding such Holder furnished in writing to the
      Company by such Holder, or (2) in the case of an occurrence of an event of
      the type specified in Section  3(c)(ii)-(v),  the use by such Holder of an
      outdated or  defective  prospectus  after the Company  has  notified  such
      Holder in writing that the  Prospectus  is outdated or defective and prior
      to the receipt by such Holder of the Advice  contemplated in Section 6(d).
      The Company shall notify the Holders promptly of the  institution,  threat
      or assertion of any Proceeding of which the Company is aware in connection
      with the transactions contemplated by this Agreement.

            (b) Indemnification by Holders. Each Holder shall, severally and not
      jointly, indemnify and hold harmless the Company, its directors, officers,
      agents,  and employees,  and each Person who controls the Company  (within
      the  meaning  of Section 15 of the  Securities  Act and  Section 20 of the
      Exchange Act), and the  directors,  officers,  agents or employees of such
      controlling  Persons,  to the fullest extent  permitted by applicable law,
      from and against all Losses, as incurred,  to the extent arising out of or
      based  upon:  (x) such  Holder's  failure  to comply  with the  prospectus
      delivery  requirements  of the Securities Act or (y) any untrue or alleged
      untrue  statement  of  a  material  fact  contained  in  any  Registration
      Statement, any Prospectus,  or any form of prospectus, or in any amendment
      or supplement thereto or in any preliminary prospectus,  or arising out of
      or  relating  to any  omission  or alleged  omission  of a  material  fact
      required to be stated therein or necessary to make the statements  therein
      not misleading to the extent, but only to the extent,  that such untrue or
      alleged statement or omission is contained in any information so furnished
      in writing by such Holder to the Company for inclusion in such  Prospectus
      or to the extent that in the case of an occurrence of an event of the type
      specified in Section  3(c)(ii)-(v),  the use by such Holder of an outdated
      or  defective  Prospectus  after the Company has  notified  such Holder in
      writing  that the  Prospectus  is outdated or  defective  and prior to the
      receipt by such Holder of the Advice  contemplated  in Section 6(c). In no
      event shall the  liability of any selling  Holder  hereunder be greater in
      amount than the dollar amount of the net proceeds  received by such Holder
      upon  the  sale  of  the  Registrable   Securities  giving  rise  to  such
      indemnification obligation.

                                       7
<PAGE>

            (c) Conduct of Indemnification  Proceedings. If any Proceeding shall
      be brought or asserted against any Person entitled to indemnity  hereunder
      (an "Indemnified Party"), such Indemnified Party shall promptly notify the
      Person  from  whom  indemnity  is sought  (the  "Indemnifying  Party")  in
      writing,  and the  Indemnifying  Party  shall have the right to assume the
      defense   thereof,   including  the   employment  of  counsel   reasonably
      satisfactory  to the  Indemnified  Party and the  payment  of all fees and
      expenses incurred in connection with defense thereof;  provided,  that the
      failure of any Indemnified Party to give such notice shall not relieve the
      Indemnifying  Party of its  obligations  or  liabilities  pursuant to this
      Agreement,  except  (and  only) to the  extent  that it  shall be  finally
      determined by a court of competent  jurisdiction  (which  determination is
      not  subject to appeal or further  review)  that such  failure  shall have
      prejudiced the Indemnifying Party.

            An Indemnified Party shall have the right to employ separate counsel
      in any such Proceeding and to participate in the defense thereof,  but the
      fees  and  expenses  of  such  counsel  shall  be at the  expense  of such
      Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
      in writing to pay such fees and expenses; (2) the Indemnifying Party shall
      have  failed  promptly  to assume the  defense of such  Proceeding  and to
      employ counsel  reasonably  satisfactory to such Indemnified  Party in any
      such  Proceeding;  or  (3)  the  named  parties  to  any  such  Proceeding
      (including any impleaded  parties) include both such Indemnified Party and
      the Indemnifying Party, and such Indemnified Party shall have been advised
      by counsel  that a  conflict  of  interest  is likely to exist if the same
      counsel  were to represent  such  Indemnified  Party and the  Indemnifying
      Party (in which case, if such Indemnified  Party notifies the Indemnifying
      Party in writing that it elects to employ separate  counsel at the expense
      of the Indemnifying Party, the Indemnifying Party shall not have the right
      to assume the defense  thereof and the reasonable fees and expenses of one
      separate counsel shall be at the expense of the Indemnifying  Party).  The
      Indemnifying  Party  shall not be liable  for any  settlement  of any such
      Proceeding  affected without its written consent,  which consent shall not
      be unreasonably  withheld.  No Indemnifying Party shall, without the prior
      written  consent of the  Indemnified  Party,  effect any settlement of any
      pending  Proceeding in respect of which any Indemnified  Party is a party,
      unless  such  settlement   includes  an  unconditional   release  of  such
      Indemnified Party from all liability on claims that are the subject matter
      of such Proceeding.

            All reasonable fees and expenses of the Indemnified Party (including
      reasonable  fees and expenses to the extent  incurred in  connection  with
      investigating  or  preparing  to defend  such  Proceeding  in a manner not
      inconsistent with this Section) shall be paid to the Indemnified Party, as
      incurred,  within  ten  Trading  Days of  written  notice  thereof  to the
      Indemnifying  Party;  provided,  that the Indemnified Party shall promptly
      reimburse  the  Indemnifying  Party  for  that  portion  of such  fees and
      expenses  applicable to such actions for which such  Indemnified  Party is
      not  entitled  to  indemnification  hereunder,  determined  based upon the
      relative faults of the parties.

                                       8
<PAGE>

            (d) Contribution.  If a claim for indemnification under Section 5(a)
      or 5(b) is unavailable to an Indemnified Party (by reason of public policy
      or otherwise),  then each Indemnifying Party, in lieu of indemnifying such
      Indemnified  Party, shall contribute to the amount paid or payable by such
      Indemnified  Party as a result of such Losses,  in such  proportion  as is
      appropriate  to reflect the relative fault of the  Indemnifying  Party and
      Indemnified Party in connection with the actions,  statements or omissions
      that  resulted  in such  Losses  as well as any other  relevant  equitable
      considerations.   The  relative  fault  of  such  Indemnifying  Party  and
      Indemnified Party shall be determined by reference to, among other things,
      whether any action in  question,  including  any untrue or alleged  untrue
      statement  of a material  fact or  omission of a material  fact,  has been
      taken or made by, or relates to information supplied by, such Indemnifying
      Party or Indemnified  Party, and the parties' relative intent,  knowledge,
      access to information  and  opportunity to correct or prevent such action,
      statement or  omission.  The amount paid or payable by a party as a result
      of any Losses shall be deemed to include,  subject to the  limitations set
      forth in Section 5(c), any reasonable  attorneys' or other reasonable fees
      or expenses  incurred by such party in connection  with any  Proceeding to
      the  extent  such  party  would  have  been  indemnified  for such fees or
      expenses if the indemnification provided for in this Section was available
      to such party in accordance with its terms.

            The parties  hereto agree that it would not be just and equitable if
      contribution  pursuant to this  Section 5(d) were  determined  by pro rata
      allocation  or by any other method of  allocation  that does not take into
      account  the  equitable  considerations  referred  to in  the  immediately
      preceding paragraph.  Notwithstanding the provisions of this Section 5(d),
      no Holder shall be required to contribute, in the aggregate, any amount in
      excess of the amount of proceeds actually received by such Holder from the
      sale of the  Registrable  Securities  by reason of such  untrue or alleged
      untrue  statement or omission or alleged  omission,  except in the case of
      gross  negligence or fraud by such Holder.  The indemnity and contribution
      agreements contained in this Section are in addition to any liability that
      the Indemnifying Parties may have to the Indemnified Parties.

      6.    Miscellaneous

            (a)  Remedies.  In the  event of a  breach  by the  Company  or by a
      Holder, of any of their  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.  The Company and each Holder agree that monetary  damages would
      not provide  adequate  compensation for any losses incurred by reason of a
      breach by it of any of the provisions of this Agreement and hereby further
      agrees  that,  in the event of any  action  for  specific  performance  in
      respect of such  breach,  it shall waive the defense  that a remedy at law
      would be adequate.

            (b) Compliance. Each Holder covenants and agrees that it will comply
      with federal and state  securities laws including the prospectus  delivery
      requirements  of the Securities Act as applicable to it in connection with
      resales of Registrable Securities pursuant to the Registration Statement.

                                       9
<PAGE>

            (c) 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 any event of the kind  described in Section
      3(c),  such  Holder  will  forthwith   discontinue   disposition  of  such
      Registrable   Securities  under  the  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.  The Company may
      provide  appropriate  stop  orders  to  enforce  the  provisions  of  this
      paragraph.

            (d)   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 the stock option or other employee
      benefit plans, then the Company shall send to each Holder a written notice
      of such  determination  and, if within fifteen days after the date 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,  subject to customary
      underwriter cutbacks applicable to all holders of registration rights.

            (e)  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  each  Holder  of  the  then   outstanding   Registrable
      Securities.

            (f)  Notices.  Any  and  all  notices  or  other  communications  or
      deliveries  required or  permitted  to be provided  hereunder  shall be in
      writing and shall be deemed given and effective on the earliest of (i) the
      date of  transmission,  if such notice or  communication  is delivered via
      facsimile  prior to 6:30 p.m.  (New York City time) on a Trading Day, (ii)
      the  Trading  Day  after  the  date of  transmission,  if such  notice  or
      communication  is delivered via  facsimile  later than 6:30 p.m. (New York
      City time) on any date and earlier than 11:59 p.m. (New York City time) on
      such date, (iii) the Trading Day following the date of mailing, if sent by
      nationally  recognized  overnight  courier  service,  or (iv) upon  actual
      receipt  by the party to whom such  notice is  required  to be given.  The
      address or facsimile number for such notices and  communications  shall be
      delivered and addressed as set forth in the Purchase Agreement.

                                       10
<PAGE>

            (g)  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.  Each
      Holder may assign their  respective  rights hereunder in the manner and to
      the Persons as permitted under the Purchase Agreement.

            (h) 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.

            (i)  Governing  Law.  All  questions  concerning  the  construction,
      validity,  enforcement  and  interpretation  of this  Agreement  shall  be
      governed by and  construed  and enforced in  accordance  with the internal
      laws of the  State  of New  York,  without  regard  to the  principles  of
      conflicts  of law thereof.  Each party  agrees that all legal  proceedings
      concerning   the   interpretations,   enforcement   and   defense  of  the
      transactions  contemplated  by this Agreement  (whether  brought against a
      party  hereto  or  its   respective   affiliates,   directors,   officers,
      shareholders,  employees or agents) shall be commenced  exclusively in the
      state and federal courts  sitting in the City of New York, New York.  Each
      party hereto hereby irrevocably  submits to the exclusive  jurisdiction of
      the state and federal courts sitting in the City of New York, New York for
      the  adjudication  of any dispute  hereunder or in connection  herewith or
      with any transaction  contemplated  hereby or discussed herein  (including
      with respect to the enforcement of this Agreement), and hereby irrevocably
      waives,  and agrees not to assert in any suit,  action or proceeding,  any
      claim that it is not personally  subject to the  jurisdiction  of any such
      court, that such suit, action or proceeding is improper. Each party hereto
      hereby  irrevocably  waives  personal  service of process and  consents to
      process being served in any such suit,  action or proceeding by delivering
      a copy thereof via overnight  delivery (with evidence of delivery) to such
      party at the address in effect for notices to it under this  Agreement and
      agrees that such service shall  constitute good and sufficient  service of
      process and notice thereof.  Nothing  contained  herein shall be deemed to
      limit in any way any right to serve  process  in any manner  permitted  by
      law. Each party hereto hereby  irrevocably  waives,  to the fullest extent
      permitted  by  applicable  law,  any and all right to trial by jury in any
      legal  proceeding  arising  out of or relating  to this  Agreement  or the
      transactions contemplated hereby. If either party shall commence an action
      or  proceeding  to enforce  any  provisions  of this  Agreement,  then the
      prevailing  party in such action or proceeding  shall be reimbursed by the
      other party for its attorney's fees and other costs and expenses  incurred
      with the  investigation,  preparation  and  prosecution  of such action or
      proceeding.

            (j) Cumulative Remedies. The remedies provided herein are cumulative
      and not exclusive of any remedies provided by law.

                                       11
<PAGE>

            (k) 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 commercially 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.

            (l) Headings.  The headings in this Agreement are for convenience of
      reference only and shall not limit or otherwise affect the meaning hereof.

            (m) Independent  Nature of Purchasers'  Obligations and Rights.  The
      obligations of each Purchaser hereunder are several and not joint with the
      obligations of any other  Purchaser  hereunder,  and no Purchaser shall be
      responsible in any way for the performance of the obligations of any other
      Purchaser hereunder. Nothing contained herein or in any other agreement or
      document  delivered at any closing,  and no action taken by any  Purchaser
      pursuant  hereto or thereto,  shall be deemed to constitute the Purchasers
      as a  partnership,  an  association,  a joint venture or any other kind of
      entity,  or create a presumption that the Purchasers are in any way acting
      in  concert  with  respect  to  such   obligations  or  the   transactions
      contemplated  by this  Agreement.  Each  Purchaser  shall be  entitled  to
      protect and enforce its rights,  including  without  limitation the rights
      arising out of this Agreement, and it shall not be necessary for any other
      Purchaser to be joined as an additional  party in any  proceeding for such
      purpose.

            (n) Conflicting  Instructions.  A person or entity is deemed to be a
      holder of  Registrable  Securities  whenever such person or entity owns of
      record such Registrable  Securities.  If the Company receives  conflicting
      instructions,  notices or  elections  from two or more Persons or entities
      with respect to the same Registrable Securities, the Company will act upon
      the basis of instructions, notice or election received from the registered
      owner of such Registrable Securities.

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

-----------------------------------            ----------------------------
Xfone, Inc.                 Date

By:
Title:
      -----------------------------

                                CRESTVIEW CAPITAL MASTER LLC

                                By:
                                   --------------------------------
                                Name: Richard Levy
                                Title: Managing Partner

                                       12
<PAGE>

                                 SCHEDULE 2 (d)

                          Outstanding Rights to Equity

<PAGE>

                                  SCHEDULE 2(s)

                                 CapitalizationEXHIBIT 10.20

                      SHARES AND WARRANT PURCHASE AGREEMENT

      SHARES  AND  WARRANT  PURCHASE  AGREEMENT  (this  "Agreement")  made as of
_________ ____, 2004 by and between Xfone, Inc a Nevada  corporation  having its
executive  offices  located at  Britannia  House,  960 High Road London N12 9RY,
United  Kingdom (the  "Company"),  and the  purchasers  identified  on Exhibit 1
hereto (each a "Purchaser" and together, the "Purchasers").

      WHEREAS,  each  of  the  Purchasers  has  agreed  (severally  and  not  in
connection  with the  purchase by the other  Purchasers)  to  purchase  from the
Company, and the Company has agreed to sell to each of the Purchasers, shares of
common stock of the Company (the "Shares") described herein; and

      WHEREAS, the Company has agreed to issue to each of the Purchasers certain
warrants to purchase  shares of common  stock of the  Company  (the  "Warrants")
described herein.

      NOW,  THEREFORE,  in  consideration  of the premises and mutual  covenants
herein contained and for other good and valuable consideration,  the receipt and
sufficiency  of which are hereby  acknowledged,  each of the  Purchasers and the
Company agree as follows:

      Section 1. Issuance of Shares and Warrants ("Securities").  Subject to the
terms and conditions of this Agreement,  each Purchaser  agrees,  simultaneously
with the execution and delivery of this Agreement,  to purchase from the Company
the amount of Shares  (the  Common  Shares)  set forth  opposite  to its name in
Exhibit 1 at a purchase price of U.S.  $3.00 per share ("the  purchase  price").
Simultaneously  with the  execution  and  delivery  of this  Agreement  (i) each
Purchaser  is paying the  Purchase  Price set forth on Exhibit 1 opposite to the
name of such  Purchaser by wire transfer of immediately  available  funds to the
Company in accordance with the wire transfer instructions set forth on Exhibit 2
hereto and is executing and  delivering to the Company an  Irrevocable  Proxy in
favor of Guy Nissenson, the President and Chief Executive Officer of the Company
in the form attached hereto as Exhibit 3; (ii) the Company is delivering to each
Purchaser a stock  certificate  evidencing  such  Purchaser's  ownership  of the
number of shares set forth in Exhibit 1 opposite to the name of such  Purchaser.
Simultaneously with the payment of the purchase price, the Company is issuing to
each  Purchaser  Warrants  to  purchase  the amount of Shares of the Company set
forth on Exhibit 1 opposite to the name of such  Purchaser,  such Warrants to be
in the forms  attached  hereto  as  Exhibits  4 and 5.  Each A Warrant  shall be
exercisable  at a  price  of  $5.50  per  share  and  Each B  Warrant  shall  be
exercisable at a price of $3.50 per share. Simultaneously with the execution and
delivery of this  Agreement,  the Company and each  Purchaser is  executing  and
delivering a Registration Rights Agreement (the "Registration Rights Agreement")
substantially  in the  form of  Exhibit  6  hereto.  As  used  herein  the  term
"Transaction Documents" means this Agreement,  the Warrants and the Registration
Rights  Agreement,  and execution of this agreement and the Registration  Rights
Agreement by each Purchaser and the Company and tender of the purchase price for
the  Securities  by each  Purchaser  to the Company is  considered  the "Closing
Date". For purposes of this Agreement,  the term securities refers to the common
shares, warrants and shares of common stock underlying the warrants.

<PAGE>

      Section 2. Company Representations and Warranties.  The Company represents
and warrants to each of the Purchasers severally that:

            (a) Due Incorporation. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the respective  jurisdictions of their  incorporation  and have the requisite
corporate  power to own their  properties  and to carry on their business as now
being conducted. The Company and each of its subsidiaries is duly qualified as a
foreign  corporation to do business and is in good standing in each jurisdiction
where the nature of the business  conducted  or property  owned by it makes such
qualification necessary,  other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business,  operations
or financial condition of the Company.

            (b) Outstanding  Stock. All issued and outstanding shares of capital
stock of the Company and each of its  subsidiaries  has been duly authorized and
validly issued and are fully paid and non-assessable.

