Document:

ex10106.htm

    EXHIBIT
      10.106

     

    STOCK
      PURCHASE AGREEMENT

    by
      and
      among

     

    Xfone,
      Inc.

    a
      Nevada Corporation,

     

    as
      Purchaser,

     

    NTS
      Communications, Inc.,

     

    a
      Texas corporation,

     

    as
      the
      Company,

     

    and

     

    The
      Shareholders of the Company,

     

    set
      forth herein

     

    as
      Sellers

     

    August
      22, 2007

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

     

    
      
        	
                Article
                  I Definitions.

              	
                1

              
	 	 
	
                1.1 
                  Defined Terms

              	
                1

              
	
                1.2 
                  References and Titles

              	
                12

              
	 	 
	
                Article
                  II Contemplated Transactions

              	
                13

              
	 	 
	
                2.1 
                  Transaction

              	
                13

              
	
                2.2 
                  Purchase Price; Payment and Working Capital
                  Adjustment

              	
                13

              
	
                2.3 
                  The Closing

              	
                17

              
	
                2.4 
                  Distribution Prior to Closing

              	
                17

              
	
                2.5 
                  Conditions to Purchaser’s Obligation to Close

              	
                18

              
	
                2.6 
                  Conditions to Company’s and Sellers’ Obligations to
                  Close

              	
                20

              
	
                2.7 
                  Items to be Delivered by the Sellers and the
                  Company

              	
                21

              
	
                2.8 
                  Items to be Delivered by Purchaser

              	
                21

              
	 	 
	
                Article
                  III Seller’s Representations and Warranties Concerning
                  Transaction

              	
                22

              
	 	 
	
                3.1 
                  Organization of Seller

              	
                22

              
	
                3.2 
                  Authorization of Transaction

              	
                22

              
	
                3.3 
                  Required Regulatory Approvals and Filings; Consents

              	
                22

              
	
                3.4 
                  Non-contravention

              	
                22

              
	
                3.5 
                  Company Shares

              	
                23

              
	
                3.6 
                  Brokers’ Fees

              	
                23

              
	
                3.7 
                  Knowledge, Access and Sophistication

              	
                23

              
	
                3.8 
                  Tax Matters

              	
                23

              
	
                3.9 
                  No Other Seller Representations

              	
                24

              
	
                3.10 
                  Jackson Walker

              	
                24

              
	 	 
	
                Article
                  IV Purchaser’s Representations and
                  Warranties

              	
                24

              
	 	 
	
                4.1 
                  Organization of Purchaser

              	
                24

              
	
                4.2 
                  Authorization of Transaction

              	
                24

              
	
                4.3 
                  Required Regulatory Approvals and Filings; Consents

              	
                24

              
	
                4.4 
                  Non-contravention

              	
                25

              
	
                4.5 
                  Issuance of Shares

              	
                25

              
	
                4.6 
                  Purchaser’s SEC Filings and Financial Statements

              	
                25

              
	
                4.7 
                  Financing

              	
                26

              
	
                4.8 
                  Brokers’ Fees

              	
                26

              
	
                4.9 
                  Investment Representations

              	
                26

              
	
                4.10 
                  No Knowledge of Certain Conditions

              	
                26

              
	
                4.11 
                  Due Diligence Investigation; No Representations or
                  Warranties

              	
                26

              
	
                4.12 
                  No Other Purchaser Representations

              	
                26

              
	 	 
	
                Article
                  V Representations and Warranties of the
                  Company

              	
                27

              
	 	 
	
                5.1 
                  Organization, Qualification, and Corporate Power

              	
                27

              
	
                5.2 
                  Capitalization

              	
                27

              
	
                5.3 
                  Subsidiaries

              	
                27

              
	
                5.4 
                  Non-contravention

              	
                27

              
	
                5.5 
                  Brokers’ Fees

              	
                28

              
	
                5.6 
                  Title and Sufficiency of Assets

              	
                28

              
	
                5.7 
                  Licenses, Permits, Compliance

              	
                28

              
	
                5.8 
                  Financial Statements

              	
                29

              
	
                5.9 
                  Events Subsequent to Most Recent Financial
                  Statements

              	
                29

              
	
                5.10 
                  Undisclosed Liabilities

              	
                31

              
	
                5.11 
                  Legal Compliance

              	
                31

              
	
                5.12 
                  Tax Matters

              	
                31

              
	
                5.13 
                  Real Property, Network

              	
                32

              
	
                5.14 
                  Intellectual Property

              	
                34

              
	
                5.15 
                  Contracts

              	
                35

              
	
                5.16 
                  Customers and Suppliers

              	
                36

              
	
