Document:

Exhibit 10.97

 

COMPANY LETTERHEAD

 

August 18,
2005

 

Scott Brown

 

Dear Scott:

 

I am pleased to
offer you full time regular employment with Catalyst Semiconductor, Inc.
(CSI) as Vice President of Marketing Analog/Mixed Signal - reporting
to me. Your biweekly salary will be $6,462.00 (US
dollars), which is the equivalent of $168,000.00 annually.

 

Subject to
approval by the Board of Directors, you will also receive a grant for an option
of 200,000 shares of Catalyst stock. The price
and vesting of these options is subject to the terms and conditions of the
Catalyst Stock Option Plan and the Stock Option Agreement.

 

You will also
participate in the same executive incentive plan as enjoyed by the other
Catalyst Semiconductor Vice Presidents. The customary severance agreement for
Catalyst VPs will become effective for you upon completion of six months of
full-time employment.

 

Your employment
with CSI is “at-will” employment. This simply means that you and CSI have no
agreement, expressed or implied, which would control how long you will work for
CSI or what circumstances must exist before the relationship can be terminated.
Rather, we are both equally free to terminate our employment relationship at
any time, whenever you or Catalyst Semiconductor chooses, regardless of the
reason that you or CSI might have for so doing.

 

As part of our
employment package, CSI offers: medical insurance, dental insurance, vision
insurance, life insurance and disability insurance. We also provide a 125
flexible benefits plan, employee assistance, and 401K (company currently
matches 25%) programs for your benefit. CSI employees may also obtain dependent
benefit coverage via payroll deductions. To further acquaint you with our
policies and to enroll you in our various benefit programs, please contact Joan
Vargas at 408-542-1051 or email joan.vargas@catsemi.com.

 

This offer is
contingent upon our having completed a satisfactory background check and your
provision of proof of authorization to work for any employer in the United
States.

 

This offer letter,
if not signed, will expire at 8 PM on Thursday, August 18, 2005.

 

 

I look forward to
having you join Catalyst.

 

Sincerely,

 

	
  By:

  	
   /s/  Gelu Voicu

  	
   

  
	
   

  	
  Gelu Voicu

  
	
   

  	
  President and Chief Executive Officer

  
	
   

  
	
  Offer Accepted:

  	
   /s/ Scott Brown

  	
   

  
	
   

  
	
  Today’s Date:

  	
   August 18,
  2005

  	
   

  
	
   

  
	
  Start Date:

  	
   September 5,
  2005Unassociated Document

    

    EXHIBIT
      10.63

     

     

    First
      Amendment to

    Agreement
      and Plan of Merger

     

    This
      First Amendment to Agreement and Plan of Merger ("First Amendment") is entered
      into as of October 10, 2005 by and among I-55 Internet Services, Inc. (the
      "Company"), XFone, Inc. (the "Parent"), XFone USA, Inc. (the "Subsidiary")
      and
      Hunter McAllister and Brian Acosta (the "Principals").

     

    WHEREAS,
      the Company, Parent, Subsidiary and Principals entered into that certain
      Agreement and Plan of Merger dated as of August 26, 2005 (the "Merger
      Agreement"); 

     

    WHEREAS,
      to induce the Company and Subsidiary not to terminate the Merger Agreement
      due
      to a material adverse effect that Hurricane Katrina has had on the assets and
      business of Company, the Company and Principals are willing to enter into this
      First Amendment to provide for the following: (i) an increase in the Escrow
      Fund
      from 20% to 50% of the Aggregate Merger Consideration and to have all the
      Company Stockholders contribute to establish the Escrow Fund; (ii) to provide
      a
      mechanism to allow the Company and Subsidiary to make a claim for a loss under
      the Escrow Fund if there is a loss of revenues from the customers of the Company
      in the future or for the Parent to issue additional consideration if there
      is an
      increase in revenues from the customers of the Company in the future; and (iii)
      to provide that the parties may enter into a Management Agreement pending
      closing of the Merger.

     

    NOW,
      THEREFORE, in consideration of the foregoing recitals and other good and
      valuable value of consideration, the parties do hereby agree as follows
      (capitalized terms used herein have the same meaning as defined in the Merger
      Agreement, unless otherwise specified herein).