            (c) Authority;  Enforceability.  This Agreement,  the Warrants,  the
Registration  Agreement and any other  agreements  delivered  together with this
Agreement or in  connection  herewith  have been duly  authorized,  executed and
delivered  by the Company and are valid and binding  agreements  enforceable  in
accordance  with their  terms,  subject to  bankruptcy,  insolvency,  fraudulent
transfer,  reorganization,  moratorium and similar laws of general applicability
relating to or affecting  creditors' rights generally and to general  principles
of equity;  and the Company has full corporate power and authority  necessary to
enter into this Agreement,  the Warrants,  the  Registration  Agreement and such
other  agreements and to perform its  obligations  hereunder and under all other
agreements entered into by the Company relating hereto.

            (d) Outstanding  Rights to Equity. In Schedule 2(d) is a list of the
outstanding rights,  warrants or options to acquire, or instruments  convertible
into or exchangeable  for, or agreements or  understandings  with respect to the
sale or issuance of any shares of common stock or equity of the Company.

            (e) Consents.  No consent,  approval,  authorization or order of any
court,  governmental  agency or body or arbitrator having  jurisdiction over the
Company,  or any of its  affiliates,  the  Amex,  the  National  Association  of
Securities  Dealers,  Inc., Nasdaq,  SmallCap Market, the OTC Bulletin Board nor
the Company's  Shareholders  is required for the execution and compliance by the
Company of its obligations  under this  Agreement,  except as stated herein this
Agreement, and all other agreements entered into by the Company relating hereto,
including,  without limitation, the issuance and sale of the Securities, and the
performance  of the  Company's  obligations  hereunder  and under all such other
agreements.

            (f) No  Violation  or Conflict.  Assuming  the  representations  and
warranties of the Purchasers herein this Agreement are true and correct, neither
the  issuance and sale of the Shares and  Warrants  nor the  performance  of the
Company's obligations under this Agreement and all other agreements entered into
by the Company relating thereto by the Company will:

                                       2
<PAGE>

                  (i)  violate,  conflict  with,  result  in  a  breach  of,  or
constitute  a default  (or an event which with the giving of notice or the lapse
of time or both would be reasonably  likely to  constitute a default)  under (A)
the  articles of  incorporation,  charter or bylaws of the  Company,  (B) to the
Company's knowledge, any decree, judgment,  order, law, treaty, rule, regulation
or determination applicable to the Company of any court,  governmental agency or
body,  or  arbitrator  having  jurisdiction  over  the  Company  or  any  of its
subsidiaries  or over the  properties  or  assets of the  Company  or any of its
affiliates,  (C) the terms of any bond, debenture, note or any other evidence of
indebtedness,  or any agreement,  stock option or other similar plan, indenture,
lease,  mortgage,  deed of trust or other instrument to which the Company or any
of its  affiliates,  or  subsidiaries is a party, by which the Company or any of
its affiliates or  subsidiaries  is bound,  or to which any of the properties of
the Company or any of its  affiliates  or  subsidiaries  is subject,  or (D) the
terms of any  "lock-up"  or similar  provision  of any  underwriting  or similar
agreement to which the Company,  or any of its affiliates or  subsidiaries  is a
party except the violation, conflict, breach, or default of which would not have
a material adverse effect on the Company; or

                  (ii) result in the creation or imposition of any lien,  charge
or  encumbrance  upon the  Securities  or any of the assets of the Company,  its
subsidiaries or any of its affiliates.

            (g) The Shares and Warrants. The Securities upon issuance:

                  (i) are, or will be, free and clear of any security interests,
liens,  claims or other  encumbrances,  and will be subject to restrictions upon
transfer,  disposition  and resale under the  Securities Act of 1933, as amended
("the Securities Act") and any applicable state securities laws; and

                  (ii) have been, or will be, duly and validly authorized and on
the date of issuance, and upon exercise of the Warrants, the Warrant Shares will
be duly and validly  issued,  fully paid and  nonassessable  (and if  registered
pursuant to the Securities Act, and resold pursuant to an effective registration
statement  will be free trading and  unrestricted,  provided that each Purchaser
complies  with  state and  federal  securities  laws  including  the  prospectus
delivery requirements of the Securities Act and state securities laws); and

                  (iii) will not have been  issued or sold in  violation  of any
preemptive  or other  similar  rights of the  holders of any  securities  of the
Company; and

                  (iv)  will  not  subject  the  holders   thereof  to  personal
liability by reason of being such holders.

            (h) Litigation. There is no pending or, to the best knowledge of the
Company,  threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its  affiliates  that would affect the execution by the Company or the
performance  by the Company of its  obligations  under this  Agreement,  and all
other  agreements  entered  into by the  Company  relating  hereto.  There is no
pending or, to the best  knowledge  of the  Company,  threatened  action,  suit,
proceeding or investigation  before any court,  governmental  agency or body, or
arbitrator having  jurisdiction over the Company, or any of its affiliates which
litigation if adversely  determined  could have a material adverse effect on the
Company.

                                       3
<PAGE>

            (i)  Reporting  Company.  The  Company is  subject to the  reporting
requirements  of Section 15(d) of the Securities  Exchange Act (the "1934 Act").
The  Company  has  timely  filed all  reports  ("Reports")  and other  materials
required to be filed there under with the  Securities  and  Exchange  Commission
during the preceding twelve months.

            (j) No Market Manipulation.  The Company has not taken, and will not
take,  directly or indirectly,  any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the  common  stock  of the  Company  to  facilitate  the sale or  resale  of the
Securities or affect the price at which the Securities may be issued or resold.

            (k) Information Concerning Company. The Reports contain all material
information  relating to the Company and its operations and financial  condition
as of their  respective  dates which  information  is  required to be  disclosed
therein. Since the date of the financial statements included in the Reports, and
except as modified in the other written  information or in the Schedules hereto,
there has been no material adverse change in the Company's  business,  financial
condition or affairs not  disclosed  in the Reports.  The Reports do not contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in light of the circumstances when made.

            (l) Stop  Transfer.  The Shares and Warrants,  when issued,  will be
restricted  securities.  The Company will not issue any stop  transfer  order or
other order  impeding  the sale,  resale or  delivery of any of the  Securities,
except as may be required by any applicable  federal or state  securities  laws.
The Company will not issue any stop  transfer or other order  impeding the sale,
resale or  delivery  of the  Securities  unless  contemporaneous  notice of such
instruction is given to the Subscriber.

            (m)  Defaults.  The Company is not in  violation  of its articles of
incorporation or bylaws. The Company is (i) not in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its  properties  are bound or affected,  which default or violation
would have a material  adverse  effect on the Company,  (ii) not in default with
respect to any order of any court, arbitrator or governmental body or subject to
or party to any order of any court or governmental  authority arising out of any
action, suit or proceeding under any statute or other law respecting  antitrust,
monopoly,  restraint of trade,  unfair competition or similar matters,  or (iii)
not to its  knowledge in violation of any  statute,  rule or  regulation  of any
governmental  authority which violation would have a material  adverse effect on
the Company.

            (n) No  Integrated  Offering.  Except as disclosed in the  Company's
filings with the Securities and Exchange  Commission,  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 offer of the
Securities  pursuant to this Agreement to be integrated  with prior offerings by
the Company for purposes of the Securities Act. The Company will not conduct any
offering other than the transactions contemplated hereby that will be integrated
with the offer or issuance of the Securities.

                                       4
<PAGE>

            (o) No General  Solicitation.  Neither the  Company,  nor any of its
affiliates,  nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general  solicitation or general  advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or sale
of the Securities.

            (p)  Listing.  The  Company's  common  stock  is  quoted  on the OTC
Bulletin Board. The Company has not received any oral or written notice that its
common stock will be delisted  from the OTC  Bulletin  Board nor that its common
stock does not meet all  requirements for the continuation of such quotation and
the Company  satisfies the requirements for the continued  listing of its common
stock on the Bulletin Board.

            (q) No  Undisclosed  Liabilities.  The Company has no liabilities or
obligations which are material,  individually or in the aggregate, which are not
disclosed  in the  Reports  and Other  Written  Information,  other  than  those
incurred in the ordinary course of the Company's  businesses  since December 31,
2002 and which,  individually or in the aggregate,  would reasonably be expected
to have a material adverse effect on the Company's financial condition.

            (r) No Undisclosed Events or Circumstances. Since December 31, 2002,
no event or  circumstance  has occurred or exists with respect to the Company or
its  businesses,  properties,  operations or financial  condition,  that,  under
applicable law, rule or regulation,  requires public  disclosure or announcement
prior to the date  hereof by the  Company  but  which  has not been so  publicly
announced or disclosed in the Reports.

            (s) Capitalization.  The authorized and outstanding capital stock of
the Company as of the date of this  Agreement and the Closing Date are set forth
on  Schedule  2(s).  Except  as set  forth  in the  Reports  and  Other  Written
Information  and Schedule  2(d),  there are no options,  warrants,  or rights to
subscribe to, securities, rights or obligations convertible into or exchangeable
for or giving any right to  subscribe  for any  shares of  capital  stock of the
Company.  All of the outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and nonassessable.

            (t) Dilution.  The Company's  executive  officers and directors have
studied and fully  understand the nature of the Securities being sold hereby and
recognize that they have a potential  dilutive  effect on the interests of other
holders of the Company's  securities.  The board of directors of the Company has
concluded, in its good faith business judgment that such issuance is in the best
interests of the Company.

            (u) Correctness of Representations.  The Company represents that the
foregoing  representations  and  warranties  are true and correct as of the date
hereof in all material respects, will be true and correct as of the Closing Date
in all  material  respects,  and,  unless the  Company  otherwise  notifies  the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date.  The foregoing  representations  and warranties
shall survive the Closing Date for a period of three years.

                                       5
<PAGE>

      Section 3. Representations by the Purchasers

            Each of the Purchasers  (severally  and not jointly)  represents and
      warrants to the Company as follows:

            (a)  Investment  Purposes.  The Purchaser  represents to the Company
that the Purchaser is acquiring the Shares and the Warrants for its own account,
for the purpose of investment, and not with a view to the distribution or resale
of any  thereof,  and the  Purchaser  has no  present  plans to  enter  into any
contract,  undertaking,  agreement or arrangement  for any such  distribution or
resale.

            (b) Enforceability. This Agreement constitutes the Purchaser's valid
and legally binding obligation  enforceable in accordance with its terms, except
as  such  enforcement  may be  limited  by  applicable  bankruptcy,  insolvency,
reorganization,  moratorium or other  similar laws,  now or hereafter in effect,
relating to, or affecting the enforcement of, creditors' rights generally.

            (c) Sophistication.  Each Purchaser is a sophisticated investor, and
has such  knowledge and  experience  in financial and business  matters as to be
capable of evaluating the merits and risks of investing in the Company's  Shares
and  receiving  the  Warrants.  Without  limiting the  foregoing,  the Purchaser
represents and warrants that it, he, or she is an "accredited investor," as that
term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended (the "Securities  Act"). The Purchaser has the financial ability to bear
the economic risk of such  Purchaser's  investment  contemplated  hereby and has
adequate  net  worth  and  means  of  providing   for  its  current   needs  and
contingencies  to sustain a complete loss of its  investment and has no need for
liquidity in its investment in the Company.  Each Purchaser  represents  that he
has previously invested in restricted securities.

            (d) Restrictions on Transferability.  The Purchaser  understands and
agrees that (i) the Shares,  the Warrants and the Shares  issuable upon exercise
of the Warrants (the "Securities") have not been registered under the Securities
Act by reason of their  issuance in a transaction  exempt from the  registration
requirements   of  the  Securities   Act,  (ii)  the  Securities  must  be  held
indefinitely  unless a subsequent  disposition  thereof is registered  under the
Securities Act or is exempt from such  registration,  (iii) the Securities  will
bear a legend to such  effect and (iv) the  Company  will make a notation on its
transfer  books  to  such  effect.  Any  such  transfer,   sale,  assignment  or
hypothecation  shall be conditioned upon receipt by the Company by an opinion of
counsel satisfactory to the Company and its counsel, stating that the transferee
is a permitted  transferee  under this Section and that such  transfer  does not
violate the Securities Act or any state securities laws.

            (e) Access to  Information.  The Purchaser had access to information
filed with the SEC.  The  Purchaser  and its  advisers  have been  afforded  the
opportunity   to  ask  questions  of  the  Company   concerning  the  investment
contemplated  hereby and to obtain any additional  information  they have deemed
necessary as a condition to making such investment.

                                       6
<PAGE>

      Section 4. Debt;  Issuances of Securities.  No provision of this Agreement
or of any other  document  executed and  delivered by the Company in  connection
with this Agreement restricts, or shall be construed to restrict, in any way the
ability of the Company to incur  indebtedness or to issue capital stock or other
equity  securities (or  securities  convertible  into equity  securities) of the
Company or to grant liens on its property and assets.

            Section 5. Reissuance of Securities.  (a)The  Securities may only be
      disposed of in  compliance  with state and  federal  securities  laws.  In
      connection  with any  transfer  of  Securities  other than  pursuant to an
      effective  registration  statement  or Rule 144,  to the  Company or to an
      Affiliate of a Purchaser or in connection with a pledge as contemplated in
      Section 5(b), the Company may require the transferor thereof to provide to
      the  Company  an  opinion  of  counsel  selected  by  the  transferor  and
      reasonably  acceptable  to the  Company,  the form and  substance of which
      opinion and shall be reasonably satisfactory to the Company, to the effect
      that such  transfer  does not  require  registration  of such  transferred
      Securities under the Securities Act. As a condition of transfer,  any such
      transferee  shall  agree  in  writing  to be  bound  by the  terms of this
      Agreement  and shall have the rights of a Purchaser  under this  Agreement
      and the Registration Rights Agreement.

            (b) The Purchasers  agree to the imprinting,  so long as is required
      by  this  Section  5(b),  of a  legend  on any of  the  Securities  in the
      following form:

            THESE  SECURITIES  HAVE NOT BEEN  REGISTERED WITH THE SECURITIES AND
      EXCHANGE COMMISSION OR THE SECURITIES  COMMISSION OF ANY STATE IN RELIANCE
      UPON AN EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED (THE "SECURITIES  ACT"), AND,  ACCORDINGLY,  MAY NOT BE OFFERED OR
      SOLD EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
      SECURITIES  ACT  OR  PURSUANT  TO AN  AVAILABLE  EXEMPTION  FROM,  OR IN A
      TRANSACTION  NOT  SUBJECT  TO,  THE   REGISTRATION   REQUIREMENTS  OF  THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE  STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,
      THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE COMPANY.
      THESE  SECURITIES  MAY BE PLEDGED IN  CONNECTION  WITH A BONA FIDE  MARGIN
      ACCOUNT  WITH A  REGISTERED  BROKER-DEALER  OR OTHER LOAN WITH A FINANCIAL
      INSTITUTION  THAT IS AN  "ACCREDITED  INVESTOR"  AS DEFINED IN RULE 501(a)
      UNDER THE SECURITIES ACT.

            The Company  acknowledges  and agrees that a Purchaser may from time
      to time pledge pursuant to a bona fide margin  agreement with a registered
      broker-dealer  or  grant  a  security  interest  in  some  or  all  of the
      Securities to a financial  institution that is an "accredited investor" as
      defined in Rule 501(a) under the Securities Act and who agrees to be bound
      by the provisions of this Agreement and the Registration  Rights Agreement
      and, if required under the terms of such  arrangement,  such Purchaser may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such a pledge or transfer  would not be subject to approval of the Company
      and no legal  opinion of legal  counsel of the pledgee,  secured  party or
      pledgor  shall be required in  connection  therewith.  Further,  no notice
      shall be required of such pledge. At the appropriate  Purchaser's expense,
      the Company will execute and deliver such  reasonable  documentation  as a
      pledgee  or  secured  party  of  Securities  may  reasonably   request  in
      connection with a pledge or transfer of the Securities,  including, if the
      Securities are subject to registration pursuant to the Registration Rights
      Agreement,   the  preparation  and  filing  of  any  required   prospectus
      supplement  under  Rule  424(b)(3)  under  the  Securities  Act  or  other
      applicable provision of the Securities Act to appropriately amend the list
      of Selling Stockholders thereunder.

                                       7
<PAGE>

            (c) Certificates  evidencing the Shares and Warrant Shares shall not
      contain any legend  (including the legend set forth in Section 5(b)),  (i)
      while a  registration  statement  (including the  Registration  Statement)
      covering  the resale of such  security is effective  under the  Securities
      Act, or (ii) following any sale of such Shares or Warrant Shares  pursuant
      to Rule 144, or (iii) if such Shares or Warrant  Shares are  eligible  for
      sale under  Rule  144(k),  or (iv) if such  legend is not  required  under
      applicable   requirements  of  the  Securities  Act  (including   judicial
      interpretations and pronouncements issued by the Staff of the Commission).
      The  Company  shall  cause its  counsel  to issue a legal  opinion  to the
      Company's  transfer agent promptly after the Effective Date if required by
      the  Company's  transfer  agent  to  effect  the  removal  of  the  legend
      hereunder.  If all or any portion of a Warrant is exercised at a time when
      there is an  effective  registration  statement to cover the resale of the
      Warrant  Shares,  such Warrant Shares shall be issued free of all legends.
      The Company  agrees that  following the Effective  Date or at such time as
      such legend is no longer  required  under this Section  5(c),  it will, no
      later than three Trading Days following the delivery by a Purchaser to the
      Company or the  Company's  transfer  agent of a  certificate  representing
      Shares or Warrant  Shares,  as the case may be,  issued with a restrictive
      legend  (such date,  the "Legend  Removal  Date"),  deliver or cause to be
      delivered to such  Purchaser a certificate  representing  such  Securities
      that is free from all restrictive  and other legends.  The Company may not
      make any  notation on its  records or give  instructions  to any  transfer
      agent of the Company that enlarge the  restrictions  on transfer set forth
      in this Section.

            In  addition  to such  Purchaser's  other  available  remedies,  the
      Company shall pay to a Purchaser,  in cash, as partial  liquidated damages
      and not as a penalty,  for each $1,000 of Shares or Warrant  Shares (based
      on the  Closing  Price of the  Common  Stock on the Legend  Removal  Date)
      subject  to Section  5(c),  $10 per  Trading  Day  (increasing  to $20 per
      Trading Day five (5) Trading Days after such damages have begun to accrue)
      for each Trading Day after the Legend Removal Date until such  certificate
      is delivered.  Nothing herein shall limit such Purchaser's right to pursue
      actual  damages  for  the  Company's   failure  to  deliver   certificates
      representing any Securities as required by the Transaction Documents,  and
      such Purchaser shall have the right to pursue all remedies available to it
      at law or in equity including,  without  limitation,  a decree of specific
      performance  and/or  injunctive  relief.  In lieu of such daily liquidated
      damages, each Purchaser or assignee holding Securities subject to a Legend
      Removal Failure may, at its option, require the Company to purchase all or
      any portion of the Shares and Warrant  Shares  subject to a Legend Removal
      Failure  held by each  Purchaser or assignee at a price per share equal to
      130% of the  purchase  price of such  Shares and Warrant  Shares  within a
      period of up to twenty four months from the Closing Date.