                5.17 
                  Inventories

              	
                37

              
	
                5.18 
                  Notes and Accounts Receivable

              	
                37

              
	
                5.19 
                  Powers of Attorney; Authorized Signatories; Bank
                  Accounts

              	
                37

              
	
                5.20 
                  Litigation

              	
                37

              
	
                5.21 
                  Warranties

              	
                37

              
	
                5.22 
                  Employees

              	
                37

              
	
                5.23 
                  Transactions with Affiliates

              	
                38

              
	
                5.24 
                  Employee Benefits

              	
                39

              
	
                5.25 
                  Guaranties

              	
                40

              
	
                5.26 
                  Insurance

              	
                40

              
	
                5.27 
                  Environmental Matters

              	
                40

              
	
                5.28 
                  Certain Payments

              	
                41

              
	
                5.29 
                  Disclosure

              	
                41

              
	 	 
	
                Article
                  VI Pre Closing Obligations

              	
                42

              
	 	 
	
                6.1 
                  General

              	
                42

              
	
                6.2 
                  Regulatory Matters and Approvals

              	
                42

              
	
                6.3 
                  Operation of Business

              	
                42

              
	
                6.4 
                  Notice of Developments

              	
                43

              
	
                6.5 
                  Exclusivity

              	
                44

              
	
                6.6 
                  Risk of Customer Loss

              	
                44

              
	
                6.7 
                  Public Disclosure.

              	
                45

              
	
                6.8 
                  AMEX and Shareholder Approval; Information
                  Statement

              	
                45

              
	
                6.9 
                  Metro Tower Inspection and Abatement Matters

              	
                47

              
	
                6.10 
                  Insurance

              	
                48

              
	
                6.11 
                  Levelland Segregated Account

              	
                48

              
	 	 
	
                Article
                  VII Remedies for Breaches of this
                  Agreement

              	
                49

              
	 	 
	
                7.1 
                  Termination Events

              	
                49

              
	
                7.2 
                  Effect of Termination

              	
                49

              
	
                7.3 
                  Survival of Representations, Warranties and
                  Covenants

              	
                50

              
	
                7.4 
                  Indemnification Provisions for Purchaser’s Benefit

              	
                50

              
	
                7.5 
                  Indemnification Provisions for Seller’s Benefit

              	
                51

              
	
                7.6 
                  Indemnification Procedures

              	
                52

              
	
                7.7 
                  Other Indemnification Provisions

              	
                53

              
	
                7.8 
                  Exclusive Remedy; Escrow

              	
                54

              
	 	 
	
                Article
                  VIII Post-Closing Covenants & Other
                  Agreements

              	
                55

              
	 	 
	
                8.1 
                  Non-Participating Shareholders

              	
                55

              
	
                8.2 
                  Indemnification

              	
                55

              
	
                8.3 
                  Employee Benefits

              	
                55

              
	
                8.4  
                  Further Assurances

              	
                55

              
	
                8.5 
                  Third Party Beneficiaries

              	
                55

              
	
                8.6 
                  Metro Tower Disclaimer

              	
                56

              
	
                8.7 
                  Releases

              	
                56

              
	 	 
	
                Article
                  IX Miscellaneous

              	
                57

              
	 	 
	
                9.1 
                  No Third-Party Beneficiaries

              	
                57

              
	
                9.2 
                  Succession and Assignment

              	
                57

              
	
                9.3 
                  Notices

              	
                57

              
	
                9.4 
                  Amendments and Waivers

              	
                59

              
	
                9.5 
                  Severability

              	
                59

              
	
                9.6 
                  Expenses

              	
                59

              
	
                9.7 
                  Construction

              	
                59

              
	
                9.8 
                  CONSULTATION WITH INDEPENDENT COUNSEL

              	
                60

              
	
                9.9 
                  Governing Law; Choice of Forum

              	
                60

              
	
                9.10 
                  Consent to Jurisdiction; Venue

              	
                60

              
	
                9.11 
                  Incorporation of Annexes, and Schedules

              	
                61

              
	
                9.12 
                  Entire Agreement

              	
                61

              
	
                9.13 
                  Counterparts

              	
                61

              

      

       

    

    Exhibits

    

    Exhibit
      A—Release

    Exhibit
      B—Escrow Agreement

    Exhibit
      C—Lease Agreement

    Exhibit
      D—Non-Compete Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    STOCK
      PURCHASE AGREEMENT

     

    THIS
      STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into on
      this 22 day of August, 2007 (the “Effective Date”), by and
      among Xfone, Inc., a Nevada corporation (“Purchaser”), NTS
      Communications, Inc., a Texas corporation (the “Company”), and
      each of the persons identified on the signature page of this Agreement (each
      a
“Seller” and collectively, the
“Sellers”).  The Purchaser, the Company and each
      Seller is referred to individually as a “Party” and
      collectively as the “Parties.”