     

    1.  Amendments.
      

     

    
      	(a)  	
              The
                following sentence is added to Section 1.01 as
                follows:

            

    

     

    The
      "Management Date" shall mean a date prior to the Closing Date that the Company
      and the Subsidiary enter into a Management Operating Agreement; provided,
      however, if the Company and Subsidiary fail to enter into a Management Operating
      Agreement, the Management Date shall be the Closing Date.

     

    
      	(b)  	
              The
                term "Closing Date" shall be replaced with the term "Management Date"
                in
                the following sections: 1.03(a)(i)(1); 1.03(a)(i)(2); 1.07; 4.05;
                and
                5.02(h).

            

    

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

     

     

    
      	(c)  	
              There
                is added a Section 4.15 as follows:

            

    

     

    Section
      4.15. Customer
      Billing Adjustment.
      Since
      it is impossible to currently determine the impact that Hurricane Katrina will
      have on the business and revenues of the Company, the parties agree as follows:
      (i) the Parent and Subsidiary will be entitled to claim as a Loss under Section
      6.01 hereof and proceed against the Escrow Fund to recover an amount equal
      to
      any "Negative Customer Billing Adjustment Amount" (as defined herein) not to
      exceed the Escrow Fund or (ii) the Parent shall adjust the Aggregate Merger
      Consideration by an amount equal to any “Positive Customer Billing Adjustment
      Amount” (as defined herein) not to exceed a maximum of $1,927,083.50. The
      parties agree that any Positive Customer Billing Adjustment Amount shall be
      satisfied by the issuance of a number of Parent Common Stock and Parent Stock
      Warrants in a ratio of 2/3 Parent Common Stock and 1/3 Parent Stock Warrants
      and
      that the value of the Parent Common Stock shall be determined using the weighted
      average price as reported on the website of the American Stock Exchange for
      the
      Parent Common Stock for the ten (10) trading days immediately preceding March
      1,
      2006 and the Parent Stock Warrants shall be valued using the value established
      for such Parent Stock Warrants as of the Effective Date. Each Company
      Stockholder shall be entitled to receive the same proportion of the additional
      Purchase Price paid for the Positive Customer Billing Adjustment as each did
      of
      the original Aggregate Merger Consideration. 

     

    The
      "Negative Customer Billing Adjustment Amount" shall be calculated as follows:
      First, take the percentage obtained by dividing the February 2006 Customer
      Billings (as defined herein) for the Company Customer Base (as defined herein)
      by the July 2005 Customer Billings for the Company Customer Base, which the
      parties agree to be $489,531.65, and (i) if this percentage is less than 85%,
      subtract this percentage from 85% and multiply the result by the dollar value
      of
      the Aggregate Merger Consideration (which is $3,854,167.00) to determine the
      Negative Customer Billing Adjustment Amount, or (ii) if this percentage is
      greater than 85%, then the Customer Billing Adjustment Amount shall be zero.
      For
      example, if the February 2006 Customer Billing is $450,000, then the Negative
      Customer Billing Adjustment Amount is equal to zero ($0) since
      $450,000/489,531.65 is greater than 85%. If the February 2006 Negative Customer
      Billing is $400,000, then the Customer Billing Adjustment Amount is equal to
      $126,773.18 [.85 - (400,000/489,531.65) x 3,854,167.00].

     

    The
      “Positive Customer Billing Adjustment Amount” shall be calculated as follows:
      First, take the percentage obtained by dividing the February 2006 Customer
      Billings for the Company Customer Base by the July 2005 Customer Billing, for
      the Company Customer Base and (i) if the percentage is more than 115%, then
      subtract 115% from this percentage and multiply the result by the dollar value
      of the Aggregate Merger Consideration (which is $3,854,167.00) to determine
      the
      Positive Customer Billing Adjustment Amount or if this percentage is less than
      115%, then the Positive Customer Billing Adjustment Amount shall be zero. For
      example, if the February 2006 Customer Billing is $500,000, then the Positive
      Customer Billing Adjustment Amount is equal to zero since $500,000/$489,531.36
      is less than 115%. If the February Customer Billing is $600,000, then the
      Positive Customer Billing Amount is equal to $291,613.98 ($600,000/$489,531.36)
      - 1.15 x $3,854,167.