                                       8
<PAGE>

            Each Purchaser, severally and not jointly with the other Purchasers,
agrees that the removal of the restrictive legend from certificates representing
Securities  as set forth in this  Section  5 is  predicated  upon the  Company's
reliance  that the  Purchaser  will sell any  Securities  pursuant to either the
registration  requirements  of the  Securities  Act,  including  any  applicable
prospectus delivery requirements, or an exemption therefrom.

            Section  6Blackout.  The Company undertakes and covenants that until
the first to occur of (i) the  registration  statement having been effective for
one hundred and eighty  (180)  business  days,  or (ii) until all the Shares and
Warrant Shares have been resold  pursuant to said  registration  statement,  the
Company  will  not  enter  into  any  acquisition,  merger,  exchange  or  other
transaction  that could have the effect of  delaying  the  effectiveness  of any
pending  registration  statement,  causing  an  already  effective  registration
statement to no longer be effective or current.

Section 7. Purchasers' Rights of Participation in Additional Financings

            (a) LEFT BLANK INTENTIONALLY

            (b) From the date  hereof  until the  earlier  of (a) such time as a
Purchaser no longer holds any Shares or (b) 12 months after the Closing Date, if
in connection with a Subsequent Financing, the Company or any subsidiary thereof
shall issue any Common Stock or Common Stock Equivalents entitling any person or
entity to acquire  shares of Common Stock at a price per share less than the Per
Share  Purchase  Price  (subject to  adjustment  for  reverse and forward  stock
splits,  stock dividends,  stock combinations and other similar  transactions of
the Common  Stock  that occur  after the date of this  Agreement),  the  Company
shall,  within 3 Trading Days of such  issuance,  issue to such  Purchaser  that
number of additional shares of Common Stock equal to (a) the Subscription Amount
paid by such Purchaser at the Closing divided by the Discounted  Purchase Price,
less (b) the Shares  issued to such  Purchaser  at the Closing  pursuant to this
Agreement and pursuant to this Section 7. The term  "Discounted  Purchase Price"
shall  mean the  amount  actually  paid by third  parties  for a share of Common
Stock. The sale of Common Stock  Equivalents shall be deemed to have occurred at
the time of the  issuance of the Common  Stock  Equivalents  and the  Discounted
Purchase  Price  covered  thereby  shall also  include  the actual  exercise  or
conversion  price thereof at the time of the conversion or exercise (in addition
to the  consideration  per share of Common  Stock  underlying  the Common  Stock
Equivalents  received  by the  Company  upon such sale or issuance of the Common
Stock  Equivalents).  In  the  case  of any  Subsequent  Financing  involving  a
"Variable Rate Transaction" or an "MFN Transaction" (each as defined below), the
Discounted  Purchase Price shall be deemed to be the lowest actual conversion or
exercise  price at which such  securities are converted or exercised in the case
of a Variable Rate Transaction, or the lowest adjustment price in the case of an
MFN Transaction.  If shares are issued for a consideration  other than cash, the
per  share  selling  price  shall be the fair  value  of such  consideration  as
determined  in good faith by the Board of  Directors  of the  Company.  The term
"Variable Rate Transaction" shall mean a transaction in which the Company issues
or sells any debt or equity securities that are convertible  into,  exchangeable
or exercisable for, or include the right to receive  additional shares of Common
Stock either (x) at a conversion,  exercise or exchange rate or other price that
is based upon and/or  varies with the trading  prices of or  quotations  for the
shares of Common  Stock at any time after the  initial  issuance of such debt or
equity securities, or (y) with a conversion,  exercise or exchange price that is
subject to being reset at some  future  date after the initial  issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly  related to the business of the Company or the market for
the Common Stock. The term "MFN  Transaction"  shall mean a transaction in which
the Company issues or sells any securities in a capital  raising  transaction or
series of related  transactions which grants to an investor the right to receive
additional  shares based upon future  transactions  of the Company on terms more
favorable  than those  granted to the such  investor in such  offering.  Nothing
herein  shall  limit a  Purchaser's  right  to  pursue  actual  damages  for the
Company's  failure to deliver Shares hereunder and such Purchaser shall have the
right to pursue  all  remedies  available  to it at law or in equity  including,
without limitation,  a decree of specific  performance and/or injunctive relief.
Notwithstanding  anything to the contrary herein, this Section 7 shall not apply
in  respect  of the  issuance  of (a)  shares  of  Common  Stock or  options  to
employees,  officers or directors of the Company pursuant to any stock or option
plan duly  adopted by a  majority  of the  non-employee  members of the Board of
Directors  of the  Company  or a  majority  of the  members  of a  committee  of
non-employee  directors  established  for such purpose,  (b) securities upon the
exercise of or conversion  of any  convertible  securities,  options or warrants
issued  and  outstanding  on the  date of this  Agreement,  provided  that  such
securities  have not been  amended  since  the  date of this  Agreement,  or (c)
securities in connection with acquisitions or strategic investments  (including,
without  limitation,  any licensing or distribution  arrangements),  the primary
purpose of which is not to raise  capital.  Additionally,  prior to any issuance
hereunder, a Purchaser shall have the right to continuously defer such issuances
to such Purchaser for up to periods of 75 days.

                                       9
<PAGE>

      Section 8. Covenants of the Company. The Company covenants and agrees with
the Subscribers as follows:

            (a) Stop Orders.  The Company will advise the Subscribers,  promptly
after it receives  notice of issuance by the  Commission,  any state  securities
commission or any other  regulatory  authority of any stop order or of any order
preventing or suspending  any offering of any  securities of the Company,  or of
the  suspension  of the  qualification  of the Common  Stock of the  Company for
offering or sale in any  jurisdiction,  or the  initiation of any proceeding for
any such purpose.

            (b) Listing.  The Company shall  promptly  secure the listing of the
shares of Common Stock to be  purchased  hereunder  and the Warrant  Shares upon
each  securities  exchange,  or quotation  system,  if any, upon which shares of
common stock are then listed  (subject to official notice of issuance) and shall
maintain such listing so long as any  Securities  are  outstanding.  The Company
will  maintain the listing of its Common Stock on the American  Stock  Exchange,
Nasdaq SmallCap  Market,  Nasdaq National Market System,  OTC Bulletin Board, or
New York Stock Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock (the "Principal  Market")),  and
will  comply in all  respects  with the  Company's  reporting,  filing and other
obligations  under the bylaws or rules of the Principal  Market,  as applicable.
The  Company  will  provide  the  Subscribers  copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any  Principal  Market.  As of the date of this  Agreement  and the Closing
Date, the Bulletin Board is and will be the Principal Market.

            (c) Market Regulations. The Company shall notify the Commission, the
Principal  Market and applicable  state  authorities,  in accordance  with their
requirements,  if any, of the transactions  contemplated by this Agreement,  and
shall take all other  necessary  action and  proceedings  as may be required and
permitted  by  applicable  law,  rule and  regulation,  for the  legal and valid
issuance of the  Securities  to the  Subscribers  and  promptly  provide  copies
thereof to Subscriber.

                                       10
<PAGE>

            (d) Reporting Requirements. From the Closing Date and until at least
two (2) years after the actual effective date of the Registration Statement, the
Company will (i) comply in all material  respects  with its reporting and filing
obligations under the 1934 Act, and (ii) comply with all requirements related to
any  registration  statement filed pursuant to this Agreement.  The Company will
use its best efforts not to take any action or file any document (whether or not
permitted  by the  Securities  Act or the 1934 Act or the rules there  under) to
terminate or suspend such  registration or to terminate or suspend its reporting
and filing  obligations under said acts until the earlier of two (2) years after
the actual effective date of the Registration Statement or until the registrable
securities have been sold. Until the earlier of the resale of the Shares and the
Warrant  Shares by each  Purchaser  or at least two (2) years after the Warrants
have been  exercised,  the Company  will use its best  efforts to  continue  the
quotation of its Common Stock on the OTC Bulletin Board,  and will comply in all
respects with the Company's  reporting,  filing and other  obligations under the
bylaws or rules of the OTC Bulletin Board.

            (e) Use of Proceeds.  The Purchase Price will be used by the Company
for working capital and/or  investment in equipment  and/or for acquisitions and
business  development,  and may not and will not be used for  accrued and unpaid
officer and director salaries,  payment of financing related debt, redemption of
redeemable notes or equity instruments of the Company nor non-trade  obligations
outstanding on the Closing Date.

            (f) Reservation of Common Stock.  The Company  undertakes to reserve
from its authorized but unissued common stock, at all times that Warrants remain
outstanding,  a number of common  shares  equal to the  amount of common  shares
issuable upon exercise of the Warrants.

            (g) Taxes. From the date of this Agreement until two (2) years after
the Closing Date,  the Company will promptly pay and  discharge,  or cause to be
paid and  discharged,  when due and payable,  all lawful taxes,  assessments and
governmental  charges or levies  imposed upon the income,  profits,  property or
business  of the  Company;  provided,  however,  that any such tax,  assessment,
charge or levy  need not be paid if the  validity  thereof  shall  currently  be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books  adequate  reserves with respect  thereto,  and provided,
further,  that the  Company  will pay all such  taxes,  assessments,  charges or
levies  forthwith  upon the  commencement  of  proceedings to foreclose any lien
which may have attached as security therefore.

            (h) Insurance.  From the date of this Agreement  until two (2) years
after  the  Closing  Date,  the  Company  will keep its  assets  which are of an
insurable  character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company's  line of business,  in amounts  sufficient to prevent
the Company from  becoming a  co-insurer  and not in any event less than 100% of
the insurable value of the property insured; and the Company will maintain, with
financially  sound and reputable  insurers,  insurance against other hazards and
risks and  liability  to persons  and  property  to the extent and in the manner
customary  for  companies in similar  businesses  similarly  situated and to the
extent available on commercially reasonable terms.

                                       11
<PAGE>

            (i) Books and Records. From the date of this Agreement until two (2)
years after the Closing  Date,  the Company  will keep true records and books of
account in which full,  true and correct entries will be made of all dealings or
transactions  in  relation  to its  business  and  affairs  in  accordance  with
generally accepted accounting principles applied on a consistent basis.

            (j) Governmental Authorities.  From the date of this Agreement until
two (2) years after the Closing Date, the Company shall duly observe and conform
in all material respects to all valid  requirements of governmental  authorities
relating to the conduct of its business or to its properties or assets.

            (k) Intellectual Property. From the date of this Agreement until two
(2) years after the Closing Date,  the Company shall  maintain in full force and
effect its corporate existence, rights and franchises and all licenses and other
rights to use  intellectual  property  owned or possessed  by it and  reasonably
deemed to be necessary to the conduct of its business.

            (l) Properties.  From the date of this Agreement until two (2) years
after the Closing  Date,  the Company will keep its  properties  in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements,  additions and
improvements  thereto;  and the  Company  will at all  times  comply  with  each
provision  of all  leases  to which it is a party  or  under  which it  occupies
property if the breach of such provision could  reasonably be expected to have a
material adverse effect.

            (m) Non-Public  Information.  The Company  covenants and agrees that
neither it nor any other Person  acting on its behalf will provide any Purchaser
or Purchasers  agents or counsel with any information  that the Company believes
constitutes   material  non-public   information,   unless  prior  thereto  such
Purchaser,  its  agents,  or  counsel  shall have  executed a written  agreement
regarding  the  confidentiality  and  use of  such  information.  The  Purchaser
understands  and  confirms  that the Company  shall be relying on the  foregoing
representations in effecting transactions in securities of the Company.

            (n) Securities  Laws  Disclosure;  Publicity.  The Company shall, by
8:30 a.m.  Eastern  time on the Trading Day  following  the Closing  Date file a
Current Report on Form 8-K  disclosing  the material  terms of the  transactions
contemplated hereby. Other than as set forth herein, neither the Company nor any
Purchaser  shall  issue any such  press  release  or  otherwise  make any public
disclosure or statement with respect to this agreement unless such disclosure is
required by law, in which case the disclosing  party shall promptly  provide the
other  party  with  prior  notice of such  public  statement  or  communication.
Notwithstanding the foregoing,  the Company shall not publicly disclose the name
of any  Purchaser,  or include the name of any  Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser,  except (i) as required by federal securities laws or
upon request by the  Securities  and Exchange  Commission  and (ii) OTC Bulletin
Board Regulations.  In connection therewith, the Purchasers agree to provide the
Company with articles of organization, minutes of meetings and shareholder lists
as requested by the Company and as required by federal securities laws or as the
Securities and Exchange Commission requests.

                                       12
<PAGE>

      Section  9.  Survival  of  covenants,   agreement,   representations   and
warranties.  All covenants,  agreements,  representations  and  warranties  made
herein and in certificates delivered pursuant hereto shall survive the execution
and delivery of this Agreement and the Warrants and shall continue in full force
and effect in accordance with applicable statutes of limitations.

      Section 10. Entire agreement;  Preamble,  Exhibits and Schedules;  no oral
change.  This  Agreement,  the  Registration  Rights  Agreement and the Warrants
embody the entire  agreement and  understanding  between the Company and each of
the Purchasers  (severally) relating to the subject matter hereof, and supersede
all prior  agreements and  understandings  relating to such subject matter.  The
preamble  to this  Agreement,  Exhibits  and  Schedules  attached  hereto  shall
constitute an integral part of this Agreement. This Agreement may not be changed
orally,  but only by an  agreement in writing  signed by the party  against whom
enforcement of any waiver, change, modification, or discharge is sought.

      Section  11.  Notices.  Any  notice  required  by the  provisions  of this
Agreement  will be  writing  and  will be  deemed  effectively  given:  (a) upon
personal  delivery  to the  party to be  notified;  (b) when  sent by  confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next  business  day; (c) seven (7) days after having been sent by registered
or certified mail, return receipt requested,  postage prepaid;  or (d) three (3)
days after deposit with a nationally  recognized  overnight courier,  specifying
next day delivery,  with written verification of receipt.  Notices shall be sent
to the  addresses  first set forth  above or to such  other  address  as a party
furnishes to other parties in writing.

      Section 12. Law Governing. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York with respect to contracts
executed and performed in the State of New York.

      Section  14.  JURISDICTION.   THE  COMPANY  AND  EACH  OF  THE  PURCHASERS
(SEVERALLY)  CONSENT  THAT ANY LEGAL  ACTION OR  PROCEEDING  AGAINST  IT OR THEM
UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT,  OR ANY OTHER
INSTRUMENT OR DOCUMENT EXECUTED AND DELIVERED IN CONNECTION  HEREWITH,  SHALL BE
BROUGHT  EXCLUSIVELY  IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK
COUNTY OR IN THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF NEW
YORK. THE COMPANY AND EACH OF THE PURCHASERS (SEVERALLY), BY THEIR EXECUTION AND
DELIVERY OF THIS AGREEMENT,  EXPRESSLY AND IRREVOCABLY CONSENT AND SUBMIT TO THE
PERSONAL  JURISDICTION  OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDINGS.
THE  COMPANY  AND  EACH  OF  THE  PURCHASERS  (SEVERALLY)  AGREE  THAT  PERSONAL
JURISDICTION  OVER THEM MAY BE  OBTAINED BY THE  DELIVERY OF A SUMMONS  (POSTAGE
PREPAID) IN  ACCORDANCE  WITH THE  PROVISIONS  OF SECTION 11 OF THIS  AGREEMENT.
ASSUMING DELIVERY OF THE SUMMONS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11
OF THIS  AGREEMENT,  THE COMPANY AND EACH OF THE PURCHASERS  (SEVERALLY)  HEREBY
EXPRESSLY  AND  IRREVOCABLY  WAIVE ANY ALLEGED  LACK OF  PERSONAL  JURISDICTION,
IMPROPER VENUE OF FORUM NON  CONVENIENS OR ANY SIMILAR BASIS.  EACH PARTY HERETO
EXPRESSLY  WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER
THIS  AGREEMENT,  AND AGREES THAT ANY SUCH ACTION OR  PROCEEDING  SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.

                                       13
<PAGE>

      Section 15.  Successors  and Assigns.  All the covenants and provisions of
this  Agreement  shall bind and inure to the  benefit of the  parties  and their
respective  successors and permitted assigns hereunder.  No party may assign any
rights or obligations  hereunder  without the prior written consent of the other
parties and any  purported  assignment  without such  consent  shall be null and
void.

      Section 16.  Amendments and Waivers.  The provisions of this Agreement may
not be amended,  modified or  supplemented,  and waiver or consents to departure
from the  provisions  hereof may not be given  without  the consent of the party
against whom such waiver or consent is sought.

      Section 17. Counterparts.  This Agreement may be executed in any number of
counterparts, and by the parties hereto in separate counterparts,  each of which
so executed  shall be deemed to be an original  and all of which taken  together
shall constitute one and the same agreement.

      Section  18.  Severability.  In the  event  that  any  one or  more of the
provisions contained herein, or the application thereof in any circumstances, is
held   invalid,   illegal  or   unenforceable,   the   validity,   legality  and
enforceability  of  any  such  provisions  in  every  other  respect  and of the
remaining provisions contained herein shall not be affected or impaired thereby.

      Section 19.  Lockup.  The  Purchasers and the insiders of the Company will
not sell shares for a price that is lower than the minimum  price  required  for
listing  on NASDAQ  Small Cap + US$1.00,  until the  Company is listed on NASDAQ
Small Cap or AMEX  exchange,  but for no longer  than 120 days from the  Closing
Date.

      Section  20.  Expenses;  Attorney's  Fees.  Each party  shall bear its own
expenses, including, without limitation, attorneys' fees, in connection with the
execution, delivery and performance of this Agreement.

      Section  21.  Agreement  is  Entire   Contract.   Except  as  specifically
referenced  herein,  this Agreement  constitutes the entire contract between the
parties hereto concerning the subject matter hereof and no party shall be liable
or bound to the  other  in any  manner  by any  warranties,  representations  or
covenants except as specifically set forth herein.  Any previous agreement among
the parties related to the transactions  described herein is superseded  hereby.
The terms and conditions of this Agreement  shall inure to the benefit of and be
binding  upon the  respective  successors  and  assigns of the  parties  hereto.
Nothing in this  Agreement,  express or implied,  is intended to confer upon any
party,  other than the  parties  hereto,  and their  respective  successors  and
assigns, any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided herein.