     

    RECITALS

     

    WHEREAS,
      Sellers in the aggregate own 1,077,618 shares of Common Stock of the Company,
      representing more than 80% of the Equity Interests entitled to vote with respect
      to the election of members of the Board of Directors of the Company;
      and

     

    WHEREAS,
      each Seller desires to sell, and Purchaser desires to acquire, all of the
      Seller’s Equity Interests in the Company; and

     

    WHEREAS,
      the Parties hereto desire to set forth the terms pursuant to which the
      transactions described above shall be consummated.

     

    NOW,
      THEREFORE, in consideration of the above premises and the respective
      representations, warranties, agreements and conditions herein set forth, and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Parties, intending to be legally bound, hereby agree
      as
      follows:

     

    ARTICLE
      I

     

    DEFINITIONS.

     

    1.1           Defined
      Terms.  As used in this Agreement, each of the following
      terms has the meaning given in this Section 1.1 or in the Section
      referred to below:

     

    “Abatement
      Matters”
has the meaning set forth in Section 6.9(c).

    

    “Adverse
      Consequences” means, with respect to any Person, all actions, suits,
      proceedings, hearings, investigations, charges, complaints, claims, demands,
      injunctions, judgments, orders, decrees, rulings, Damages, Liabilities, Taxes
      and Liens.

     

    “Affiliate”
      means, with respect to any Person, each other Person that directly or indirectly
      (through one or more intermediaries or otherwise) controls, is controlled by,
      or
      is under common control with such Person.  The term
“control” (including the terms “controlled by”
and “under common control with”) means the ownership,
      directly
      or indirectly, of an Equity Interest entitled to cast more than fifty percent
      (50%) of the votes entitled to be cast with respect to the election of members
      of the Board of Directors or other governing body of such Person.

     

    

    
      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

    

    

    “Affiliated
      Group” means any affiliated group within the meaning of Code §1504(a),
      or any consolidated, combined, unitary, or similar group under a similar
      provision of any state, local or foreign Tax Law.

     

    “Agreement”
      has the meaning set forth in the introductory paragraph.

     

    “Allocable
      Sale Price” has the meaning set forth in Section
      2.2(b).

     

    “Allocable
      Share” means, with respect to a holder of Equity Interests, or any
      group thereof, receiving a particular distribution of money or property, or
      being subject to a particular adjustment or Liability, the fraction obtained
      by
      dividing the Equity Interests of that holder by the Equity Interests of all
      holders, or of all holders that are members of the group in
      question.

     

    “AMEX”
      has the meaning set forth in Section 2.2(c).

     

    “Arbitrator” has
      the meaning set forth in Section 2.2(e).

     

    “Assignment”
      has the meaning set forth in Section 2.5(s).

     

    “Business
      Day” means any day other than (i) a Saturday or Sunday or (ii) a day on
      which commercial banks in Dallas, Texas are authorized or required to be
      closed.

     

    “CERCLA”
      means the Comprehensive Environmental Response, Compensation and Liability
      Act
      of 1980, 42 U.S.C. § 9601 et seq., as amended.

     

    “Claim
      Notice” has the meaning set forth in Section
      7.6(a).

     

    “Closing”
      has the meaning set forth in Section 2.3.

     

    “Closing
      Date” has the meaning set forth in Section 2.3.

     

    “COBRA”
      shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
      amended.

     

    “Code”
      means the Internal Revenue Code of 1986, as amended (and reference to a Code
      section refers also to all temporary and final treasury regulations
      thereunder).

     

    “Common
      Stock” means the Company’s Common Stock, no par value per
      share.

     

    “Communications
      Licenses” means Permits issued by the FCC, State PUCs or any other
      Governmental Authority that regulates telecommunications in each applicable
      jurisdiction in which the Company or its Subsidiaries conducts
      business.

     

    “Company”
      has the meaning set forth in the first paragraph of this Agreement and including
      all of the Subsidiaries of the Company.

     

    “Company
      Shares” means all of the Company’s Common Stock.

     

    “Company
      Releasees” has the meaning set forth in Section
      8.7(a).

     

    

    
      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

    

    

    “Contemplated
      Transactions” means all of the transactions contemplated by this
      Agreement, including but not limited to the transactions contemplated in
Article II.