     

    For
      purposes of this Section 4.15, the following shall have the following
      meaning:

     

    "Company
      Customer Base" - shall mean the customers of the Company as listed on Schedule
      4.15 attached hereto.

     

    "February
      2006 Customer Billings" shall mean the charges as shown on the February 2006
      Billing Report of the Subsidiary for each of the customers in the Company
      Customer Base who do not have any receivables which are more than 90 days old
      from the invoice date plus 2.78% of the sum of the following amounts (each
      of
      which amounts shall be determined as of the first anniversary date of the
      Effective Date): (i) the amount of insurance payments received as a result
      of
      claims related to Hurricane Katrina in excess of the amount expended to replace
      the property damaged by Hurricane Katrina and (ii) government cash grants (not
      loans) received as a result of Hurricane Katrina.

    
       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

    

    The
      Parent's independent public accountants shall calculate the Negative and/or
      Positive Customer Billing Adjustment Amount by no later than 30 days from the
      first anniversary date of the Effective Date.

     

    If
      there
      is a Negative Customer Billing Adjustment Amount, the Parent and Subsidiary
      shall be entitled to present a claim for the Negative Customer Billing
      Adjustment Amount to the Escrow Agent.

     

    If
      there
      is a Positive Customer Billing Adjustment Amount, the Parent shall issue the
      Parent Common Stock and Parent Stock Parents due each Company Shareholder within
      thirty (30) days of the date of determination by the Parent’s independent public
      accountants.

     

    
      	(d)  	
              Section
                5.01 (a) is amended to delete in (iii) thereof the word “shareholders” and
                replace it with the words “board of
                directors”.

            

    

     

    
      	(e)  	
              Section
                5.01 (e) is amended to read as
                follows:

            

    

     

    (e) MCG
      Debt and Warrants.
      MCG
      shall have agreed to accept Parent Common Stock in full payment for the MCG
      Debt
      on terms acceptable to the Parent and all obligations owed by the Company to
      MCG
      under the MCG Credit Facility shall have been extinguished, including, but
      not
      limited to, the MCG Warrants.

     

    
      	(f)  	
              Section
                5.02 (i) is amended to add the following sentence
                thereto:

            

    

     

    MCG
      shall
      have entered into an agreement in form satisfactory to the Parent and Subsidiary
      agreeing to accept Parent Common Stock in payment in full of the MCG Debt and
      agreeing as a Company Stockholder to be bound by the provisions of this Merger
      Agreement.

     

    
      	(g)  	
              Section
                5.02(p) is amended to read as
                follows:

            

    

     

    "(p)
      AMEX
      Approval.
      Approval by the American Stock Exchange of the issuance of the Parent Stock
      and
      Warrants to be issued in connection with this transaction.”

     

    
      	(h)  	
              Section
                5.02 is amended to add thereto a subparagraph (r) as
                follows:

            

    

     

    “(r)
      Each
      Company Stockholder shall have executed an Acknowledgment in form satisfactory
      to the Parent agreeing to be bound by the terms of this Merger Agreement,
      including Article VI of the Merger Agreement and to the appointment of the
      Principals as the Shareholder Representative to act on such Company
      Stockholder’s behalf as provided in Article VI of this Merger
      Agreement.

    
       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

    

    
      	(i)  	
              Article
                VI is amended in its entirety to read as
                follows:

            

    

     

    ARTICLE
      VI

    SURVIVAL
      OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;

    POST-CLOSING
      COVENANTS

     

    6.01 Survival
      of Representations, Warranties and Covenants.

     