                                       14
<PAGE>

      Section 22. Independent Nature of Purchasers'  Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers  are in any way acting in concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Document.  Each
Purchaser  shall be  entitled to  independently  protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Purchaser  to be  joined  as an  additional  party  in any  proceeding  for such
purpose.  Each Purchaser has been  represented by its own separate legal counsel
in their review and  negotiation of the Transaction  Documents.  The Company has
elected to provide all Purchasers with the same terms and Transaction  Documents
for the  convenience of the Company and not because it was required or requested
to do so by the Purchasers.

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

----------------------------------      ---------------------------
Xfone, Inc.            Date

By:
    ------------------------------

Title:
     -----------------------------

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

                                    By:
                                          --------------------------
                                          Name:
                                          Title:

                                     Subscription Amount: $

Address for all notices:

_________________

_________________

_________________

                                       15
<PAGE>

                                                                       Exhibit 1

<TABLE>
<CAPTION>
Name and Address               Name of          Share   Number of    Purchase     Number of    Number of
of Purchaser              Shares Purchased      Price     Shares       Price      Warrant A    Warrant B
------------              ----------------      -----     ------       -----      ---------    ---------
<S>                       <C>                   <C>     <C>          <C>          <C>          <C>

</TABLE>

                                       16
<PAGE>

                                                                       Exhibit 2

                           Wire Transfer Instructions

Barclays Bank U.K
Hampstead and Whetstone Business Centre
PO Box 12820
London N20 0WE
United Kingdom
Sort Code: 20-30-19
Swift Code: BARCGB22
Account Number: 43691022
Account Name: Xfone, Inc.

                                       17
<PAGE>

                                                                       Exhibit 3

                                IRREVOCABLE PROXY

      KNOW ALL PERSONS BY THESE PRESENTS that the undersigned  does hereby make,
constitute and appoint Guy Nissenson,  its true and lawful attorney,  for it and
in its name,  place and  stead,  to act as its  proxy in  respect  of all of the
Shares of Xfone,  Inc. a Nevada based  company  (hereinafter  referred to as the
"Company"),  which  it now or  hereafter  may own or  hold,  including,  without
limitation,  the right, on its behalf,  to demand the call by any proper officer
of  the  Company  pursuant  to  the  provisions  of  its  by-laws,  articles  of
association,  memorandum of association or other organizational documents and as
permitted  by law  of a  meeting  of its  shareholders  and  at any  meeting  of
shareholders, annual, general or special, to vote for the transaction of any and
all business that may come before such meeting,  or at any adjournment  thereof,
including, without limitation, the right to vote for the sale of all or any part
of the assets of the  Company  and/or the  liquidation  and  dissolution  of the
Company; giving and granting to his said attorney full power and authority to do
and perform  each and every act and thing  whether  necessary or desirable to be
done in and about the  premises,  as fully as it might or could do if personally
present with full power of  substitution,  appointment  and  revocation,  hereby
ratifying and  confirming  all that its said  attorneys  shall do or cause to be
done by virtue hereof.

      This Proxy is given to Guy Nissenson in  consideration  of the performance
of the Shares and Warrant Purchase Agreement dated _________, by and between the
undersigned  and other  Purchasers and the Company,  and this Proxy shall not be
revocable or revoked by the undersigned and shall be binding upon his successors
and assigns, provided, however, that this Proxy shall be null and void and shall
have no force and effect, in respect of such Shares (and no other securities) so
sold by the undersigned in an arm's length sale (in good faith) of the Shares to
a third party that is not an Affiliate  (as defined  below) or related  party of
the Lender.

      An "Affiliate"  means (A) an entity in which the  undersigned  owns or has
the right to own  directly or  indirectly  equity and voting  share or any other
kind of  interest or acts as an officer  thereof,  or has the right and power to
direct the policy and management of such company;  or (B) a trust or living will
or trust in which the undersigned is a beneficiary  thereof;  or (C) the spouse,
children,  parents,  and any other family  members up to a fourth  degree of the
undersigned;  or (D) any trustee of the undersigned;  or (E) any other person or
entity which will be subject to the undersigned  instructions in connection with
the ordinary shares so purchased by such person or entity.

      THE UNDERSIGNED  SHALL EXECUTE AND DELIVER SUCH  ADDITIONAL  DOCUMENTS AND
INSTRUMENTS AS THE CORPORATION OR GUY NISSENSON MAY REQUIRE TO CONFIRM THE GRANT
HEREBY, INCLUDING,  WITHOUT LIMITATION,  SUCH INSTRUMENTS AS MAY BE NECESSARY OR
APPROPRIATE UNDER ISRAELI LAW.

<PAGE>

      IN WITNESS WHEREOF,  the undersigned has executed this  Irrevocable  Proxy
this day of ______ ___, 2004.

                                    Name:
                                          --------------------------

                                    By:
                                          --------------------------
                                          Name:
                                          Title:

<PAGE>

                                                                       Exhibit 4

                                    WARRANT A

THE WARRANT  EVIDENCED OR CONSTITUTED  HEREBY,  AND ALL ORDINARY SHARES ISSUABLE
HEREUNDER,  HAVE  BEEN  AND  WILL  BE  ISSUED  WITHOUT  REGISTRATION  UNDER  THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD,  OFFERED FOR
SALE,  TRANSFERRED,  PLEDGED OR HYPOTHECATED  WITHOUT REGISTRATION UNDER THE ACT
UNLESS  EITHER (i) THE COMPANY HAS  RECEIVED AN OPINION OF COUNSEL,  IN FORM AND
SUBSTANCE   REASONABLY   SATISFACTORY  TO  THE  COMPANY,   TO  THE  EFFECT  THAT
REGISTRATION  IS NOT REQUIRED IN CONNECTION  WITH SUCH  DISPOSITION  OR (ii) THE
SALE OF SUCH SECURITIES HAS BEEN REGISTERED UNDER THE ACT.

                        WARRANT TO PURCHASE COMMON STOCK
                                 OF XFONE, INC.

NO. _

THIS CERTIFIES THAT, for value received,  ________________,  (the "HOLDER"),  is
entitled,  subject to the terms and conditions of this Warrant, to purchase from
Xfone,  Inc.  a Nevada  corporation  (the  "COMPANY"),  at a price  per share as
specified  below up to ________  shares,  subject to the terms and provisions of
this Warrant  (and  subject to  adjustment  for stock  splits,  recapitalization
events and the like) (the "WARRANT SHARES").

      Terms  used  herein  and not  otherwise  defined  shall  have the  meaning
assigned  thereto in the Shares and Warrants  Purchase  Agreement dated ________
____, 2004 between the Holder and the Company  attached hereto as Exhibit 1 (the
"AGREEMENT").

      All herein is subject to the  fulfillment  of the terms and  conditions by
the Holder are subject to the full payment of the Shares by the Purchaser in the
Agreement as described herein.

      1. CERTAIN DEFINITIONS.  As used in this Warrant the following terms shall
have the following respective meanings:

      "HSR ACT" means the Hart-Scott-Rodino  Antitrust Improvements Act of 1976,
as amended.

      "REGISTERED  HOLDER"  means any  Holder  in whose  name  this  Warrant  is
registered upon the books and records maintained by the Company.

      "WARRANT" as used herein,  includes this Warrant and any warrant delivered
in substitution or exchange therefore as provided herein.

<PAGE>

2.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      2.1 Due Authorization;  Consents.  All corporate action on the part of the
Company,   its   officers,   directors  and   shareholders   necessary  for  the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and the authorization, issuance, reservation
for  issuance and delivery of all of the Warrant  Shares,  has been taken.  This
Warrant  is a  valid  and  binding  obligation  of the  Company  enforceable  in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy,  insolvency,  moratorium,  reorganization and similar laws affecting
creditors' rights generally and to general equitable  principles.  All consents,
approvals and authorizations  of, and registrations,  qualifications and filings
with, any federal or state governmental agency,  authority or body, or any third
party,  required in connection  with the execution,  delivery and performance of
this Warrant and the consummation of the transactions  contemplated  hereby have
been obtained.

      2.2 Governmental Consents. All consents, approvals, orders, authorizations
or registrations, qualifications, designations, declarations or filings with any
governmental  authority on the part of Company  required in connection  with the
consummation of the transactions contemplated herein have been obtained.

      2.3  Compliance  with  Other  Instruments.  The  execution,  delivery  and
performance  of and  compliance  with this Warrant and the  consummation  of the
transactions  contemplated  hereby will not be in conflict  with or  constitute,
with or without  the  passage of time or the giving of notice or both,  either a
default under the  Memorandum of  Association,  Articles of  Association,  other
constitutive  document,  or any  agreement  or  contract  of the  Company,  or a
violation  of any  statutes,  laws,  regulations  or orders,  or an event  which
results in the creation of any lien, charge or encumbrance upon any asset of the
Company.

3.    EXERCISE OF WARRANT

      3.1.  Subject to compliance  with the terms and conditions of this Warrant
and applicable  securities  laws, this Warrant may be exercised,  in whole or in
part with respect to the  applicable  number of Warrant  Shares,  at an exercise
price (the "Exercise Price") of U.S. $5.50 per Warrant Share.

      3.2 Net Issue Exercise. In lieu of exercising this Warrant, the Holder may
elect to receive  Shares equal to the value of this Warrant if the  registration
statement is not effective after 12 months from the Closing Date (or the portion
thereof being canceled) by surrender of this Warrant at the principal  office of
the Company  together with notice of such  election,  in which event the Company
shall  issue to the  Holder a number of  Shares  computed  using  the  following
formula:

                        X = Y (A-B)

                            -------

                               A

              Where X     =    the number of the Shares to be issued to
                               the Holder.

                    Y     =    the number of the Shares purchasable under
                               this Warrant.

                                        2

<PAGE>

                    A     =    the fair market  value of one Share on the date
                               of determination.

                    B     =    the per share  Exercise  Price (as  adjusted to
                               the date of such calculation).

                        (c) Fair Market  Value.  For purposes of this Section 1,
                          the per share fair  market  value of the Shares  shall
                          mean:

                               (i) If the  Company's  Common  Stock is  publicly
                          traded,  the per share fair market value of the Shares
                          shall be the  average  of the  closing  prices  of the
                          Common Stock as quoted on the Nasdaq  National  Market
                          or the principal exchange on which the Common Stock is
                          listed, or if not so listed then the fair market value
                          shall be the  average of the closing bid prices of the
                          Common Stock as published in The Wall Street  Journal,
                          in each case for the fifteen  trading days ending five
                          trading  days  prior to the date of  determination  of
                          fair market value;

                               (ii)  If the  Company's  Common  Stock  is not so
                          publicly  traded,  the per share fair market  value of
                          the  Shares  shall  be such  fair  market  value as is
                          determined  in good faith by the Board of Directors of
                          the Company after taking into consideration factors it
                          deems  appropriate,   including,  without  limitation,
                          recent sale and offer  prices of the capital  stock of
                          the  Company in  private  transactions  negotiated  at
                          arm's length.

            3.3.  (i) The Holder  may  exercise  this  Warrant in respect of the
applicable  number of  Warrant  Shares,  at any time or from time to time by the
delivery (including,  without limitation,  delivery by facsimile) of the form of
Notice of Exercise attached hereto as Exhibit 2 (the "NOTICE OF EXERCISE"), duly
executed by the Holder,  at the principal office of the Company,  and as soon as
practicable after such date, surrendering:

            (a) this Warrant at the principal office of the Company, and

            (b)  payment,  (i) in cash (by  check)  or by wire  transfer,  of an
amount  equal to the  product  obtained by  multiplying  the number of shares of
Warrant  Shares  being  purchased  upon  such  exercise  by the then  applicable
Exercise  Price,  (and the Warrant Shares shall be issued as soon as practicable
after  five (5) days  commencing  the  payment  day),  except  that if Holder is
subject to HSR Act Restrictions (as defined in Section 3.4 below),  the Exercise
Amount  shall  be paid to the  Company  within  five  (5)  business  days of the
termination of all HSR Act Restrictions  (and the Warrant Shares shall be issued
as soon as  practicable  after  five  (5)  days  commencing  the  payment  day).
Certificates  for shares  purchased  hereunder  shall be delivered to the Holder
within three (3) business  days after the date on which this Warrant  shall have
been exercised as aforesaid. This Warrant shall be deemed to have been exercised
and such  certificate or certificates  shall be deemed to have been issued,  and
the Holder or any other person so designated to be named therein shall be deemed
to have  become a holder of record of such  shares for all  purposes,  as of the
date the Warrant has been  exercised  by payment to the Company of the  Exercise
Price.  If  the  Company  fails  to  deliver  to the  Holder  a  certificate  or
certificates  representing the Warrant Shares pursuant to this Section 3.3(b) by
the close of business on the third business day after the date of exercise, then
the Holder will have the right to rescind such exercise.

                                       3
<PAGE>

            (ii) Provided,  however,  that under no circumstances may the Holder
exercise,  and in no event shall the Company be  obligated to honor any exercise
of this  Warrant  to the  extent the result of such  exercise  and  issuance  of
Warrant  Shares  pursuant  thereto  would result  (after  giving  effect to such
issuance)  in the Holder  owning 4.9% or more of the then  outstanding  Ordinary
Shares of the Company.  To the extent any such exercise is not honored  pursuant
to the foregoing  proviso,  the shares  withheld from such exercise shall remain
available for issuance upon subsequent exercise of this Warrant, subject to such
proviso.

      3.4.  Fractional  Shares. The Company shall pay the Holder cash in lieu of
any  fraction of a share equal to such  fraction  of the  Exercise  Price of one
whole  share of  Warrant  Shares.  No  fractional  shares or scrip  representing
fractional shares shall be issued upon an exercise of this Warrant.

      3.5.  HSR Act.  The  Company  hereby  acknowledges  that  exercise of this
Warrant  by Holder  may  subject  the  Company  and/or  the Holder to the filing
requirements  of the HSR Act and that Holder may be  prevented  from  exercising
this Warrant until the expiration or early  termination  of all waiting  periods
imposed by the HSR Act ("HSR ACT RESTRICTIONS").

      3.6. Partial Exercise;  Effective Date of Exercise. In case of any partial
exercise of this Warrant,  the Company shall cancel this Warrant upon  surrender
hereof and shall  execute  and  deliver a new Warrant of like tenor and date for
the balance of the shares of Warrant Shares purchasable hereunder.  This Warrant
shall be  deemed  to have  been  exercised  immediately  prior  to the  close of
business on the date of its surrender for exercise as provided  above.  However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have  been  exercised  on the  date  immediately  following  the  date of the
expiration  of all HSR Act  Restrictions.  The person  entitled  to receive  the
shares of Warrant Shares issuable upon exercise of this Warrant shall be treated
for all  purposes  as the  holder of  record  of such  shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.

      3.7 Expiration of Warrant.  This Warrant shall expire, with respect to the
applicable  number of Warrant  Shares only, on the earlier to occur of : (a) the
date  that  is  five  (5)  years  following  the  date  of  this  Warrant;   (b)
[intentionally omitted]; (c) The Company can call the Warrants before the end of
the 5 years,  if the  underlying  shares are registered and the closing price of
the Share in the  market  is $12 or  higher  for 20  consecutive  trading  days,
subject to there being an effective  registration  statement and 10 days written
notice to the Holder.

4. VALID ISSUANCE;  TAXES. All shares of Warrant Shares issued upon the exercise
of this Warrant shall be validly issued, fully paid and non-assessable,  and the
Company shall pay all taxes and other  governmental  charges that may be imposed
in respect of the issue or delivery  thereof.  The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer  involved
in the  issuance  of any  certificate  for shares of Warrant  Shares in any name
other than that of the Registered  Holder of this Warrant,  and in such case the
Company  shall not be  required  to issue or deliver  any stock  certificate  or
security  until  such  tax or  other  charge  has  been  paid,  or it  has  been
established to the Company's reasonable satisfaction that no tax or other charge
is due.

                                       4
<PAGE>

5.  ADJUSTMENT  OF  PURCHASE  PRICE AND NUMBER OF  SHARES.  In  addition  to any
adjustment to the Warrant Shares required by the terms of such Warrant Shares in
the Company's  Articles of  Association,  the number of shares of Warrant Shares
issuable  upon  exercise  of this  Warrant  (or any  shares  of  stock  or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Purchase  Price are subject to adjustment  upon  occurrence of the following
events:

      5.1.  Adjustment for Share Splits,  Share  Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Warrant  Shares  issuable  upon exercise of this Warrant
(or any shares of stock or other  securities  at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision  of the Company's  Warrant Shares or Ordinary  Shares.  The Purchase
Price of this Warrant shall be proportionally increased and the number of shares
of Warrant Shares issuable upon exercise of this Warrant (or any shares of stock
or other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Shares.

      5.2.  Adjustment  for  Dividends  or  Distributions  of  Shares  or  Other
Securities or Property.  In case the Company shall make or issue, or shall fix a
record date for the  determination of eligible  holders  entitled to receive,  a
dividend or other distribution with respect to the Warrant Shares (or any shares
of stock or other  securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of retained  earnings),  then, in each such case, the
Holder of this  Warrant on exercise  hereof at any time after the  consummation,
effective  date or record  date of such  dividend or other  distribution,  shall
receive,  in  addition  to the shares of Warrant  Shares (or such other stock or
securities)  issuable  on such  exercise  prior to such date,  and  without  the
payment of  additional  consideration  therefor,  the  securities  or such other
assets of the Company to which such Holder  would have been  entitled  upon such
date if such  Holder  had  exercised  this  Warrant  on the date  hereof and had
thereafter,  during the period from the date hereof to and including the date of
such exercise,  retained such shares and/or all other additional stock available
by it as aforesaid  during such period giving effect to all  adjustments  called
for by this Section

      5.3.  Reclassification.  If the Company, by reclassification of securities
or otherwise,  shall change any of the  securities as to which  purchase  rights
under this Warrant  exist into the same or a different  number of  securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of  securities  as would have been  issuable as the
result of such change with  respect to the  securities  that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefore shall be  appropriately  adjusted,
all subject to further  adjustment  as provided in this Section 5. No adjustment
shall be made pursuant to this Section 5.3 upon any  conversion or redemption of
the Warrant Shares which is the subject of Section 5.5.