     

    “Contract”
      means all agreements, contracts, obligations or undertakings, written or oral;
      provided, that in the case of any oral agreement, contract, obligation or
      undertaking, such agreement, contract, obligation or undertaking involves
      consideration in excess of $1,000 (including any amendments and other
      modifications thereto).

     

    “Current
      Assets” shall mean the sum of those accounts required to be included in
      the determination of current assets in accordance with GAAP and consistent
      with
      the Company’s Financial Statements, including the following accounts: (i) cash,
      (ii) accounts receivable, net of allowances for bad debts, (iii) miscellaneous
      current receivables, (iv) accounts receivable for unbilled revenues, (v) prepaid
      insurance, (vi) other prepaid expenses, (vii) inventory interconnect equipment,
      (viii) accrued interest receivable net of intercompany accrued interest, and
      (ix) other current assets; provided that the foregoing accounts shall be
      adjusted appropriately to exclude intercompany or similar duplicating accounts,
      and provided further that Current Assets shall not include any Levelland
      Investment.

     

    “Current
      Liabilities” shall mean the sum of those accounts required to be
      included in the determination of current liabilities in accordance with GAAP
      and
      consistent with the Company’s Financial Statements, including the following
      accounts: (i) accounts payable – trade, (ii) accrued expenses, (iii) accrued
      payroll taxes, (iv) accrued payroll, (v) other accrued taxes, (vi) accrued
      other
      expense and (vii) other current liabilities; provided that the foregoing shall
      be adjusted appropriately to exclude intercompany or similar duplicating
      accounts and shall not include any Levelland Debt.

     

    “Damages”
      means any and all obligations, damages, losses, liabilities, fines, penalties,
      judgments, amounts paid in settlement, diminution in value whether or not
      involving a Third Party claim and all costs and expenses (including court costs
      and legal and other professional fees and expenses) actually incurred in
      investigating, defending and preparing for any claim, demand, charge, suit,
      litigation or judicial or administrative proceeding.

     

    “Deductible”
      has the meaning set forth in Section 7.4(b).

     

    “Dispute
      Statement” has the meaning set forth in Section
      7.6(b).

     

    “DOL”
      has the meaning set forth in Section 5.24(b).

     

    “Due
      Diligence Materials” means (a) all due diligence materials provided for
      review or distributed in written, electronic or digital form by Seller, the
      Company or their respective representatives to Purchaser or its representatives,
      (b) all written or electronic answers provided by Seller, the Company or their
      respective representatives to questions of Purchaser or its representatives,
      and
      (c) all materials contained in data rooms established for purposes of
      providing due diligence materials to Purchaser or its representatives provided
      by Seller, the Company or their respective representatives to Purchaser or
      its
      representatives.

     

    “Effective
      Date” has the meaning set forth in the preamble hereof.

     

    

    
      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

    

    

    “Election
      Period” has the meaning set forth in Section
      2.2(c).

     

    “Employee
      Benefit Plan” means any “employee benefit plan” (as such term is
      defined in ERISA §3(3)) and any other material employee benefit plan, program or
      arrangement of any kind maintained by the Company and any ERISA Affiliate to
      which the Company contributes or has contributed.

     

    “Employee
      Pension Benefit Plan” has the meaning set forth in ERISA
§3(2).

     

    “Employee
      Welfare Benefit Plan” has the meaning set forth in ERISA
§3(1).

     

    “Environmental
      Permits” has the meaning set forth in Section
      5.27(e).

     

    “Environmental
      Requirements” shall mean, as amended and as now in effect, all Legal
      Requirements concerning pollution or protection of the environment, including,
      without limitation, all those relating to the presence, use, production,
      generation, handling, transportation, treatment, storage, disposal,
      distribution, labeling, testing, processing, discharge, release, threatened
      release, control, or cleanup of any Hazardous Material, substances, or wastes,
      chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
      chemicals, petroleum products or byproducts, asbestos, polychlorinated
      biphenyls, noise, or radiation.

     

    “Equity
      Interest” means (i) the equity ownership rights in a business entity,
      whether a corporation, company, joint stock company, limited liability company,
      general or limited partnership, joint venture, bank, association, trust, trust
      company, land trust, business trust, sole proprietorship or other business
      entity or organization, and whether in the form of capital stock, ownership
      unit, limited liability company interest, limited or general partnership
      interest or any other form of ownership, and (ii) also includes all Equity
      Interest Equivalents.

     

    “Equity
      Interest Equivalents” means all rights, warrants, options, convertible
      securities or indebtedness, exchangeable securities or other instruments, or
      other rights that are outstanding and exercisable for or convertible or
      exchangeable into, directly or indirectly, any Equity Interest at the time
      of
      issuance or upon the passage of time or occurrence of some future
      event.