    (a) The
      representations and warranties of the Company and each of the Principals
      contained in this Agreement, or in any certificate or other instrument delivered
      pursuant to this Agreement, shall remain in effect until, and will expire upon
      the second year following the Closing Date (the "Termination
      Date"),
      except for the representations and warranties set forth in Section 2.10 (Tax
      Matters) which shall survive the Termination Date until the expiration of the
      applicable statute of limitations. The representations and warranties of the
      Parent and the Subsidiary contained in this Agreement, or in any certificate
      or
      other instrument delivered pursuant to this Agreement will expire upon the
      Termination Date, provided that the maximum liability of the Parent and
      Subsidiary for any breach of a representation or warranty shall be twenty
      percent of the Aggregate Merger Consideration, and any liability shall be
      satisfied by the issuance of a number of shares of Parent Common Stock and
      Parent Stock Warrants in a ratio of 2/3 Parent Common Stock and 1/3 Parent
      Stock
      Warrants with a value equal to the amount of such liability as established
      at
      the time of payment using the same formula as in the definition of such terms
      as
      provided in Section 1.03 hereof. Notwithstanding the foregoing:

     

    (i) the
      Termination Date or limitation or indemnification as set forth in 6.2(e) shall
      not apply to claims based upon intentional fraud; and

     

    (ii) the
      representation, warranty, covenant or obligation that is the subject matter
      of a
      timely submitted Claim Notice (as defined in Section 6.01(c)) shall not so
      expire with respect to such Claim Notice or any subsequent Claim Notice that
      is
      reasonably related to the subject matter of such Claim Notice, but rather shall
      remain in full force and effect until such time as each and every claim that
      is
      based upon, or that reasonably relates to, any breach or alleged breach of
      such
      representation, warranty, covenant or obligation and that is reasonably related
      to the subject matter of such Claim Notice or any such subsequent Claim Notice
      has been fully and finally resolved, either by means of a written settlement
      agreement executed by the Principals, as Shareholder Representative for the
      Company Stockholders and the Parent and Subsidiary or by means of a final,
      non-appealable judgment issued by a court of competent
      jurisdiction.

     

    (b) No
      disclosure in any Schedule referred to in Article II will be deemed adequate
      to
      disclose an exception to a representation or warranty made in this Agreement
      unless the applicable disclosure schedule identifies the exception. Without
      limiting the generality of the foregoing, the mere listing (or inclusion of
      a
      copy) of a document or other item will not be deemed adequate to disclose an
      exception to a representation or warranty made in this Agreement (unless the
      representation or warranty regards the existence of the document or other item
      itself).

    
       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

    

    (c) For
      purposes of this Agreement, a "Claim
      Notice"
      relating to a particular representation, warranty, covenant or obligation shall
      be deemed to have been given if the Parent or Subsidiary, acting in good faith,
      delivers within the time periods provided in Section 6.01(a) to the Principals,
      as Shareholder Representative for the Company Stockholders and the Escrow Agent
      a written notice stating that such Indemnified Party believes that there is
      or
      has been a possible breach of such representation, warranty, covenant or
      obligation and containing (i) a brief description of the circumstances
      supporting such Indemnified Party's belief that there is or has been such a
      possible breach; and (ii) a non-binding, preliminary estimate of the aggregate
      dollar amount of the actual and potential damages that have arisen and may
      arise
      as a direct or indirect result of such possible breach. For purposes of this
      Agreement, "Parent Indemnified Parties" shall mean the following persons and
      entities: (a) Parent; (b) Parent's current and future affiliates and Subsidiary;
      (c) the respective officers, directors, employees and agents of the persons
      and
      entities referred to in clauses "(a)" and "(b)" above; and (d) the respective
      successors and assigns of the persons and entities referred to in clauses "(a)"
      and "(b)" above; provided, however, that none of Hunter McAllister or Brian
      Acosta or any of the Company Stockholders shall be deemed to be a Parent
      Indemnified Party.

     

    6.02 Indemnification
      by the Company Stockholders; Escrow Fund.

     

    (a) The
      Company Stockholders, jointly and severally, agree that, subject to the limits
      of Sections 6.01 and 6.02(b)-(e), from and after the Effective Date, the Company
      Stockholders shall indemnify and hold the Parent Indemnified Parties harmless
      against all claims, losses, liabilities, damages, lawsuits, administrative
      proceedings, investigations, audits, demands, assessments, adjustments,
      judgments, settlement payments, penalties, fines, interest, deficiencies, costs
      and expenses, including reasonable attorneys' fees and expenses of investigation
      and defense (individually a "Loss"
      and
      collectively "Losses")
      incurred by the Parent Indemnified Parties directly or indirectly as a result
      of:

     

    (i) any
      inaccuracy or breach of a representation or warranty of the Company or any
      Principal contained in: (A) this Agreement both as of the date of this Agreement
      and as of the Effective Time as if made on and as of the Effective Time; (B)
      any
      of the agreements executed in connection with this Agreement; or (C) or in
      any
      certificate, instrument or other document delivered by the Company or any
      Principal pursuant to the terms of this Agreement; or

     

    (ii) any
      failure by the Company or any of the Principals to perform or comply with any
      covenant contained in this Agreement or in any of the agreements executed in
      connection with this Agreement; or

     

    (iii) any
      Negative Customer Billing Adjustment Amount as determined in accordance with
      Section 4.13 hereof.

     

    (b) (i) As
      security for the indemnity provided to the Parent Indemnified Parties in this
      Article VI and by virtue of this Agreement and the Articles of Merger, the
      Company Stockholders agree that an amount of the Parent Company Stock and Parent
      Stock Warrants to which they are entitled at the Effective Date of the Merger
      equal to fifty percent (50%) of the Aggregate Merger Consideration (the "Escrow
      Shares") shall be deposited with the Escrow Agent and held in the name of the
      Escrow Agent pursuant to the Escrow Agreement and each of the Company
      Stockholders direct the Parent to deposit the Escrow Shares (plus any additional
      shares as may be issued in respect of any stock split, stock dividend or
      recapitalization effected by Parent after the Effective Time with respect to
      the
      Escrow Shares) with the Escrow Agent, without any act of the Company
      Stockholders, such deposit to constitute an escrow fund (the "Escrow
      Fund").
      Each
      Company Stockholder shall be required to contribute the Company Stockholder's
      Pro Rata Portion (as defined herein) of the Escrow Shares with the escrow to
      be
      funded in the same proportions of Parent Company Stock to Parent Stock Warrant
      that each Company Stockholder received in connection with the Merger. It is
      understood and agreed that the portion of the Aggregate Merger Consideration
      deposited into the Escrow Fund by each of the Company Stockholders shall be
      issued and outstanding on the books of Parent, and the Company Stockholders
      shall be the owners thereof, but registered in the Escrow Agent's name until
      the
      Escrow Agreement is terminated.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    Any
      cash
      dividends paid on Parent Common Stock in the Escrow Fund shall be deposited
      with
      the Escrow Agent and become part of the Escrow Fund. Each Company Stockholder
      shall have voting rights with respect to the shares of Parent Common Stock
      contributed to the Escrow Fund on behalf of such Company Stockholder (and on
      any
      voting securities added to the Escrow Fund in respect of such shares of Parent
      Common Stock) so long as such shares of Parent Common Stock or other voting
      securities are held in the Escrow Fund. The Escrow Fund shall be in existence
      immediately following the Effective Time and shall terminate at 5:00 p.m.,
      Central Time, on the second year from the Effective Date, unless sooner
      terminated due to the distribution of the Escrow Fund at an earlier date or
      unless the termination date is extended due to pending Claims Notice(s) for
      indemnification in accordance with this Section 6.03. For purposes of satisfying
      the indemnification obligations of this Section 6.02, the shares of Parent
      Common Stock and Parent Stock Warrants in the Escrow Fund shall be valued as
      of
      (i) the date that the Parent Indemnified Party sends notice to release a portion
      of the Escrow Fund in satisfaction of a Loss as determined in accordance with
      this Article VI or (ii) the date that the Principals as Shareholder
      Representative for the Company Stockholders request a release of a portion
      of
      the Escrow Fund in accordance with Section 6.02(b); provided if there is a
      counter-notice to the requested release from the Escrow given disputing the
      requested release from the Escrow, then the date for valuation shall be
      suspended until such time as the Escrow Agent is requested to make payment
      upon
      a joint instruction of the Parent Indemnified Party and the Principals, as
      Shareholder Representative for the Company Stockholders or the date of a final
      non-appealable order of a court of competent jurisdiction is entered as to
      the
      disputed release. The Parent Common Stock shall be valued at the closing trading
      price for the ten trading days immediately preceding the valuation date and
      the
      Parent Stock Warrants shall be valued at the price at which they were valued
      and
      issued on the Effective Date in connection with the Merger. The Escrow Agent
      shall satisfy any indemnification obligations first with the Parent Common
      Stock
      and then with the Parent Stock Warrants. The Escrow Fund shall be governed
      by
      the terms of this Agreement and the Escrow Agreement. The Parent Indemnified
      Parties' right to recover any property held pursuant to the Escrow Agreement
      shall be in addition to and not in limitation of any other rights or remedies
      of
      the Parent Indemnified Parties at law or in equity.