                                       5
<PAGE>

      5.4. Adjustment for Capital  Reorganization,  Merger or Consolidation.  In
case of any capital  reorganization  of the capital stock of the Company  (other
than  a  combination,  reclassification,   exchange  or  subdivision  of  shares
otherwise  provided for herein),  or any merger or  consolidation of the Company
with or into another  corporation,  or the sale of all or substantially  all the
assets  of  the  Company  then,  and in  each  such  case,  as a  part  of  such
reorganization,  merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this  Warrant  shall  thereafter  be  entitled  to
receive upon exercise of this Warrant,  during the period  specified  herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization,  merger,  consolidation,  sale or transfer  that a holder of the
shares  deliverable  upon  exercise of this Warrant  would have been entitled to
receive in such reorganization,  consolidation, merger, sale or transfer if this
Warrant  had been  exercised  immediately  before such  reorganization,  merger,
consolidation,  sale or transfer,  all subject to further adjustment as provided
in this Section 5. The foregoing  provisions of this Section 5.4 shall similarly
apply  to  successive  reorganizations,   consolidations,   mergers,  sales  and
transfers and to the stock or securities  of any other  corporation  that are at
the  time  receivable  upon  the  exercise  of this  Warrant.  If the  per-share
consideration  payable to the Holder  hereof for shares in  connection  with any
such transaction is in a form other than cash or marketable securities, then the
value of such  consideration  shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's  Board of Directors)  shall be made in the application of
the  provisions  of this Warrant with respect to the rights and interests of the
Holder after the  transaction,  to the end that the  provisions  of this Warrant
shall be applicable  after that event, as near as reasonably may be, in relation
to any shares or other  property  deliverable  after that event upon exercise of
this Warrant.

6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares  issuable upon exercise of this Warrant,  the
Chief  Financial  Officer  or  Controller  of the  Company  shall  compute  such
adjustment  in  accordance  with  the  terms  of  this  Warrant  and  prepare  a
certificate  setting forth such  adjustment and showing in detail the facts upon
which such adjustment is based,  including a statement of the adjusted  Purchase
Price.  The Company shall  promptly send (by facsimile and by either first class
mail, postage prepaid or overnight  delivery) a copy of each such certificate to
the Holder.

7. LOSS OR MUTILATION.  Upon receipt of evidence reasonably  satisfactory to the
Company of the ownership of and the loss,  theft,  destruction  or mutilation of
this Warrant, and of indemnity  reasonably  satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute  and  deliver in lieu  thereof a new  Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.

8. RESERVATION OF WARRANT SHARES. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery  upon exercise of this Warrant
such number of shares of Warrant  Shares or other shares of capital stock of the
Company as are from time to time  issuable  upon  exercise of this  Warrant and,
from time to time,  will  take all steps  necessary  to amend  its  Articles  of
Association to provide sufficient  reserves of shares of Warrant Shares issuable
upon exercise of this  Warrant.  All such shares shall be duly  authorized,  and
when  issued  upon  such  exercise,  shall be  validly  issued,  fully  paid and
non-assessable,  free and clear of all liens,  security  interests,  charges and
other  encumbrances or restrictions on sale and free and clear of all preemptive
rights,  except  encumbrances  or  restrictions  arising  under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing share certificates
to execute and issue the  necessary  certificates  for shares of Warrant  Shares
upon the exercise of this Warrant.

                                       6
<PAGE>

9.  RESTRICTIONS ON TRANSFER.  The Holder,  by acceptance  hereof,  agrees that,
absent  an  effective  registration  statement  filed  with  the SEC  under  the
Securities  Act of 1933 (the "ACT"),  covering the  disposition  or sale of this
Warrant or the Warrant  Shares issued or issuable  upon  exercise  hereof as the
case may be, and registration or qualification under applicable state securities
laws,  such Holder will not sell,  transfer,  pledge,  or hypothecate any or all
such Warrants or Warrant Shares, unless such transfer is performed in compliance
with the provisions of the Company's  Articles of Association and either (i) the
Company has  received an opinion of counsel,  in form and  substance  reasonably
satisfactory  to the  Company,  to the  effect  that  such  registration  is not
required in connection with such disposition or (ii) the sale of such securities
has been registered under the Act.

10.  COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant,  the Holder
hereby  represents,  warrants and covenants  that any shares of stock  purchased
upon exercise of this Warrant shall be acquired for investment only and not with
a view to, or for sale in connection  with, any distribution  thereof;  that the
Holder has had such  opportunity  as such  Holder has deemed  adequate to obtain
from  representatives  of the Company such information as is necessary to permit
the Holder to evaluate  the merits and risks of its  investment  in the Company;
that the Holder is able to bear the economic  risk of holding such shares as may
be acquired  pursuant to the exercise of this Warrant for an indefinite  period;
that the Holder  understands  that the shares of stock acquired  pursuant to the
exercise of this Warrant will not be registered under the Act (unless  otherwise
required pursuant to exercise by the Holder of the registration  rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within  the  meaning  of Rule 144  under  the Act and that  the  exemption  from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this  Warrant,  subject to any special  treatment by the SEC
for  exercise  of this  Warrant,  and even then will not be  available  unless a
public market then exists for the stock,  adequate  information  concerning  the
Company is then available to the public,  and other terms and conditions of Rule
144 are complied with; and that all stock  certificates  representing  shares of
stock  issued to the Holder  upon  exercise  of this  Warrant  may have  affixed
thereto a legend substantially in the following form:

         THE SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN REGISTERED  UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
         LAWS OF ANY STATE.  THESE  SECURITIES  ARE SUBJECT TO  RESTRICTIONS  ON
         TRANSFERABILITY  AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
         AS PERMITTED UNDER THE ACT AND THE APPLICABLE  STATE  SECURITIES  LAWS,
         PURSUANT TO REGISTRATION OR EXEMPTION  THEREFROM.  INVESTORS  SHOULD BE
         AWARE THAT THEY MAY BE  REQUIRED  TO BEAR THE  FINANCIAL  RISKS OF THIS
         INVESTMENT  FOR AN  INDEFINITE  PERIOD  OF TIME.  THE  ISSUER  OF THESE
         SECURITIES  MAY  REQUIRE AN  OPINION  OF COUNSEL IN FORM AND  SUBSTANCE
         SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED  TRANSFER OR
         RESALE  IS  IN  COMPLIANCE  WITH  THE  ACT  AND  ANY  APPLICABLE  STATE
         SECURITIES LAWS.

                                       7
<PAGE>

11. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company.  In
the absence of  affirmative  action by the Holder to purchase  Warrant Shares by
exercise of this  Warrant no  provisions  of this  Warrant,  and no  enumeration
herein of the rights or  privileges of the Holder hereof shall cause such Holder
hereof to be a shareholder of the Company for any purpose.

12.  REPRESENTATIONS  AND  WARRANTIES BY THE HOLDER.  The Holder  represents and
warrants to the Company as follows:

            (a) This Warrant and the Shares  issuable upon exercise  thereof are
being  acquired for its own account,  for  investment and not with a view to, or
for resale in connection  with,  any  distribution  or public  offering  thereof
within the meaning of the Securities  Act of 1933, as amended (the "Act").  Upon
exercise _____________ of ____________ this _____________ Warrant, _____________
the  ____________  Holder  shall,  if so requested  by the  Company,  confirm in
writing,  in a form  satisfactory to the Company,  that the securities  issuable
upon exercise of this Warrant are being  acquired for  investment and not with a
view toward distribution or resale.

            (b) The Holder  understands that the Warrant and the Shares have not
been  registered  under  the Act by reason of their  issuance  in a  transaction
exempt from the  registration  and prospectus  delivery  requirements of the Act
pursuant  to  Section  4(2)  thereof,  and that they must be held by the  Holder
indefinitely,  and that the Holder must therefore bear the economic risk of such
investment  indefinitely,  unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration.

            (c) The Holder has such  knowledge  and  experience in financial and
business  matters that it is capable of  evaluating  the merits and risks of the
purchase  of this  Warrant and the Shares  purchasable  pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.

            (d) The Holder is able to bear the economic  risk of the purchase of
the Shares pursuant to the terms of this Warrant.

13. NOTICES. All notices and other communications  hereunder shall be in writing
and shall be given in person,  by registered mail (registered  international air
mail if mailed internationally), by an overnight courier service which obtains a
receipt to  evidence  delivery,  or by  facsimile  transmission  (provided  that
written confirmation of receipt is provided), addressed as set forth below:

If to the Company:        XFONE, Inc.
                          Brittania House
                          960 High Road
                          London N12 9RY
                          United Kingdom

If to the Holder:

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

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

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

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

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

                                       8
<PAGE>

Or such other address as any party may designate to the other in accordance with
the  aforesaid  procedure.  All notices and other  communications  delivered  in
person or by courier  service shall be deemed to have been given as of three (3)
business days after sending thereof, those given by facsimile transmission shall
be deemed given  twenty-four hours following  transmission,  and all notices and
other  communications  sent by  registered  mail (or air mail if the  posting in
international) shall be deemed given seven (7) days after posting.

14.  HEADINGS.  The headings in this Warrant are for purposes of  convenience in
reference only, and shall not be deemed to constitute a part hereof.

15.  GOVERNING  LAW;  JURISDICTION.  Any claim arising under or relating to this
Warrant,  shall be governed by the laws of the State of New York, without regard
to  principles  of conflict of laws.  Each party hereto  consents that any legal
action or proceeding against it under,  arising out of or in any manner relating
to this Warrant shall be brought  exclusively  in the courts of the State of New
York located in New York County or in the United States  District  Court for the
Southern District of New York. Each party hereto expressly waives any right to a
trial by jury in any action or proceeding  under this  Warrant,  and agrees that
any such  action or  proceeding  shall be tried  before a court and not before a
jury.

16. NO  IMPAIRMENT.  The Company  will at all times in good faith  assist in the
carrying  out of all such terms and in the  taking of all such  action as may be
necessary or appropriate in order to protect the rights of the Registered Holder
of this Warrant  against  impairment.  Without  limiting the  generality  of the
foregoing,  the  Company  (a) will not  increase  the par value of any shares of
stock  issuable  upon the  exercise  of this  Warrant  above the amount  payable
therefor  upon  such  exercise,  and (b) will  take all  such  action  as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  non-assessable  shares of Warrant  Shares upon  exercise of this
Warrant.

17.   NOTICES OF RECORD DATE. In case:

      17.1. the Company shall take a record of the holders of its Warrant Shares
(or other stock or securities at the time  receivable  upon the exercise of this
Warrant),  for the purpose of  entitling  them to receive any  dividend or other
distribution,  or any right to subscribe  for or purchase any shares of stock of
any class or any other securities or to receive any other right; or

      17.2. of any  consolidation  or merger of the Company with or into another
corporation,  any capital reorganization of the Company, any reclassification of
the share capital of the Company,  or any conveyance of all or substantially all
of the  assets of the  Company to another  corporation  in which  holders of the
Company's  stock  are to  receive  stock,  securities  or  property  of  another
corporation; or

      17.3.  of any  voluntary  dissolution,  liquidation  or  winding-up of the
Company; or

      17.4. of any redemption or conversion of all  outstanding  Ordinary Shares
or Warrant Shares;

                                       9
<PAGE>

then, and in each such case, if applicable, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be,  (i) the date on which a record is to be taken for the  purpose  of such
dividend,  distribution or right, or (ii) the date on which such reorganization,
reclassification,  consolidation, merger, conveyance, dissolution,  liquidation,
winding-up,  redemption or conversion is to take place,  and the time, if any is
to be fixed,  as of which the  holders  of record of  Warrant  Shares,  Ordinary
Shares  or (such  stock or  securities  as at the time are  receivable  upon the
exercise of this Warrant), shall be entitled to exchange their shares of Warrant
Shares,  Ordinary Shares (or such other stock or securities),  for securities or
other  property   deliverable   upon  such   reorganization,   reclassification,
consolidation,  merger, conveyance, dissolution, liquidation or winding-up. Such
notice  shall be  delivered  at least  ten (10) days  prior to the date  therein
specified.

18.  SEVERABILITY.  If any term,  provision,  covenant  or  restriction  of this
Warrant is held by a court of  competent  jurisdiction  to be  invalid,  void or
unenforceable,   the   remainder  of  the  terms,   provisions,   covenants  and
restrictions  of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.

19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of  this  Warrant  may be  executed  by the  parties  hereto  and  delivered  by
facsimile,  and each such executed  counterpart shall be, and shall be deemed to
be, an original instrument.

20. NO  INCONSISTENT  AGREEMENTS.  The Company  will not on or after the date of
this  Warrant  enter into any  agreement  with respect to its  securities  which
prohibits the rights granted to the Holders of this Warrant.  The rights granted
to  the  Holders  hereunder  do not  in  any  way  conflict  with  and  are  not
inconsistent  with the rights  granted to  holders of the  Company's  securities
under any other agreements, except rights that have been waived or lapsed.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       10
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have executed this Warrant as of
____________ , 2004.

HOLDER:                                  XFONE,INC
        -----------------------

By:                                      By:
   ----------------------------             --------------------------

-------------------------------          -----------------------------
Printed Name                             Printed Name

-------------------------------          -----------------------------
Title                                    Title

                                       11
<PAGE>

                                    EXHIBIT 1

                                    AGREEMENT

                                       12
<PAGE>

                                    EXHIBIT 2

                               NOTICE OF EXERCISE

                    (To be executed upon exercise of Warrant)

XFONE, INC.                                                  WARRANT NO. __

The  undersigned  hereby  irrevocably  elects to exercise  the right of purchase
represented by the within Warrant  Certificate for, and to purchase  thereunder,
the  securities  of Xfone,  Inc.,  as  provided  for  therein,  and  (check  the
applicable box):

|_|   Tenders herewith payment of the exercise price in full in the form of cash
      or (by  check) or by wire  transfer  in  same-day  funds in the  amount of
      $____________ for _________ such securities, pursuant to the Warrant.

|_|   Please issue a certificate or certificates for such securities in the name
      of,  and pay any cash for any  fractional  share to  (please  print  name,
      address and social security number):

Name:
                 ----------------------------------------------

Address:
                 ----------------------------------------------

Signature:
                 ----------------------------------------------

Note: The above signature should  correspond  exactly with the name on the first
page of the Warrant Certificate to which this notice is attached as Exhibit 2.

If said  number of  shares  shall not be all the  shares  purchasable  under the
within  Warrant  Certificate,  a new Warrant  Certificate is to be issued in the
name of said  undersigned  for the balance  remaining of the shares  purchasable
there under rounded up to the next higher whole number of shares.

                                       13
<PAGE>

                                                                       Exhibit 4

                                    WARRANT B

THE WARRANT  EVIDENCED OR CONSTITUTED  HEREBY,  AND ALL ORDINARY SHARES ISSUABLE
HEREUNDER,  HAVE  BEEN  AND  WILL  BE  ISSUED  WITHOUT  REGISTRATION  UNDER  THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD,  OFFERED FOR
SALE,  TRANSFERRED,  PLEDGED OR HYPOTHECATED  WITHOUT REGISTRATION UNDER THE ACT
UNLESS  EITHER (i) THE COMPANY HAS  RECEIVED AN OPINION OF COUNSEL,  IN FORM AND
SUBSTANCE   REASONABLY   SATISFACTORY  TO  THE  COMPANY,   TO  THE  EFFECT  THAT
REGISTRATION  IS NOT REQUIRED IN CONNECTION  WITH SUCH  DISPOSITION  OR (ii) THE
SALE OF SUCH SECURITIES HAS BEEN REGISTERED UNDER THE ACT.

                        WARRANT TO PURCHASE COMMON STOCK
                                 OF XFONE, INC.

NO. _

      THIS CERTIFIES THAT, for value received,  ___________  (the "HOLDER"),  is
entitled,  subject to the terms and conditions of this Warrant, to purchase from
Xfone,  Inc.  a Nevada  corporation  (the  "COMPANY"),  at a price  per share as
specified  below up to ________  Shares,  subject to the terms and provisions of
this Warrant  (and  subject to  adjustment  for stock  splits,  recapitalization
events and the like) (the "WARRANT SHARES").

      Terms  used  herein  and not  otherwise  defined  shall  have the  meaning
assigned  thereto in the Shares and Warrants  Purchase  Agreement dated ________
____, 2004 between the Holder and the Company  attached hereto as Exhibit 1 (the
"AGREEMENT").

      All herein is subject to the  fulfillment  of the terms and  conditions by
the Holder are subject to the full payment of the Shares by the Purchaser in the
Agreement as described herein.

1. CERTAIN  DEFINITIONS.  As used in this Warrant the following terms shall have
the following respective meanings:

      "HSR ACT" means the Hart-Scott-Rodino  Antitrust Improvements Act of 1976,
as amended.

      "REGISTERED  HOLDER"  means any  Holder  in whose  name  this  Warrant  is
registered upon the books and records maintained by the Company.

      "WARRANT" as used herein,  includes this Warrant and any warrant delivered
in substitution or exchange therefore as provided herein.

<PAGE>

2.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      2.1 Due Authorization;  Consents.  All corporate action on the part of the
Company,   its   officers,   directors  and   shareholders   necessary  for  the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and the authorization, issuance, reservation
for  issuance and delivery of all of the Warrant  Shares,  has been taken.  This
Warrant  is a  valid  and  binding  obligation  of the  Company  enforceable  in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy,  insolvency,  moratorium,  reorganization and similar laws affecting
creditors' rights generally and to general equitable  principles.  All consents,
approvals and authorizations  of, and registrations,  qualifications and filings
with, any federal or state governmental agency,  authority or body, or any third
party,  required in connection  with the execution,  delivery and performance of
this Warrant and the consummation of the transactions  contemplated  hereby have
been obtained.

      2.2 Governmental Consents. All consents, approvals, orders, authorizations
or registrations, qualifications, designations, declarations or filings with any
governmental  authority on the part of Company  required in connection  with the
consummation of the transactions contemplated herein have been obtained.

      2.3  Compliance  with  Other  Instruments.  The  execution,  delivery  and
performance  of and  compliance  with this Warrant and the  consummation  of the
transactions  contemplated  hereby will not be in conflict  with or  constitute,
with or without  the  passage of time or the giving of notice or both,  either a
default under the  Memorandum of  Association,  Articles of  Association,  other
constitutive  document,  or any  agreement  or  contract  of the  Company,  or a
violation  of any  statutes,  laws,  regulations  or orders,  or an event  which
results in the creation of any lien, charge or encumbrance upon any asset of the
Company.