     

    “ERISA”
      means the Employee Retirement Income Security Act of 1974, as
      amended.

     

    “ERISA
      Affiliate” shall mean any other person or entity under common control
      with the Company or its parent, as applicable, within the meaning of Section
      414(b), (c), (m) or (o) of the Code.

     

    “Escrow
      Agent” means the Escrow Agent provided for in the Escrow
      Agreement.

     

    “Escrow
      Agreement” has the meaning set forth in Section
      2.5(m).

     

    “Escrow
      Amount” has the meaning set forth in Section
      2.2(b)(ii).

     

    “Estimated
      Working Capital” shall mean an estimate of the positive difference
      between the Current Assets and the sum of Current Liabilities and Other
      Liabilities of the Company on the day preceding the Closing, determined by
      the
      Sellers in accordance with Section 2.2.

     

    

    
      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

    

    

    “Exchange
      Act” mean the Securities Exchange Act of 1934, as amended.

     

    “Expiration
      Date” shall mean January 15, 2008 or such later date as determined
      pursuant to the terms and conditions of Section 6.8(d).

     

    “Fair
      Market Value” means, as of any date, the value of Xfone Common Stock as
      determined below. The Fair Market Value on any date on which shares of Xfone
      Common Stock are registered under Section 12 of the Exchange Act
      (a) if the Xfone Common Stock is admitted to quotation on the Nasdaq over
      the counter market or any interdealer quotation system and closing prices are
      reported, the Fair Market Value on any date shall be the average of the closing
      prices reported for the Xfone Common Stock on such market or system for the
      ten
      (10) trading days preceding such date on which a closing price is report or,
      if
      closing prices are not reported, the Fair Market Value on any given date shall
      be the average of the following for the ten (10) trading days preceding such
      date: the average of the highest bid and lowest asked prices of the Xfone Common
      Stock reported for each such date or, if no bid and asked prices were reported
      for such date, for the last day preceding such date for which such prices were
      reported, (b) if the Xfone Common Stock is admitted to trading on a
      national securities exchange, including the New York Stock Exchange, AMEX and
      the Nasdaq National Market, or Nasdaq Small Cap Market, the Fair Market Value
      on
      any date shall be the average of the closing price reported for the Xfone Common
      Stock on such exchange or system for the ten (10) trading days preceding such
      date on which a closing price was report, or (c) in the absence of an
      established market for the Xfone Common Stock, the Fair Market Value determined
      in good faith by the Purchaser and the Sellers’ Representative and such
      determination shall be conclusive and binding on all persons.

     

    “FCC”
      means the Federal Communications Commission.

     

    “Filing”
      means all filings, notices, reports, returns, registrations, statements or
      applications, together with any amendments thereto, required to be filed with
      any Governmental Authority under any Legal Requirements other than those for
      which the failure to file will not have any Adverse Consequences.

     

    “Financial
      Statements” has the meaning set forth in Section
      5.8.

     

    “Financing
      Documents” has the meaning set forth in Section
      6.8(d)(ii).

     

    “GAAP”
      means United States generally accepted accounting principles as in effect from
      time to time, consistently applied.

     

    “Governmental
      Authority” means any federal, state, county or municipal government,
      any agency or commission with statewide jurisdiction, any court or Arbitrator
      in
      any case that has jurisdiction over Seller, the Company or Purchaser or any
      of
      their respective properties or assets.

     

    “Governmental
      Authorization” means any approval, consent, assignment, novation,
      exemption, license, permit, waiver, or other authorization issued, granted,
      given, or otherwise made available by or under the authority of any Governmental
      Authority or pursuant to any Legal Requirement.

     

    

    
      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

    

    

    “Hazardous
      Material” means:  (i) any “hazardous substance,” “hazardous
      waste” or “solid waste,” as defined by CERCLA, any analogous state or local
      statutes, or any regulations promulgated thereunder, (ii) any solid, hazardous,
      dangerous or toxic chemical, material, waste or substance, within the meaning
      of
      and regulated by any Environmental Requirement, (iii) any radioactive
      material and any source, special or byproduct material as defined in 42 U.S.C.
      § 2011 et seq. and any amendments or authorizations thereof, (iv)
      any asbestos-containing materials in any form or condition, (v) any
      polychlorinated biphenyls in any form or condition and (vi) petroleum,
      petroleum hydrocarbons or any fraction or byproducts thereof.

     

    “Hazardous
      Materials Activities” has the meaning set forth in
Section 5.27(d).

     

    “Improvements”
      means all improvements and fixtures included in a parcel of real
      property.