     

    "Company
      Stockholder's Pro Rata Portion" shall mean, with respect to each Company
      Stockholder, an amount equal to the quotient obtained by dividing (x) the number
      of shares of the Parent Common Stock which the Company Stockholder is entitled
      to receive in connection with the Merger by (y) the total number of shares
      of
      the Parent Common Stock that all Company Stockholders are entitled to receive
      in
      connection with the Merger.

     

    (ii) The
      percentage set forth below of each Company Stockholder's Pro Rata Share of
      the
      Escrow Fund shall be released upon the happening of the following events
      provided that at the date of the required release that there remains sufficient
      Escrow Funds to cover the maximum amount of any pending Claims Notice(s) as
      provided in this Article VI: (1) one-half (1/2) shall be released within 60
      days
      after the end of the first full 14 month period following the Effective Date;
      and (2) one-half (1/2) shall be released within 60 days after the end of the
      first full twenty-four month period following the Effective Date. If there
      are
      any Pending Claims outstanding at the second anniversary of the Effective Date,
      the Escrow Agreement shall continue until final resolution of any such Pending
      Claims in accordance with this Article VI.

     

    (iii) The
      Parent Indemnified Party agrees that each Company Stockholder shall only be
      responsible for such Company Stockholder's Pro Rata Portion of such Loss and
      each Company Stockholder's Escrowed Shares in an amount equal to the Company
      Stockholder's Pro Rata Share of such Loss shall be subject to release to the
      Parent Indemnified Party to satisfy such Company Stockholder's Pro Rata Share
      of
      the Loss.

     

    
      
        
        

      

      
        -5-

        
          

        

      

       

    

    
       
(c) For
      purposes of quantifying the amount owing to any Parent Indemnified Party under
      this Section 6.02 resulting from a Loss or Losses caused by a breach of any
      representation or warranty given in Article II hereof, the term material adverse
      effect or other materiality qualification or any similar qualification contained
      or incorporated directly or indirectly in such representation or warranty shall
      be disregarded.

     

    (d) For
      purposes of this Agreement and without limitation, a breach of the
      representations and warranties included in Sections 2.01, 2.02 and 2.03 hereof
      will be deemed a "willful misrepresentation."

     

    (e)  Limitation
      on Indemnification.
      Notwithstanding any provision of this Agreement to the contrary, after the
      Effective Time, no Parent Indemnified Party shall be entitled to indemnification
      until such Parent Indemnified Parties suffer Losses in excess of $60,000 in
      the
      aggregate (the "Basket
      Amount"),
      in
      which case the Parent Indemnified Parties shall be entitled to recover all
      Losses including the Basket Amount; provided, however, any amounts required
      to
      be paid resulting from any failure by the Company or any of the Principals
      to
      perform or comply with any covenant contained in this Agreement or any Related
      Agreement and any claim for any Negative Customer Billing Adjustment Amount
      shall not be subject to such Basket Amount; and provided further, however,
      that
      any amounts required to be paid by the Parent or the Surviving Corporation
      as a
      result of the Company's breach of, or any inaccuracy contained in, Section
      2.21
      herein shall not be subject to such Basket Amount. The total liability of each
      Company Stockholder shall be limited to his/her Escrow Shares then remaining
      in
      the escrow and no Company Stockholder shall have any personal liability beyond
      his Escrow Shares; provided that each of the Principals shall have personal
      liability if the claim is based upon intentional fraud by such
      Principal.