3.    EXERCISE OF WARRANT

      3.1.  Subject to compliance  with the terms and conditions of this Warrant
and applicable  securities  laws, this Warrant may be exercised,  in whole or in
part with respect to the  applicable  number of Warrant  Shares,  at an exercise
price (the "Exercise Price") of U.S. $3.50 per Warrant Share.

      3.2 Net Issue Exercise. In lieu of exercising this Warrant, the Holder may
elect to receive  Shares equal to the value of this Warrant if the  registration
statement is not effective after 12 months from the Closing Date (or the portion
thereof being canceled) by surrender of this Warrant at the principal  office of
the Company  together with notice of such  election,  in which event the Company
shall  issue to the  Holder a number of  Shares  computed  using  the  following
formula:

                        X = Y (A-B)

                            -------

                               A

              Where X     =   the  number  of the  Shares to be issued to the
                              Holder.

                    Y     =   the number of the Shares purchasable under this
                              Warrant.

                                        2

<PAGE>

                    A     =   the fair market  value of one Share on the date
                              of determination.

                    B     =   the per share  Exercise  Price (as  adjusted to
                              the date of such calculation).

                        (c) Fair Market  Value.  For purposes of this Section 1,
                          the per share fair  market  value of the Shares  shall
                          mean:

                               (i) If the  Company's  Common  Stock is  publicly
                          traded,  the per share fair market value of the Shares
                          shall be the  average  of the  closing  prices  of the
                          Common Stock as quoted on the Nasdaq  National  Market
                          or the principal exchange on which the Common Stock is
                          listed, or if not so listed then the fair market value
                          shall be the  average of the closing bid prices of the
                          Common Stock as published in The Wall Street  Journal,
                          in each case for the fifteen  trading days ending five
                          trading  days  prior to the date of  determination  of
                          fair market value;

                               (ii)  If the  Company's  Common  Stock  is not so
                          publicly  traded,  the per share fair market  value of
                          the  Shares  shall  be such  fair  market  value as is
                          determined  in good faith by the Board of Directors of
                          the Company after taking into consideration factors it
                          deems  appropriate,   including,  without  limitation,
                          recent sale and offer  prices of the capital  stock of
                          the  Company in  private  transactions  negotiated  at
                          arm's length.

            3.3.  (i) The Holder  may  exercise  this  Warrant in respect of the
applicable  number of  Warrant  Shares,  at any time or from time to time by the
delivery (including,  without limitation,  delivery by facsimile) of the form of
Notice of Exercise attached hereto as Exhibit 2 (the "NOTICE OF EXERCISE"), duly
executed by the Holder,  at the principal office of the Company,  and as soon as
practicable after such date, surrendering:

            (a) this Warrant at the principal office of the Company, and

            (b)  payment,  (i) in cash (by  check)  or by wire  transfer,  of an
amount  equal to the  product  obtained by  multiplying  the number of shares of
Warrant  Shares  being  purchased  upon  such  exercise  by the then  applicable
Exercise  Price,  (and the Warrant Shares shall be issued as soon as practicable
after  five (5) days  commencing  the  payment  day),  except  that if Holder is
subject to HSR Act Restrictions (as defined in Section 3.4 below),  the Exercise
Amount  shall  be paid to the  Company  within  five  (5)  business  days of the
termination of all HSR Act Restrictions  (and the Warrant Shares shall be issued
as soon as  practicable  after  five  (5)  days  commencing  the  payment  day).
Certificates  for shares  purchased  hereunder  shall be delivered to the Holder
within three (3) business  days after the date on which this Warrant  shall have
been exercised as aforesaid. This Warrant shall be deemed to have been exercised
and such  certificate or certificates  shall be deemed to have been issued,  and
the Holder or any other person so designated to be named therein shall be deemed
to have  become a holder of record of such  shares for all  purposes,  as of the
date the Warrant has been  exercised  by payment to the Company of the  Exercise
Price.  If  the  Company  fails  to  deliver  to the  Holder  a  certificate  or
certificates  representing the Warrant Shares pursuant to this Section 3.3(b) by
the close of business on the third business day after the date of exercise, then
the Holder will have the right to rescind such exercise.

                                       3
<PAGE>

            (ii) Provided,  however,  that under no circumstances may the Holder
exercise,  and in no event shall the Company be  obligated to honor any exercise
of,  this  Warrant to the extent the result of such  exercise  and  issuance  of
Warrant  Shares  pursuant  thereto  would result  (after  giving  effect to such
issuance)  in the Holder  owning 4.9% or more of the then  outstanding  Ordinary
Shares of the Company.  To the extent any such exercise is not honored  pursuant
to the foregoing  proviso,  the shares  withheld from such exercise shall remain
available for issuance upon subsequent exercise of this Warrant, subject to such
proviso.

      3.4  Fractional  Shares.  The Company shall pay the Holder cash in lieu of
any  fraction of a share equal to such  fraction  of the  Exercise  Price of one
whole  share of  Warrant  Shares.  No  fractional  shares or scrip  representing
fractional shares shall be issued upon an exercise of this Warrant.

      3.5.  HSR Act.  The  Company  hereby  acknowledges  that  exercise of this
Warrant  by Holder  may  subject  the  Company  and/or  the Holder to the filing
requirements  of the HSR Act and that Holder may be  prevented  from  exercising
this Warrant until the expiration or early  termination  of all waiting  periods
imposed by the HSR Act ("HSR ACT RESTRICTIONS").

      3.6. Partial Exercise;  Effective Date of Exercise. In case of any partial
exercise of this Warrant,  the Company shall cancel this Warrant upon  surrender
hereof and shall  execute  and  deliver a new Warrant of like tenor and date for
the balance of the shares of Warrant Shares purchasable hereunder.  This Warrant
shall be  deemed  to have  been  exercised  immediately  prior  to the  close of
business on the date of its surrender for exercise as provided  above.  However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have  been  exercised  on the  date  immediately  following  the  date of the
expiration  of all HSR Act  Restrictions.  The person  entitled  to receive  the
shares of Warrant Shares issuable upon exercise of this Warrant shall be treated
for all  purposes  as the  holder of  record  of such  shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.

      3.7 Expiration of Warrant.  This Warrant shall expire, with respect to the
applicable  number of Warrant  Shares  only,  on the earlier to occur of: (a) 10
days after the Company  provides notice to the Holder that the Company's  common
stock has been  approved for listing on NASDAQ  Small Cap or the American  Stock
Exchange or 10 days following  effectiveness of the registration statement to be
filed by the company pursuant to the Registration  Rights Agreement  between the
Holder  and the  Company  of even  date  hereof;  (b) the date  that is 375 days
following the date of this Warrant; (c) [intentionally omitted]; (d) The Company
can call the Warrants before the end of the180 days, if the closing price of the
Share in the market is $12 or higher for 20 consecutive trading days, subject to
there being an effective  registration  statement and 10 days written  notice to
the Holder.

4. VALID ISSUANCE;  TAXES. All shares of Warrant Shares issued upon the exercise
of this Warrant shall be validly issued, fully paid and non-assessable,  and the
Company shall pay all taxes and other  governmental  charges that may be imposed
in respect of the issue or delivery  thereof.  The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer  involved
in the  issuance  of any  certificate  for shares of Warrant  Shares in any name
other than that of the Registered  Holder of this Warrant,  and in such case the
Company  shall not be  required  to issue or deliver  any stock  certificate  or
security  until  such  tax or  other  charge  has  been  paid,  or it  has  been
established to the Company's reasonable satisfaction that no tax or other charge
is due.

                                       4
<PAGE>

5.  ADJUSTMENT  OF  PURCHASE  PRICE AND NUMBER OF  SHARES.  In  addition  to any
adjustment to the Warrant Shares required by the terms of such Warrant Shares in
the Company's  Articles of  Association,  the number of shares of Warrant Shares
issuable  upon  exercise  of this  Warrant  (or any  shares  of  stock  or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Purchase  Price are subject to adjustment  upon  occurrence of the following
events:

      5.1.  Adjustment for Share Splits,  Share  Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Warrant  Shares  issuable  upon exercise of this Warrant
(or any shares of stock or other  securities  at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision  of the Company's  Warrant Shares or Ordinary  Shares.  The Purchase
Price of this Warrant shall be proportionally increased and the number of shares
of Warrant Shares issuable upon exercise of this Warrant (or any shares of stock
or other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Shares.

      5.2.  Adjustment  for  Dividends  or  Distributions  of  Shares  or  Other
Securities or Property.  In case the Company shall make or issue, or shall fix a
record date for the  determination of eligible  holders  entitled to receive,  a
dividend or other distribution with respect to the Warrant Shares (or any shares
of stock or other  securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of retained  earnings),  then, in each such case, the
Holder of this  Warrant on exercise  hereof at any time after the  consummation,
effective  date or record  date of such  dividend or other  distribution,  shall
receive,  in  addition  to the shares of Warrant  Shares (or such other stock or
securities)  issuable  on such  exercise  prior to such date,  and  without  the
payment of  additional  consideration  therefor,  the  securities  or such other
assets of the Company to which such Holder  would have been  entitled  upon such
date if such  Holder  had  exercised  this  Warrant  on the date  hereof and had
thereafter,  during the period from the date hereof to and including the date of
such exercise,  retained such shares and/or all other additional stock available
by it as aforesaid  during such period giving effect to all  adjustments  called
for by this Section 5.

      5.3.  Reclassification.  If the Company, by reclassification of securities
or otherwise,  shall change any of the  securities as to which  purchase  rights
under this Warrant  exist into the same or a different  number of  securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of  securities  as would have been  issuable as the
result of such change with  respect to the  securities  that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefore shall be  appropriately  adjusted,
all subject to further  adjustment  as provided in this Section 5. No adjustment
shall be made pursuant to this Section 5.3 upon any  conversion or redemption of
the Warrant Shares which is the subject of Section 5.5.

                                       5
<PAGE>

      5.4. Adjustment for Capital  Reorganization,  Merger or Consolidation.  In
case of any capital  reorganization  of the capital stock of the Company  (other
than  a  combination,  reclassification,   exchange  or  subdivision  of  shares
otherwise  provided for herein),  or any merger or  consolidation of the Company
with or into another  corporation,  or the sale of all or substantially  all the
assets  of  the  Company  then,  and in  each  such  case,  as a  part  of  such
reorganization,  merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this  Warrant  shall  thereafter  be  entitled  to
receive upon exercise of this Warrant,  during the period  specified  herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization,  merger,  consolidation,  sale or transfer  that a holder of the
shares  deliverable  upon  exercise of this Warrant  would have been entitled to
receive in such reorganization,  consolidation, merger, sale or transfer if this
Warrant  had been  exercised  immediately  before such  reorganization,  merger,
consolidation,  sale or transfer,  all subject to further adjustment as provided
in this Section 5. The foregoing  provisions of this Section 5.4 shall similarly
apply  to  successive  reorganizations,   consolidations,   mergers,  sales  and
transfers and to the stock or securities  of any other  corporation  that are at
the  time  receivable  upon  the  exercise  of this  Warrant.  If the  per-share
consideration  payable to the Holder  hereof for shares in  connection  with any
such transaction is in a form other than cash or marketable securities, then the
value of such  consideration  shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's  Board of Directors)  shall be made in the application of
the  provisions  of this Warrant with respect to the rights and interests of the
Holder after the  transaction,  to the end that the  provisions  of this Warrant
shall be applicable  after that event, as near as reasonably may be, in relation
to any shares or other  property  deliverable  after that event upon exercise of
this Warrant.

6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares  issuable upon exercise of this Warrant,  the
Chief  Financial  Officer  or  Controller  of the  Company  shall  compute  such
adjustment  in  accordance  with  the  terms  of  this  Warrant  and  prepare  a
certificate  setting forth such  adjustment and showing in detail the facts upon
which such adjustment is based,  including a statement of the adjusted  Purchase
Price.  The Company shall  promptly send (by facsimile and by either first class
mail, postage prepaid or overnight  delivery) a copy of each such certificate to
the Holder.

7. LOSS OR MUTILATION.  Upon receipt of evidence reasonably  satisfactory to the
Company of the ownership of and the loss,  theft,  destruction  or mutilation of
this Warrant, and of indemnity  reasonably  satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute  and  deliver in lieu  thereof a new  Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.

8. RESERVATION OF WARRANT SHARES. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery  upon exercise of this Warrant
such number of shares of Warrant  Shares or other shares of capital stock of the
Company as are from time to time  issuable  upon  exercise of this  Warrant and,
from time to time,  will  take all steps  necessary  to amend  its  Articles  of
Association to provide sufficient  reserves of shares of Warrant Shares issuable
upon exercise of this  Warrant.  All such shares shall be duly  authorized,  and
when  issued  upon  such  exercise,  shall be  validly  issued,  fully  paid and
non-assessable,  free and clear of all liens,  security  interests,  charges and
other  encumbrances or restrictions on sale and free and clear of all preemptive
rights,  except  encumbrances  or  restrictions  arising  under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing share certificates
to execute and issue the  necessary  certificates  for shares of Warrant  Shares
upon the exercise of this Warrant.

                                       6
<PAGE>

9.  RESTRICTIONS ON TRANSFER.  The Holder,  by acceptance  hereof,  agrees that,
absent  an  effective  registration  statement  filed  with  the SEC  under  the
Securities  Act of 1933 (the "ACT"),  covering the  disposition  or sale of this
Warrant or the Warrant  Shares issued or issuable  upon  exercise  hereof as the
case may be, and registration or qualification under applicable state securities
laws,  such Holder will not sell,  transfer,  pledge,  or hypothecate any or all
such Warrants or Warrant Shares, unless such transfer is performed in compliance
with the provisions of the Company's  Articles of Association and either (i) the
Company has  received an opinion of counsel,  in form and  substance  reasonably
satisfactory  to the  Company,  to the  effect  that  such  registration  is not
required in connection with such disposition or (ii) the sale of such securities
has been registered under the Act.

10.  COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant,  the Holder
hereby  represents,  warrants and covenants  that any shares of stock  purchased
upon exercise of this Warrant shall be acquired for investment only and not with
a view to, or for sale in connection  with, any distribution  thereof;  that the
Holder has had such  opportunity  as such  Holder has deemed  adequate to obtain
from  representatives  of the Company such information as is necessary to permit
the Holder to evaluate  the merits and risks of its  investment  in the Company;
that the Holder is able to bear the economic  risk of holding such shares as may
be acquired  pursuant to the exercise of this Warrant for an indefinite  period;
that the Holder  understands  that the shares of stock acquired  pursuant to the
exercise of this Warrant will not be registered under the Act (unless  otherwise
required pursuant to exercise by the Holder of the registration  rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within  the  meaning  of Rule 144  under  the Act and that  the  exemption  from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this  Warrant,  subject to any special  treatment by the SEC
for  exercise  of this  Warrant,  and even then will not be  available  unless a
public market then exists for the stock,  adequate  information  concerning  the
Company is then available to the public,  and other terms and conditions of Rule
144 are complied with; and that all stock  certificates  representing  shares of
stock  issued to the Holder  upon  exercise  of this  Warrant  may have  affixed
thereto a legend substantially in the following form:

         THE SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN REGISTERED  UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
         LAWS OF ANY STATE.  THESE  SECURITIES  ARE SUBJECT TO  RESTRICTIONS  ON
         TRANSFERABILITY  AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
         AS PERMITTED UNDER THE ACT AND THE APPLICABLE  STATE  SECURITIES  LAWS,
         PURSUANT TO REGISTRATION OR EXEMPTION  THEREFROM.  INVESTORS  SHOULD BE
         AWARE THAT THEY MAY BE  REQUIRED  TO BEAR THE  FINANCIAL  RISKS OF THIS
         INVESTMENT  FOR AN  INDEFINITE  PERIOD  OF TIME.  THE  ISSUER  OF THESE
         SECURITIES  MAY  REQUIRE AN  OPINION  OF COUNSEL IN FORM AND  SUBSTANCE
         SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED  TRANSFER OR
         RESALE  IS  IN  COMPLIANCE  WITH  THE  ACT  AND  ANY  APPLICABLE  STATE
         SECURITIES LAWS.

                                       7
<PAGE>

11. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company.  In
the absence of  affirmative  action by the Holder to purchase  Warrant Shares by
exercise of this  Warrant no  provisions  of this  Warrant,  and no  enumeration
herein of the rights or  privileges of the Holder hereof shall cause such Holder
hereof to be a shareholder of the Company for any purpose.

12.  REPRESENTATIONS  AND  WARRANTIES BY THE HOLDER.  The Holder  represents and
warrants to the Company as follows:

            (a) This Warrant and the Shares  issuable upon exercise  thereof are
being  acquired for its own account,  for  investment and not with a view to, or
for resale in connection  with,  any  distribution  or public  offering  thereof
within the meaning of the Securities  Act of 1933, as amended (the "Act").  Upon
exercise _________ of ____________ this _____________ Warrant, _____________ the
____________  Holder shall, if so requested by the Company,  confirm in writing,
in a form  satisfactory  to the  Company,  that  the  securities  issuable  upon
exercise of this Warrant are being  acquired for  investment and not with a view
toward distribution or resale.

            (b) The Holder  understands that the Warrant and the Shares have not
been  registered  under  the Act by reason of their  issuance  in a  transaction
exempt from the  registration  and prospectus  delivery  requirements of the Act
pursuant  to  Section  4(2)  thereof,  and that they must be held by the  Holder
indefinitely,  and that the Holder must therefore bear the economic risk of such
investment  indefinitely,  unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration.

            (c) The Holder has such  knowledge  and  experience in financial and
business  matters that it is capable of  evaluating  the merits and risks of the
purchase  of this  Warrant and the Shares  purchasable  pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.

            (d) The Holder is able to bear the economic  risk of the purchase of
the Shares pursuant to the terms of this Warrant.

13. NOTICES. All notices and other communications  hereunder shall be in writing
and shall be given in person,  by registered mail (registered  international air
mail if mailed internationally), by an overnight courier service which obtains a
receipt to  evidence  delivery,  or by  facsimile  transmission  (provided  that
written confirmation of receipt is provided), addressed as set forth below:

If to the Company:        XFONE, Inc.
                          Britannia House
                          960 High Road
                          London N12 9RY
                          United Kingdom

                                       8
<PAGE>

If to Holder:

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

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

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

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

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

Or such other address as any party may designate to the other in accordance with
the  aforesaid  procedure.  All notices and other  communications  delivered  in
person or by courier  service shall be deemed to have been given as of three (3)
business days after sending thereof, those given by facsimile transmission shall
be deemed given  twenty-four hours following  transmission,  and all notices and
other  communications  sent by  registered  mail (or air mail if the  posting in
international) shall be deemed given seven (7) days after posting.