     

    “Income
      Tax” means any Tax based upon or calculated with respect to net income
      or profits, including a franchise tax the computation of which is based in
      whole
      or part upon net or taxable income.

     

    “Indemnified
      Party” has the meaning set forth in Section 7.6(a).

     

    “Indemnifying
      Party” has the meaning set forth in Section 7.6(a).

     

    “Independent
      Accounting Firm” shall mean Deloitte & Touche LLP or if the
      managing partner of their Dallas office should be unable or unwilling to
      designate a Person to  be the Arbitrator, another firm of independent
      accountants agreed upon by the Purchaser and the Sellers’ Representative, or
      failing such agreement, designated by agreement among the lead audit partners
      for the Company’s and the Purchaser’s respective independent
      accountants.

     

    “Inspection
      Period” has the meaning set forth in Section
      6.9(a).

     

    “Intellectual
      Property” means all of the following, if any: (i) all patents, patent
      applications, and patent disclosures, together with all reissuances,
      continuations, continuations-in-part, revisions, extensions, and reexaminations
      thereof, (ii) all trademarks, service marks, trade dress, logos, slogans, trade
      names, Internet domain names, and rights in telephone numbers and including
      all
      goodwill associated therewith, and all applications, registrations, and renewals
      in connection therewith, (iii) all copyrightable works, all copyrights, and
      all
      applications, registrations, and renewals in connection therewith, (iv) all
      mask
      works and all applications, registrations, and renewals in connection therewith,
      (v) all trade secrets, (vi) all computer software, (vii) all advertising and
      promotional materials, and (viii) all copies and tangible embodiments thereof
      (in whatever form or medium).

     

    “IRS”
      has the meaning set forth in Section 5.24(b).

     

    “Knowledge”
      means (i) with respect an individual, that such individual is actually aware
      of
      that fact or matter or could reasonably be expected to discover or otherwise
      become aware of such fact or matter upon due inquiry, and (ii) with respect
      to a
      Person (other than an individual), that any individual who is serving as a
      director, officer, partner, executor, or trustee of that Person (or in any
      similar capacity) has, or at any time had, Knowledge of that fact or other
      matter as set forth in (i) above.

     

    

    
      
        
          
          

        

        
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    “Lease
      Agreement” has the meaning set forth in Section
      2.5(o).

     

    “Leased
      Real Property” means all leasehold or subleasehold estates and other
      rights to use or occupy any land, buildings, structures, improvements, fixtures,
      or other interest in real property held by the Company, including the right
      to
      all security deposits and other amounts and instruments deposited by or on
      behalf of the Company thereunder.

     

    “Leases”
      means all leases, collocation agreements, subleases, or other occupancy
      agreements pursuant to which the Company occupies Leased Real Property,
      including all amendments, extensions, renewals, guaranties, with respect
      thereto, including the right to all security deposits and other amounts and
      instruments deposited by or on behalf of the Company thereunder.

     

    “Legal
      Requirement” means any federal, state, local, municipal, foreign,
      international, multinational or other constitution, law, ordinance, binding
      directive, principle of common law, code, regulation, statute or treaty
      (including without limitation, (i) the Communications Act of 1934, as amended,
      and the communications-related statutes of each state in which the Company
      or
      its Subsidiaries operates; (ii) the rules, regulations, orders, and policies
      of
      the FCC and State PUCs, (iii) any and all Universal Service Fund obligations,
      and (iv) the Communications Assistance to Law Enforcement Act).

     

    “Levelland
      Debt” shall mean any indebtedness of the Company or any Subsidiary
      incurred in connection with the Levelland Project, including Levelland RDUP
      Debt
      and any other indebtedness and the current portion thereof incurred and
      deposited into the Levelland Segregated Accounts.

     

    “Levelland
      Equity” shall mean the aggregate of all amounts, from whatever source
      derived (with the exception of any amounts of Levelland RDUP Debt), deposited
      or
      contributed by or on behalf of the Company, from time to time, into the
      Levelland Segregated Accounts, but not, in any event, to exceed
      $2,420,000.  The application of the foregoing may result in the amount
      of the Levelland Equity exceeding the aggregate balance held in the Levelland
      Segregated Accounts on any measurement date.

     

    “Levelland
      Investment” shall mean any amounts held in accounts by the Company or
      any Subsidiary, but restricted for use in connection with the Levelland Project,
      or any other current asset of the Company that is restricted in its use or
      application to expenditures or other uses in connection with the Levelland
      Project.

     

    “Levelland
      Project” means the fiber optic network build-out project expected to be
      undertaken by the Company in Levelland and Smyer, Texas.