     

    6.03 Indemnification
      Procedures.
      All
      claims for indemnification under Section 6.02 shall be asserted and resolved
      as
      follows:

     

    (a) Third-Party
      Claims.
      In the
      event any Parent Indemnified Party becomes aware of a third-party claim that
      such Parent Indemnified Party believes may result in a demand under Section
      6.02, such Parent Indemnified Party shall notify the Principals, as Shareholder
      Representative of the Company Stockholders of such claim who agree to notify
      the
      other the Company Stockholders, and the Company Stockholders shall be entitled,
      at their expense, to participate in, but not to determine or conduct, the
      defense of such claim. The Parent Indemnified Party shall have the right in
      its
      sole discretion to conduct the defense of and settle any such claim; provided,
      however, that except with the written consent of the Principals, as Shareholder
      Representative of the Company Stockholders, no settlement of any such claim
      with
      third-party claimants shall alone be determinative of the amount of Losses
      relating to such matter. In the event that the Principals have consented to
      any
      such settlement, then the Company Stockholders shall not have the power or
      authority to object to the amount of any claim by any Parent Indemnified Party
      with respect to such settlement.

     

    (b) Non-Third
      Party Claims.
      In the
      event a Parent Indemnified Party has a claim hereunder that does not involve
      a
      claim being asserted against or sought to be collected by a third party, the
      Parent Indemnified Party shall with reasonable promptness send a Claim Notice
      with respect to such claim to the Principals, as Shareholder Representative
      of
      the Company Stockholders and the Escrow Agent (if applicable). If both the
      Principals, as Shareholder Representative for the Company Stockholders do not
      notify the Parent Indemnified Party within ten (10) calendar days from the
      date
      of receipt of such Claim Notice that the indemnifying party disputes such claim,
      the amount of such claim shall be conclusively deemed a liability of the
      indemnifying party hereunder. In case the Principals, as Shareholder
      Representative for the Company Stockholders shall object in writing to any
      claim
      made in accordance with this Section 6.03(b), the Parent Indemnified Party
      shall
      have fifteen (15) calendar days to respond in a written statement to the
      objection of the Principals, as Shareholder Representative of the Company
      Stockholders. If after such fifteen (15) calendar day period there remains
      a
      dispute as to any claim, the parties shall attempt in good faith for sixty
      (60)
      calendar days to agree upon the rights of the respective parties with respect
      to
      each of such claims. If the Parent Indemnified Parties and the Principals,
      as
      Shareholder Representative of the Company Stockholders should so agree, a
      memorandum setting forth such agreement shall be prepared and signed by the
      Parent Indemnified Parties and the Principals, as Shareholder Representative
      of
      the Company Stockholders, which agreement shall be binding on all of the Company
      Stockholders and the Company Stockholders agree that the Principals shall have
      the power to act for all of them as their respective Shareholder Representative.
      If the parties do not so agree, and a claim has been made against the Escrow
      Fund, the Escrow Agent shall refrain from disbursing any portion of the Escrow
      Fund until resolution of such dispute in the form of (i) a final written
      decision of an arbitrator or (ii) a final non-appealable order of a court of
      competent jurisdiction.

    
       

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

    

    (c) The
      Parent Indemnified Party's failure to give reasonably prompt notice to the
      Principals, as Shareholder Representative of any actual, threatened or possible
      claim or demand which may give rise to a right of indemnification hereunder
      shall not relieve any indemnifying party of any liability which the indemnifying
      party may have to the Parent Indemnified Party unless the failure to give such
      notice materially and adversely prejudiced the indemnifying party.

     

    (d) Each
      Company Stockholder hereby appoints the Principals as Shareholder Representative
      to act on its behalf as provided in this Article VI and the act of the
      Principals taken under this Article VI and the Escrow Agreement shall be binding
      on the Company Stockholders and the Parent Indemnified Parties shall have the
      right to rely on the acts of the Principals as those of the Company Stockholders
      for purposes of this Article VI and the Escrow Agreement. The Company
      Stockholders agree that the Principals shall have the right to act on behalf
      of
      all Company Stockholders provided that Company Stockholders who held a majority
      in interest of the Company Common Stock as of the Effective Date approve such
      action.