14.  HEADINGS.  The headings in this Warrant are for purposes of  convenience in
reference only, and shall not be deemed to constitute a part hereof.

15.  GOVERNING  LAW;  JURISDICTION.  Any claim arising under or relating to this
Warrant,  shall be governed by the laws of the State of New York, without regard
to  principles  of conflict of laws.  Each party hereto  consents that any legal
action or proceeding against it under,  arising out of or in any manner relating
to this Warrant shall be brought  exclusively  in the courts of the State of New
York located in New York County or in the United States  District  Court for the
Southern District of New York. Each party hereto expressly waives any right to a
trial by jury in any action or proceeding  under this  Warrant,  and agrees that
any such  action or  proceeding  shall be tried  before a court and not before a
jury.

16. NO  IMPAIRMENT.  The Company  will at all times in good faith  assist in the
carrying  out of all such terms and in the  taking of all such  action as may be
necessary or appropriate in order to protect the rights of the Registered Holder
of this Warrant  against  impairment.  Without  limiting the  generality  of the
foregoing,  the  Company  (a) will not  increase  the par value of any shares of
stock  issuable  upon the  exercise  of this  Warrant  above the amount  payable
therefore  upon  such  exercise,  and (b) will  take all such  action  as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  non-assessable  shares of Warrant  Shares upon  exercise of this
Warrant.

17.   NOTICES OF RECORD DATE. In case:

      17.1. the Company shall take a record of the holders of its Warrant Shares
(or other stock or securities at the time  receivable  upon the exercise of this
Warrant),  for the purpose of  entitling  them to receive any  dividend or other
distribution,  or any right to subscribe  for or purchase any shares of stock of
any class or any other securities or to receive any other right; or

      17.2. of any  consolidation  or merger of the Company with or into another
corporation,  any capital reorganization of the Company, any reclassification of
the share capital of the Company,  or any conveyance of all or substantially all
of the  assets of the  Company to another  corporation  in which  holders of the
Company's  stock  are to  receive  stock,  securities  or  property  of  another
corporation; or

      17.3.  of any  voluntary  dissolution,  liquidation  or  winding-up of the
Company; or

                                       9
<PAGE>

      17.4. of any redemption or conversion of all  outstanding  Ordinary Shares
or Warrant Shares;

then, and in each such case, if applicable, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be,  (i) the date on which a record is to be taken for the  purpose  of such
dividend,  distribution or right, or (ii) the date on which such reorganization,
reclassification,  consolidation, merger, conveyance, dissolution,  liquidation,
winding-up,  redemption or conversion is to take place,  and the time, if any is
to be fixed,  as of which the  holders  of record of  Warrant  Shares,  Ordinary
Shares  or (such  stock or  securities  as at the time are  receivable  upon the
exercise of this Warrant), shall be entitled to exchange their shares of Warrant
Shares,  Ordinary Shares (or such other stock or securities),  for securities or
other  property   deliverable   upon  such   reorganization,   reclassification,
consolidation,  merger, conveyance, dissolution, liquidation or winding-up. Such
notice  shall be  delivered  at least  ten (10) days  prior to the date  therein
specified.

18.  SEVERABILITY.  If any term,  provision,  covenant  or  restriction  of this
Warrant is held by a court of  competent  jurisdiction  to be  invalid,  void or
unenforceable,   the   remainder  of  the  terms,   provisions,   covenants  and
restrictions  of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.

19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of  this  Warrant  may be  executed  by the  parties  hereto  and  delivered  by
facsimile,  and each such executed  counterpart shall be, and shall be deemed to
be, an original instrument.

20. NO  INCONSISTENT  AGREEMENTS.  The Company  will not on or after the date of
this  Warrant  enter into any  agreement  with respect to its  securities  which
prohibits the rights granted to the Holders of this Warrant.  The rights granted
to  the  Holders  hereunder  do not  in  any  way  conflict  with  and  are  not
inconsistent  with the rights  granted to  holders of the  Company's  securities
under any other agreements, except rights that have been waived or lapsed.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       10
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have executed this Warrant as of
________ ____, 2004.

HOLDER:                                        XFONE, INC
       ------------------------

By:                                            By:
   ------------------------                       --------------------------

---------------------------                    -----------------------------
Printed Name                                   Printed Name

---------------------------                    -----------------------------
Title                                          Title

                                       11
<PAGE>

                                    EXHIBIT 1

                                    AGREEMENT

                                       12
<PAGE>

                                    EXHIBIT 2

                               NOTICE OF EXERCISE

                    (To be executed upon exercise of Warrant)

XFONE, INC.                                                  WARRANT B NO. __

The  undersigned  hereby  irrevocably  elects to exercise  the right of purchase
represented by the within Warrant  Certificate for, and to purchase  thereunder,
the  securities  of Xfone,  Inc.,  as  provided  for  therein,  and  (check  the
applicable box):

|_|   Tenders herewith payment of the exercise price in full in the form of cash
      or (by  check) or by wire  transfer  in  same-day  funds in the  amount of
      $____________ for _________ such securities, pursuant to the Warrant.

|_|   Please issue a certificate or certificates for such securities in the name
      of,  and pay any cash for any  fractional  share to  (please  print  name,
      address and social security number):

Name:
                 ----------------------------------------------

Address:
                 ----------------------------------------------

Signature:
                 ----------------------------------------------

Note: The above signature should  correspond  exactly with the name on the first
page of the Warrant Certificate to which this notice is attached as Exhibit 2.

If said  number of  shares  shall not be all the  shares  purchasable  under the
within  Warrant  Certificate,  a new Warrant  Certificate is to be issued in the
name of said  undersigned  for the balance  remaining of the shares  purchasable
there under rounded up to the next higher whole number of shares.

                                       13
<PAGE>

                                                                       EXHIBIT 6

                          REGISTRATION RIGHTS AGREEMENT

      This Registration  Rights Agreement (this "Agreement") is made and entered
into as of ________ ____,  2004 by and between Xfone,  Inc a Nevada  corporation
having its executive  offices located at Britannia  House,  960 High Road London
N12 9RY,  United  Kingdom (the  "Company"),  and the  purchasers  identified  on
Exhibit 1 hereto (each a "Purchaser" and together, the "Purchasers").

      This  Agreement  is made  pursuant  to the  Shares and  Warrants  Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").

      The Company and the Purchasers hereby agree as follows:

1. Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Purchase  Agreement  shall have the meanings  given such terms in
the Purchase  Agreement.  As used in this  Agreement,  the following terms shall
have the following meanings:

            "Effectiveness   Date"  means,  with  respect  to  the  Registration
      Statement  required  to be filed  hereunder,  the earlier of (a) the 120th
      calendar  day  following  the  Closing  Date as  defined  in the  Purchase
      Agreement.  and (b) the tenth  Trading Day following the date on which the
      Company is notified by the Commission that the Registration Statement will
      not be reviewed or is no longer subject to further review and comments.

            "Effectiveness  Period"  shall have the meaning set forth in Section
      2(a).

            "Exchange  Act" means the  Securities  and Exchange Act of 1934,  as
      amended.

            "Filing  Date"  means,  with respect to the  Registration  Statement
      required  to be filed  hereunder,  the 45th  calendar  day  following  the
      Closing Date as defined in the Purchase Agreement.

            "Holder" or "Holders" means the holder or holders or Purchasers,  as
      the case may be, from time to time of Registrable Securities.

            "Indemnified  Party"  shall  have the  meaning  set forth in Section
      5(c).

            "Indemnifying  Party"  shall have the  meaning  set forth in Section
      5(c).

            "Losses" shall have the meaning set forth in Section 5(a).

            "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.

<PAGE>

            "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 and the Warrant  Shares,
      together with any shares of Common Stock issued or issuable upon any stock
      split,  dividend or other distribution,  recapitalization or similar event
      with respect to the foregoing.

            "Registration  Statement" means the registration statements required
      to be filed hereunder, including (in each case) the Prospectus, amendments
      and  supplements to the  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 the
      registration statement.

            "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.

            "Rule 424" means Rule 424 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.

      2.    Registration.

            (a) On or prior to the Filing Date,  the Company  shall use its best
      efforts to prepare and file with the Commission the Registration Statement
      covering the resale of all of the  Registrable  Securities for an offering
      to be made on a continuous  basis  pursuant to Rule 415. The  Registration
      Statement  required hereunder shall be on Form SB-2 and shall register the
      resale of the Shares and the Warrant  Shares.  The  Company  shall use its
      best efforts to cause the  Registration  Statement to become effective and
      remain   effective  as  provided   herein.   The  Company  shall  use  its
      commercially  reasonable efforts to cause the Registration Statement to be
      declared  effective under the Securities Act as promptly as possible after
      the  filing  thereof,  but in any event not later  than the  Effectiveness
      Date,  and  shall  use its  commercially  reasonable  efforts  to keep the
      Registration  Statement  continuously  effective  under the Securities Act
      until the earlier of the date when all Registrable  Securities  covered by
      the Registration  Statement (a) have been sold, transferred or disposed of
      pursuant  to  the   Registration   Statement  or  an  exemption  from  the
      registration  requirements  of the  Securities  Act or (b)  may be sold by
      non-affiliates  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 (the "Effectiveness Period").

                                       2
<PAGE>

            (b) If: a Registration Statement is (i) not filed on or prior to its
      Filing Date the Company  shall pay to each Holder an amount in shares,  as
      liquidated  damages  and not as a  penalty,  equal to 1% of the  aggregate
      Shares purchased by such Holder pursuant to the Purchase Agreement for any
      Registrable  Securities  then  held  by  such  Holder;  and  if  (ii)  the
      Registration  Statement is not declared  effective by the Commission on or
      before the Effectiveness Date, or (iii) after a Registration  Statement is
      first declared  effective by the  Commission,  it ceases for any reason to
      remain continuously  effective as to all Registrable  Securities not sold,
      disposed of or  transferred  for which it is required to be effective,  or
      the Holders are not permitted to utilize the Prospectus  therein to resell
      such Registrable Securities through no fault of their own, for in any such
      cases  twenty  Trading  Days (which need not be  consecutive  days) in the
      aggregate  during any  12-month  period (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 (ii) the date which
      such Trading Day period is  exceeded,  or for purposes of clause (iii) the
      date on which such twenty  Trading Day period is exceeded,  being referred
      to as "Event Date"),  then in addition to any other rights the Holders may
      have  hereunder or under  applicable  law: on each monthly  anniversary of
      each such Event Date (if the applicable Event shall not have been cured by
      such date) until the applicable  Event is cured or no more than a total of
      twelve months from the Closing Date,  the Company shall pay to each Holder
      an amount in shares, as liquidated damages and not as a penalty,  equal to
      2% of the aggregate  Shares owned by such Holder  pursuant to the Purchase
      Agreement for any Registrable  Securities then held by such Holder no more
      than a total of twelve  months from the Closing  date.  In no way will the
      Company pay more than 2% per month if the  Company  misses both the Filing
      Date and Effective  Date.  The  liquidated  damages  pursuant to the terms
      hereof shall apply on a pro-rata basis for any portion of a month prior to
      the cure of an Event.

      3.    Registration Procedures

            i.  In  connection  with  the  Company's  registration   obligations
            hereunder, the Company shall:

            (a) Not less  than  five  Trading  Days  prior to the  filing of the
      Registration  Statement  or any related  Prospectus  or any  amendment  or
      supplement  thereto,  and subject to the Purchase Agreement (i) furnish to
      the Holders copies of all such documents  proposed to be filed  (including
      documents  incorporated or deemed  incorporated by reference to the extent
      requested  by such Person and not  available on the EDGAR  system),  which
      documents will be provided for the review of such Holders,  and (ii) cause
      its officers  and  directors,  counsel and  independent  certified  public
      accountants  to respond to such  inquiries as shall be  necessary,  in the
      reasonable  opinion  of  respective  counsel  of the  Company to conduct a
      reasonable  investigation  within the meaning of the  Securities  Act. The
      Company shall not file the  Registration  Statement or any such Prospectus
      or any  amendments  or  supplements  thereto  to which  the  Holders  of a
      majority of the Registrable  Securities  shall  reasonably  object in good
      faith.  Should Holders object, all liquidated damages and/or penalties set
      forth herein shall be waived. For purposes of this paragraph  objection by
      Holders of any  disclosure  required to be made under  Federal  Securities
      laws as determined by Company's  counsel shall not be deemed to be in good
      faith.

                                       3
<PAGE>

            (b) (i)  Prepare  and file  with  the  Commission  such  amendments,
      including post-effective amendments, to the Registration Statement and the
      Prospectus  used in  connection  therewith as may be necessary to keep the
      Registration   Statement  continuously  effective  as  to  the  applicable
      Registrable  Securities  for the  Effectiveness  Period;  (ii)  cause  the
      related   Prospectus  to  be  amended  or  supplemented  by  any  required
      Prospectus  supplement,  and as so  supplemented  or  amended  to be filed
      pursuant to Rule 424;  (iii) respond as promptly as  reasonably  possible,
      and  attempt in good faith to respond  within  ten  Trading  Days,  to any
      comments  received from the  Commission  with respect to the  Registration
      Statement  or  any  amendment  thereto  and,  as  promptly  as  reasonably
      possible,  upon request,  provide its counsel true and complete  copies of
      all correspondence from and to the Commission relating to the Registration
      Statement; and (iv) comply in all material respects with the provisions of
      the Securities  Act and the Exchange Act with respect to the  Registration
      Statement.

            (c) Notify the  Holders of  Registrable  Securities  as  promptly as
      reasonably  possible (and, in the case of (i)(A) below, not less than five
      trading Days prior to such  filing) and (if  requested by any such Person)
      confirm such notice in writing  promptly  following  the day (i)(A) when a
      Prospectus or any Prospectus supplement or post-effective amendment to the
      Registration  Statement is proposed to be filed;  (B) when the  Commission
      notifies the Company whether there will be a "review" of the  Registration
      Statement  and  whenever  the  Commission   comments  in  writing  on  the
      Registration  Statement  (the Company shall upon request  provide true and
      complete copies thereof and all written  responses  thereto to each of the
      Holders);  and (C)  with  respect  to the  Registration  Statement  or any
      post-effective  amendment, when the same has become effective; (ii) of any
      request  by the  Commission  or any other  Federal  or state  governmental
      authority during the period of effectiveness of the Registration Statement
      for amendments or supplements to the Registration  Statement or Prospectus
      or for additional information;  (iii) of the issuance by the Commission or
      any  other  federal  or state  governmental  authority  of any stop  order
      suspending the effectiveness of the Registration Statement covering any or
      all of the Registrable Securities or the initiation of any Proceedings for
      that purpose;  (iv) of 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 (v) of the  occurrence  of any event or passage of time that
      makes the  financial  statements  included in the  Registration  Statement
      ineligible for inclusion therein or any statement made in the 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 the Registration Statement,  Prospectus or other
      documents  so  that,  in the  case of the  Registration  Statement  or the
      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.

                                       4
<PAGE>

            (d) Use its  commercially  reasonable  efforts to avoid the issuance
      of, or, if issued,  obtain the withdrawal of (i) any order  suspending the
      effectiveness of the Registration Statement, or (ii) any suspension of the
      qualification (or exemption from  qualification) of any of the Registrable
      Securities  for  sale in any  jurisdiction,  at the  earliest  practicable
      moment.

            (e) Furnish to each Holder upon request,  without  charge,  at least
      one  conformed  copy of the  Registration  Statement  and  each  amendment
      thereto,  including  financial  statements  and  schedules,  all documents
      incorporated  or deemed to be  incorporated  therein by  reference  to the
      extent requested by such Holder,  and all exhibits to the extent requested
      by such Holder  (including those  previously  furnished or incorporated by
      reference)   promptly   after  the  filing  of  such  documents  with  the
      Commission.

            (f) Promptly deliver to each Holder,  without charge, the Prospectus
      or Prospectuses  (including each form of prospectus) and each amendment or
      supplement  thereto as such Holder may  reasonably  request in  connection
      with resales by the Holder of Registrable  Securities.  The Company hereby
      consents to the use of such  Prospectus  and each  amendment or supplement
      thereto by each of the selling Holders in connection with the offering and
      sale of the  Registrable  Securities  covered by such  Prospectus  and any
      amendment  or  supplement  thereto,  except after the giving of any notice
      pursuant to Section 3(c).

            (g) Prior to any resale of Registrable  Securities by a Holder,  use
      its  commercially  reasonable  efforts to register or qualify or cooperate
      with  the  selling  Holders  in  connection   with  the   registration  or
      qualification  (or exemption from the  registration or  qualification)  of
      such  Registrable  Securities  for the  resale  by the  Holder  under  the
      securities or Blue Sky laws of such jurisdictions within the United States
      as  any  Holder  reasonably   requests  in  writing,  to  keep  each  such
      registration or qualification  (or exemption  therefrom)  effective during
      the  Effectiveness  Period  and to do any and  all  other  acts or  things
      reasonably  necessary to enable the disposition in such  jurisdictions  of
      the  Registrable   Securities  covered  by  the  Registration   Statement;
      provided,  that the Company shall not be required to qualify  generally to
      do business  in any  jurisdiction  (i) where it is not then so  qualified,
      (ii) that  would  subject  the  Company  to any  material  tax in any such
      jurisdiction  where it is not then so subject or (iii) that would  require
      the  Company  to file a general  consent to service of process in any such
      jurisdiction.

            (h) If  requested  by the  Holders,  cooperate  with the  Holders to
      facilitate   the  timely   preparation   and   delivery  of   certificates
      representing  Registrable  Securities  to  be  delivered  to a  transferee
      pursuant to the Registration Statement,  which certificates shall be free,
      to the extent  permitted by the  Purchase  Agreement,  of all  restrictive
      legends,  and  to  enable  such  Registrable  Securities  to  be  in  such
      denominations and registered in such names as any such Holders may request
      so long  as such  transfers  are in  compliance  with  federal  and  state
      securities laws.