     

    “Levelland
      RDUP Debt” shall mean any indebtedness of the Company or any Subsidiary
      provided through the Rural Development Utilities Program.

     

    

    
      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

    

    

    “Levelland
      Segregated Accounts” shall mean any account or accounts held, owned or
      otherwise set aside by the Company or any Subsidiary containing funds that
      are
      restricted for use or application to expenditures in connection with the
      Levelland Project.

     

    “Liability”
      means any liability or obligation of whatever kind or nature (whether asserted
      or unasserted, whether absolute or contingent, whether accrued or unaccrued,
      whether liquidated or unliquidated, and whether due or to become due), including
      any liability for Taxes.

     

    “Lien”
      means any charge, claim, equitable interest, lien, mortgage, security interest,
      pledge, deposit, encumbrance, right of purchase, right of a vendor under any
      title retention or conditional sale agreement, or other arrangement
      substantially equivalent thereto.

     

    “Material
      Adverse Effect” or “Material Adverse Change” means,
      with respect to any Person, any effect or change that could reasonably be
      expected to be material and adverse to the business, assets, condition
      (financial or otherwise), operating results or operations of that Person, taken
      as a whole, or on the ability of that Person to conduct its business as the
      business is currently being conducted or to consummate timely the transactions
      contemplated hereby, excluding any such effect of change which (a) affects
      the
      economy generally or (b) affects the national, regional or local
      telecommunications industry as a whole and does not affect the Company
      materially differently from other companies in the same industry.

     

    “Material
      Agreements” has the meaning set forth in
Section 5.15.

     

    “Metro
      Tower” means that certain land and the 20 story building thereon
      commonly known as 1220 Broadway Street, Lubbock, Texas, together with the
      parcels of property owned by NTS Management which provide parking for such
      building and which are commonly known as 1220 Broadway Street, Lubbock,
      Texas  79414, and together with the parcels owned by NTS Management,
      those parcels of real property leased by NTS Management, located in Lubbock,
      Texas at 1221 Main Street, 1301 10th Street, 1402 Main Street, 1220
      Broadway and 1219 Broadway under the Parking Lot Leases.

     

    “Most
      Recent Balance Sheet” means the balance sheet contained within the Most
      Recent Financial Statements.

     

    “Most
      Recent Financial Statements” has the meaning set forth in Section
      5.8.

     

    “Most
      Recent Fiscal Month End” has the meaning set forth in Section
      5.8.

     

    “Net
      Purchase Price” has the meaning set forth in Section
      2.2(b)(iv).

     

    “Non-Participating
      Shareholder” has the meaning set forth in Section
      8.1.

     

    “Non-Participating
      Shareholders Holdback” has the meaning set forth in Section
      2.2(a).

     

    “NTS
      Landlord” means Shareholder Value, Ltd, lessor under the NTS
      Headquarters Lease.

     

    

    
      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

    

    

    “NTS
      Management” means NTS Management Company, L.L.C., a Texas limited
      liability company, and a wholly-owned subsidiary of the Company.

     

    “NTS
      Properties” means NTS Properties, L.C., a Texas limited liability
      company and wholly owned Subsidiary of the Company that serves as the general
      partner of NTS Landlord.

     

    “Objections”
      has the meaning set forth in Section 6.9(b).

     

    “Ordinary
      Course of Business” means, with respect to any Person, the ordinary
      course of business consistent with past custom and practice (including with
      respect to quantity and frequency) or consistent with that Person’s existing
      budget and business plan for the current year.

     

    “Organizational
      Documents” means as applicable, the certificate of incorporation,
      articles of incorporation, bylaws, certificate of limited partnership,
      partnership or limited partnership agreement, articles of organization,
      certificate of organization, certificate of formation, regulations, operating
      agreement, joint venture agreement and each other Contract or instrument and
      any
      amendments to any of the foregoing (i) pursuant to which a Person is
      established and organized, or (ii) which establishes the governance of such
      Person.

     

    “Other
      Liabilities” shall mean all the liabilities, other than Current
      Liabilities, of the Company required to be included in the Company’s balance
      sheet in accordance with GAAP and consistent with the Company’s Financial
      Statements, including but not limited to the following accounts:  (i)
      Performance Targets; (ii) Long Term Portion—City Bank; (iii) Equipment Loan—GE
      Capital, and (iv) Other Long Term Liabilities.