     

    6.04 No
      Contribution.
      Each
      Company Stockholder waives, and acknowledges and agrees that it shall not have
      and shall not exercise or assert (or attempt to exercise or assert), any right
      of contribution, right of indemnity or other right or remedy against the
      Subsidiary in connection with any indemnification or other rights any
      Indemnified Party may have under or in connection with this
      Agreement.

     

    6.05 Benefit
      Plans.
      Each
      former Company employee who is offered and accepts employment with Subsidiary
      shall be entitled to credit for time served with the Company for any purpose
      relating to the Subsidiary’s or Parent’s plans, including the amount of any
      benefits, whether such benefits are available, and the vesting of any benefits.
      Nothing in this Section 6.05 obligates Subsidiary to offer employment to any
      Company employee.

     

    2.  Parent
      Waiver.
      Upon
      receipt of this First Amendment as executed by the Company and Principals,
      Parent agrees that Hurricane Katrina and/or its effects have not caused and
      will
      not cause a material adverse affect on the Company for the purpose of the
      condition to closing set forth in Section 5.02(c) of this Agreement. Further,
      in
      consideration for this First Amendment, Parent hereby waives and releases any
      claim it might otherwise have had that Hurricane Katrina and/or its effects
      have
      resulted or will result as of the Effective Time in the breach by the Company
      or
      the Principals of the following representations, warranties or covenants in
      the
      Merger Agreement: (i) the representation that there will have been no event
      having a material adverse impact on the Company as set forth in Section 2.09(t);
      (ii) the representation in Section 2.17 that all accounts receivable will be
      collected within 90 days after such accounts arose, and (iii) the
      representations with respect to the discontinuance of customer contracts due
      to
      customer financial difficulties; provided, however, the foregoing waiver shall
      not prevent the Parent from seeking recovery for a breach of the foregoing
      representations if such were false or incorrect as of the date the Agreement
      was
      executed or to the extent the representation relates to a specific time prior
      to
      the date of Hurricane Katrina. Conversely, Company retains the right to contend
      that Hurricane Katrina had other effects not anticipated at this time and that
      such effects, including any breaches of warranties or representations, are
      waived and released by this Amendment. Should Parent or Subsidiary contend
      that
      a breach of the representations specifically enumerated above predated Hurricane
      Katrina or if Company contends that a breach of a representation or warranty
      other than those specifically enumerated above was caused by Hurricane Katrina,
      then, if the other party disputes such contention, then the dispute shall be
      mediated, and if mediation does not resolved that dispute, then the dispute
      shall be resolved via binding arbitration before a single arbitrator pursuant
      to
      the Commercial Rules of the American Arbitration Association.

     

    3.  Ratification.
      The
      Merger Agreement as amended hereby is ratified and affirmed, and except as
      expressly amended hereby, all other terms and provisions of the Merger Agreement
      remain unchanged and continue in full force and effect.

     

    4.  Execution.
      This
      First Amendment may be executed simultaneously in multiple counterparts, each
      of
      which will be deemed an original, but all of which together shall constitute
      one
      and the same instrument. The parties hereto agree to accept facsimile signatures
      as an original signature.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    Executed
      as of the day and year first above written.

     

    
      
        	
                 XFONE,
                  INC

                 

                 

              	 	 	 I-55
                INTERNET SERVICES, INC
	/s/ Guy
                Nissenson	 	 	/s/ Hunter
                McAllister
	
                
Guy
                Nissenson	 	 	
                
Hunter
                McAllister
	President
                and CEO 	 	 	President/CEO

      

      
        	
                 XFONE
                  USA, INC

                 

                 

              	 	 	 PRINCIPALS:
	/s/ Wade
                Spooner	 	 	/s/ Hunter
                McAllister
	
                
Wade
                Spooner	 	 	
                
Hunter
                McAllister
	President	 	 	 

      

      
        	
                 

                 

                 

              	 	 	 
	 	 	 	/s/ Brian
                Acosta
	 	 	 	
                
Brian
                Acosta
	 	 	 	 

      

 
 

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

        
        

      

    

    

    Schedule
      4.15

     

    List
      of Company Customers

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