                                       5
<PAGE>

            (i)  Upon  the  occurrence  of any  event  contemplated  by  Section
      3(c)(v),  as promptly as  reasonably  possible,  prepare a  supplement  or
      amendment,  including  a  post-effective  amendment,  to the  Registration
      Statement  or a  supplement  to the  related  Prospectus  or any  document
      incorporated or deemed to be incorporated  therein by reference,  and file
      any other required document so that, as thereafter delivered,  neither the
      Registration   Statement  nor  such  Prospectus  will  contain  an  untrue
      statement of a material  fact or omit 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.  If the
      Company  notifies the Holders in accordance  with clauses (ii) through (v)
      of  Section  3(c)  above to suspend  the use of any  Prospectus  until the
      requisite  changes to such  Prospectus  have been made,  then the  Holders
      shall suspend use of such  Prospectus.  The Company will use  commercially
      reasonable efforts to ensure that the use of the Prospectus may be resumed
      as promptly as is  practicable.  The Company shall be entitled to exercise
      its right  under  this  Section  3(i) to  suspend  the  availability  of a
      Registration   Statement  and  Prospectus,   subject  to  the  payment  of
      liquidated damages pursuant to Section 2(b), for a period not to exceed 60
      days (which need not be consecutive days).

            (j)  Comply  with  all  applicable  rules  and  regulations  of  the
      Commission.

            (k) The Company may require  each  selling  Holder to furnish to the
      Company a certified  statement  as to the number of shares of Common Stock
      beneficially  owned by such Holder and, the Person thereof that has voting
      and dispositive control over the Shares. It shall be a condition precedent
      to the  obligations  of the  Company to take any action  pursuant  to this
      agreement,  that each of the  Holders  shall  furnish to the  Company  the
      information  regarding them  specified  immediately  above,  and as to the
      Registrable  Securities of any particular Holder, that such Holder respond
      to any specific written comments from the SEC with respect to such Holder.

      4.  Registration   Expenses.   All  fees  and  expenses  incident  to  the
performance  of or compliance  with this Agreement by the Company shall be borne
by the Company whether or not any Registrable  Securities are sold,  disposed of
or transferred  pursuant to the  Registration  Statement.  The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including,  without limitation,  fees and expenses
(A) with respect to filings required to be made with the Trading Market on which
the  Common  Stock  is then  listed  for  trading,  and (B) in  compliance  with
applicable  state  securities  or  Blue  Sky  laws),   (ii)  printing   expenses
(including,   without   limitation,   expenses  of  printing   certificates  for
Registrable   Securities  and  of  printing  prospectuses  if  the  printing  of
prospectuses  is  reasonably  requested  by the  holders  of a  majority  of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses,  (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance,  if the Company so desires such
insurance,  and (vi) fees and  expenses  of all other  Persons  retained  by the
Company in connection with the consummation of the transactions  contemplated by
this  Agreement.  In addition,  the Company shall be responsible  for all of its
internal   expenses   incurred  in  connection  with  the  consummation  of  the
transactions contemplated by this Agreement (including,  without limitation, all
salaries  and  expenses  of its  officers  and  employees  performing  legal  or
accounting  duties),  the expense of any annual  audit and the fees and expenses
incurred in  connection  with the listing of the  Registrable  Securities on any
securities  exchange as required  hereunder.  All selling  expenses  relating to
securities  registered  by the  Holders  shall be borne by the  Holders  of such
securities.

                                       6
<PAGE>

      5.    Indemnification

            (a)   Indemnification   by   the   Company.   The   Company   shall,
      notwithstanding  any  termination  of this  Agreement,  indemnify and hold
      harmless  each Holder,  the officers,  directors,  agents and employees of
      each of them, each Person who controls any such Holder (within the meaning
      of Section 15 of the Securities Act or Section 20 of the Exchange Act) and
      the officers,  directors,  agents and  employees of each such  controlling
      Person,  to the fullest  extent  permitted  by  applicable  law,  from and
      against  any  and  all  losses,  claims,   damages,   liabilities,   costs
      (including,  without limitation,  reasonable attorneys' fees) and expenses
      (collectively,  "Losses"),  as incurred,  to the extent  arising out of or
      relating  to any untrue or alleged  untrue  statement  of a material  fact
      contained in the  Registration  Statement,  any  Prospectus or any form of
      prospectus or in any amendment or supplement thereto or in any preliminary
      prospectus,  or arising  out of or  relating  to any  omission  or alleged
      omission of a material fact required to be stated  therein or necessary to
      make the  statements  therein  (in the case of any  Prospectus  or form of
      prospectus  or supplement  thereto,  in light of the  circumstances  under
      which  they  were   made)  not   misleading,   except  in  the   following
      circumstances:  The Company  shall not  indemnify  or hold  harmless  each
      Holder if (1) such untrue or alleged  untrue  statements  or omissions are
      based upon  information  regarding such Holder furnished in writing to the
      Company by such Holder, or (2) in the case of an occurrence of an event of
      the type specified in Section  3(c)(ii)-(v),  the use by such Holder of an
      outdated or  defective  prospectus  after the Company  has  notified  such
      Holder in writing that the  Prospectus  is outdated or defective and prior
      to the receipt by such Holder of the Advice  contemplated in Section 6(d).
      The Company shall notify the Holders promptly of the  institution,  threat
      or assertion of any Proceeding of which the Company is aware in connection
      with the transactions contemplated by this Agreement.

            (b) Indemnification by Holders. Each Holder shall, severally and not
      jointly, indemnify and hold harmless the Company, its directors, officers,
      agents,  and employees,  and each Person who controls the Company  (within
      the  meaning  of Section 15 of the  Securities  Act and  Section 20 of the
      Exchange Act), and the  directors,  officers,  agents or employees of such
      controlling  Persons,  to the fullest extent  permitted by applicable law,
      from and against all Losses, as incurred,  to the extent arising out of or
      based  upon:  (x) such  Holder's  failure  to comply  with the  prospectus
      delivery  requirements  of the Securities Act or (y) any untrue or alleged
      untrue  statement  of  a  material  fact  contained  in  any  Registration
      Statement, any Prospectus,  or any form of prospectus, or in any amendment
      or supplement thereto or in any preliminary prospectus,  or arising out of
      or  relating  to any  omission  or alleged  omission  of a  material  fact
      required to be stated therein or necessary to make the statements  therein
      not misleading to the extent, but only to the extent,  that such untrue or
      alleged statement or omission is contained in any information so furnished
      in writing by such Holder to the Company for inclusion in such  Prospectus
      or to the extent that in the case of an occurrence of an event of the type
      specified in Section  3(c)(ii)-(v),  the use by such Holder of an outdated
      or  defective  Prospectus  after the Company has  notified  such Holder in
      writing  that the  Prospectus  is outdated or  defective  and prior to the
      receipt by such Holder of the Advice  contemplated  in Section 6(c). In no
      event shall the  liability of any selling  Holder  hereunder be greater in
      amount than the dollar amount of the net proceeds  received by such Holder
      upon  the  sale  of  the  Registrable   Securities  giving  rise  to  such
      indemnification obligation.

                                       7
<PAGE>

            (c) Conduct of Indemnification  Proceedings. If any Proceeding shall
      be brought or asserted against any Person entitled to indemnity  hereunder
      (an "Indemnified Party"), such Indemnified Party shall promptly notify the
      Person  from  whom  indemnity  is sought  (the  "Indemnifying  Party")  in
      writing,  and the  Indemnifying  Party  shall have the right to assume the
      defense   thereof,   including  the   employment  of  counsel   reasonably
      satisfactory  to the  Indemnified  Party and the  payment  of all fees and
      expenses incurred in connection with defense thereof;  provided,  that the
      failure of any Indemnified Party to give such notice shall not relieve the
      Indemnifying  Party of its  obligations  or  liabilities  pursuant to this
      Agreement,  except  (and  only) to the  extent  that it  shall be  finally
      determined by a court of competent  jurisdiction  (which  determination is
      not  subject to appeal or further  review)  that such  failure  shall have
      prejudiced the Indemnifying Party.

            An Indemnified Party shall have the right to employ separate counsel
      in any such Proceeding and to participate in the defense thereof,  but the
      fees  and  expenses  of  such  counsel  shall  be at the  expense  of such
      Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
      in writing to pay such fees and expenses; (2) the Indemnifying Party shall
      have  failed  promptly  to assume the  defense of such  Proceeding  and to
      employ counsel  reasonably  satisfactory to such Indemnified  Party in any
      such  Proceeding;  or  (3)  the  named  parties  to  any  such  Proceeding
      (including any impleaded  parties) include both such Indemnified Party and
      the Indemnifying Party, and such Indemnified Party shall have been advised
      by counsel  that a  conflict  of  interest  is likely to exist if the same
      counsel  were to represent  such  Indemnified  Party and the  Indemnifying
      Party (in which case, if such Indemnified  Party notifies the Indemnifying
      Party in writing that it elects to employ separate  counsel at the expense
      of the Indemnifying Party, the Indemnifying Party shall not have the right
      to assume the defense  thereof and the reasonable fees and expenses of one
      separate counsel shall be at the expense of the Indemnifying  Party).  The
      Indemnifying  Party  shall not be liable  for any  settlement  of any such
      Proceeding  affected without its written consent,  which consent shall not
      be unreasonably  withheld.  No Indemnifying Party shall, without the prior
      written  consent of the  Indemnified  Party,  effect any settlement of any
      pending  Proceeding in respect of which any Indemnified  Party is a party,
      unless  such  settlement   includes  an  unconditional   release  of  such
      Indemnified Party from all liability on claims that are the subject matter
      of such Proceeding.

            All reasonable fees and expenses of the Indemnified Party (including
      reasonable  fees and expenses to the extent  incurred in  connection  with
      investigating  or  preparing  to defend  such  Proceeding  in a manner not
      inconsistent with this Section) shall be paid to the Indemnified Party, as
      incurred,  within  ten  Trading  Days of  written  notice  thereof  to the
      Indemnifying  Party;  provided,  that the Indemnified Party shall promptly
      reimburse  the  Indemnifying  Party  for  that  portion  of such  fees and
      expenses  applicable to such actions for which such  Indemnified  Party is
      not  entitled  to  indemnification  hereunder,  determined  based upon the
      relative faults of the parties.

                                       8
<PAGE>

            (d) Contribution.  If a claim for indemnification under Section 5(a)
      or 5(b) is unavailable to an Indemnified Party (by reason of public policy
      or otherwise),  then each Indemnifying Party, in lieu of indemnifying such
      Indemnified  Party, shall contribute to the amount paid or payable by such
      Indemnified  Party as a result of such Losses,  in such  proportion  as is
      appropriate  to reflect the relative fault of the  Indemnifying  Party and
      Indemnified Party in connection with the actions,  statements or omissions
      that  resulted  in such  Losses  as well as any other  relevant  equitable
      considerations.   The  relative  fault  of  such  Indemnifying  Party  and
      Indemnified Party shall be determined by reference to, among other things,
      whether any action in  question,  including  any untrue or alleged  untrue
      statement  of a material  fact or  omission of a material  fact,  has been
      taken or made by, or relates to information supplied by, such Indemnifying
      Party or Indemnified  Party, and the parties' relative intent,  knowledge,
      access to information  and  opportunity to correct or prevent such action,
      statement or  omission.  The amount paid or payable by a party as a result
      of any Losses shall be deemed to include,  subject to the  limitations set
      forth in Section 5(c), any reasonable  attorneys' or other reasonable fees
      or expenses  incurred by such party in connection  with any  Proceeding to
      the  extent  such  party  would  have  been  indemnified  for such fees or
      expenses if the indemnification provided for in this Section was available
      to such party in accordance with its terms.

            The parties  hereto agree that it would not be just and equitable if
      contribution  pursuant to this  Section 5(d) were  determined  by pro rata
      allocation  or by any other method of  allocation  that does not take into
      account  the  equitable  considerations  referred  to in  the  immediately
      preceding paragraph.  Notwithstanding the provisions of this Section 5(d),
      no Holder shall be required to contribute, in the aggregate, any amount in
      excess of the amount of proceeds actually received by such Holder from the
      sale of the  Registrable  Securities  by reason of such  untrue or alleged
      untrue  statement or omission or alleged  omission,  except in the case of
      gross  negligence or fraud by such Holder.  The indemnity and contribution
      agreements contained in this Section are in addition to any liability that
      the Indemnifying Parties may have to the Indemnified Parties.

      6.    Miscellaneous

            (a)  Remedies.  In the  event of a  breach  by the  Company  or by a
      Holder, of any of their  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.  The Company and each Holder agree that monetary  damages would
      not provide  adequate  compensation for any losses incurred by reason of a
      breach by it of any of the provisions of this Agreement and hereby further
      agrees  that,  in the event of any  action  for  specific  performance  in
      respect of such  breach,  it shall waive the defense  that a remedy at law
      would be adequate.

            (b) Compliance. Each Holder covenants and agrees that it will comply
      with federal and state  securities laws including the prospectus  delivery
      requirements  of the Securities Act as applicable to it in connection with
      resales of Registrable Securities pursuant to the Registration Statement.

                                       9
<PAGE>

            (c) 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 any event of the kind  described in Section
      3(c),  such  Holder  will  forthwith   discontinue   disposition  of  such
      Registrable   Securities  under  the  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.  The Company may
      provide  appropriate  stop  orders  to  enforce  the  provisions  of  this
      paragraph.

            (d)   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 the stock option or other employee
      benefit plans, then the Company shall send to each Holder a written notice
      of such  determination  and, if within fifteen days after the date 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,  subject to customary
      underwriter cutbacks applicable to all holders of registration rights.

            (e)  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  each  Holder  of  the  then   outstanding   Registrable
      Securities.

            (f)  Notices.  Any  and  all  notices  or  other  communications  or
      deliveries  required or  permitted  to be provided  hereunder  shall be in
      writing and shall be deemed given and effective on the earliest of (i) the
      date of  transmission,  if such notice or  communication  is delivered via
      facsimile  prior to 6:30 p.m.  (New York City time) on a Trading Day, (ii)
      the  Trading  Day  after  the  date of  transmission,  if such  notice  or
      communication  is delivered via  facsimile  later than 6:30 p.m. (New York
      City time) on any date and earlier than 11:59 p.m. (New York City time) on
      such date, (iii) the Trading Day following the date of mailing, if sent by
      nationally  recognized  overnight  courier  service,  or (iv) upon  actual
      receipt  by the party to whom such  notice is  required  to be given.  The
      address or facsimile number for such notices and  communications  shall be
      delivered and addressed as set forth in the Purchase Agreement.

                                       10
<PAGE>

            (g)  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.  Each
      Holder may assign their  respective  rights hereunder in the manner and to
      the Persons as permitted under the Purchase Agreement.

            (h) 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.

            (i)  Governing  Law.  All  questions  concerning  the  construction,
      validity,  enforcement  and  interpretation  of this  Agreement  shall  be
      governed by and  construed  and enforced in  accordance  with the internal
      laws of the  State  of New  York,  without  regard  to the  principles  of
      conflicts  of law thereof.  Each party  agrees that all legal  proceedings
      concerning   the   interpretations,   enforcement   and   defense  of  the
      transactions  contemplated  by this Agreement  (whether  brought against a
      party  hereto  or  its   respective   affiliates,   directors,   officers,
      shareholders,  employees or agents) shall be commenced  exclusively in the
      state and federal courts  sitting in the City of New York, New York.  Each
      party hereto hereby irrevocably  submits to the exclusive  jurisdiction of
      the state and federal courts sitting in the City of New York, New York for
      the  adjudication  of any dispute  hereunder or in connection  herewith or
      with any transaction  contemplated  hereby or discussed herein  (including
      with respect to the enforcement of this Agreement), and hereby irrevocably
      waives,  and agrees not to assert in any suit,  action or proceeding,  any
      claim that it is not personally  subject to the  jurisdiction  of any such
      court, that such suit, action or proceeding is improper. Each party hereto
      hereby  irrevocably  waives  personal  service of process and  consents to
      process being served in any such suit,  action or proceeding by delivering
      a copy thereof via overnight  delivery (with evidence of delivery) to such
      party at the address in effect for notices to it under this  Agreement and
      agrees that such service shall  constitute good and sufficient  service of
      process and notice thereof.  Nothing  contained  herein shall be deemed to
      limit in any way any right to serve  process  in any manner  permitted  by
      law. Each party hereto hereby  irrevocably  waives,  to the fullest extent
      permitted  by  applicable  law,  any and all right to trial by jury in any
      legal  proceeding  arising  out of or relating  to this  Agreement  or the
      transactions contemplated hereby. If either party shall commence an action
      or  proceeding  to enforce  any  provisions  of this  Agreement,  then the
      prevailing  party in such action or proceeding  shall be reimbursed by the
      other party for its attorney's fees and other costs and expenses  incurred
      with the  investigation,  preparation  and  prosecution  of such action or
      proceeding.

            (j) Cumulative Remedies. The remedies provided herein are cumulative
      and not exclusive of any remedies provided by law.

                                       11
<PAGE>

            (k) 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 commercially 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.

            (l) Headings.  The headings in this Agreement are for convenience of
      reference only and shall not limit or otherwise affect the meaning hereof.

            (m) Independent  Nature of Purchasers'  Obligations and Rights.  The
      obligations of each Purchaser hereunder are several and not joint with the
      obligations of any other  Purchaser  hereunder,  and no Purchaser shall be
      responsible in any way for the performance of the obligations of any other
      Purchaser hereunder. Nothing contained herein or in any other agreement or
      document  delivered at any closing,  and no action taken by any  Purchaser
      pursuant  hereto or thereto,  shall be deemed to constitute the Purchasers
      as a  partnership,  an  association,  a joint venture or any other kind of
      entity,  or create a presumption that the Purchasers are in any way acting
      in  concert  with  respect  to  such   obligations  or  the   transactions
      contemplated  by this  Agreement.  Each  Purchaser  shall be  entitled  to
      protect and enforce its rights,  including  without  limitation the rights
      arising out of this Agreement, and it shall not be necessary for any other
      Purchaser to be joined as an additional  party in any  proceeding for such
      purpose.

            (n) Conflicting  Instructions.  A person or entity is deemed to be a
      holder of  Registrable  Securities  whenever such person or entity owns of
      record such Registrable  Securities.  If the Company receives  conflicting
      instructions,  notices or  elections  from two or more Persons or entities
      with respect to the same Registrable Securities, the Company will act upon
      the basis of instructions, notice or election received from the registered
      owner of such Registrable Securities.

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

---------------------------------           ----------------------------
Xfone, Inc.                 Date

By:
    -----------------------------

Title:
     ----------------------------

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

                                    By:
                                          --------------------------
                                          Name:
                                          Title:

                                       12
<PAGE>

                                 SCHEDULE 2 (d)

                          Outstanding Rights to Equity

<PAGE>

                                  SCHEDULE 2(s)

                                 Capitalization

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