     

    “Owned
      Real Property” means all land, together with all buildings, structures,
      improvements, and fixtures located thereon, including all electrical,
      mechanical, plumbing and other building systems, fire protection, security
      and
      surveillance systems, telecommunications systems, computer, wiring, and cable
      installations, utility installations, water distribution systems, and
      landscaping, together with all easements, and other rights and interests
      appurtenant thereto (including air, oil, gas, mineral, and water
      rights).

     

    “Parking
      Lot Leases” means those leases by NTS Management of parking lots
      serving the Metro Tower.

     

    “Party”
      and “Parties” have the meanings set forth in the first
      paragraph of this Agreement.

     

    “Performance
      Targets” means all matters arising from or relating to designated
      performance guarantees, goals, targets, thresholds, formulas or the like under
      any Contracts for which the failure to attain or exceed may result in recourse
      against the Company, including but not limited to an adjustment to the
      remuneration that has been paid, is being paid or may be paid to the Company
      under such Contract.

     

    “Permits”
      means all federal, state, local and foreign governmental approvals,
      authorizations, certificates, filings, franchises, licenses, notices, permits
      and rights.

     

    

    
      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

    

    

    “Permitted
      Encumbrances” means: (i) all of the Company’s and its Subsidiaries
      obligations, including performance obligations, under the Contracts to which
      they are a party, (ii) the Legal Requirements applicable to the Company and
      its Subsidiaries and their respective assets and businesses, including those
      arising under the Communications Licenses, (iii) Taxes, assessments and
      other governmental levies, fees, or charges that are (A) not due and
      payable as of the Closing Date or (B) being contested in good faith and for
      which appropriate reserves have been established in accordance with GAAP and
      are
      included in the Company’s Financial Statements; (iv) mechanics’, material
      suppliers’, carriers’, warehousemans’, landlords’, and other similar liens
      incurred in the Ordinary Course of Business for amounts that are (A) not
      due and payable as of the Closing Date and for which appropriate reserves have
      been established in accordance with GAAP and are included in the Company’s
      Financial Statements; or (B) being contested in good faith and for which
      appropriate reserves have been established in accordance with GAAP and are
      included in the Company’s Financial Statements; (v) zoning, building codes
      and other land use Legal Requirements regulating the use, occupancy or
      improvement of any Owned Real Property or the activities conducted thereon
      which
      are imposed by any Governmental Authority having jurisdiction over such Real
      Property and are not violated by the current use or occupancy of such Real
      Property or the operation of the Company’s business as currently conducted
      thereon; (vi) easements, reservations, covenants, conditions, restrictions,
      encroachments, and other non-monetary Liens affecting title that do not impair
      the use or occupancy of such Real Property in the operation of the Company’s and
      its Subsidiaries respective business as currently conducted thereon or create
      any Liability; and (vii) the matters identified on
Schedule 1.1.

     

    “Person”
      means an individual, a partnership, a corporation, a limited liability company,
      an association, a joint stock company, a trust, a joint venture, an
      unincorporated organization, any other business entity, or a governmental entity
      (or any department, agency, or political subdivision thereof).

     

    “Pre-Closing
      Distribution” has
      the meaning
      set forth in Section 2.4(a).

     

    “Purchase
      Price” has the meaning set forth in Section 2.2(a).

     

    “Purchaser”
      has the meaning set forth in the first paragraph of this Agreement.

     

    “Purchaser
      Indemnified Party” has the meaning set forth in Section
      7.4(a).

     

    “Purchaser
      Shareholder Consent” has the meaning set forth in Section
      6.8(b).

     

    “Purchaser
      Shareholder Vote” has the meaning set forth in Section
      6.8(b).

     

    “Purchaser’s
      Disclosure Schedules” has the meaning set forth in the first paragraph
      of Article IV.

     

    “Purchaser’s
      Offer” has the meaning set forth in Section
2.2(c)(i).

     

    “Purchaser’s
      Required Consents” has the meaning set forth in
Section 4.3.

     

    “Real
      Property” has the meaning set forth in Section
5.13(b)(ix)

     

    

    
      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

    

    

    “Real
      Property Permits” has the meaning set forth in Section
5.13(c).

     

    “Required
      Consents” means the Company Required Consents, the Purchaser’s Required
      Consents, the Seller’s Required Consents and any consents of any Governmental
      Authority under any Legal Requirement reasonably deemed necessary by the Company
      or Purchaser to the consummation of the Contemplated Transactions.

     

    “Required
      Telecommunications Notices and Consents” has the meaning set forth in
Section 3.3.

     

    “Sale
      of the Company” has the meaning set forth in Section
      6.5.

     

    “SEC”
      means the U.S. Securities and Exchange Commission.

     

    “Securities
      Act” means the Securities Act of 1933, as amended.

     

    “Seller”
      or “Sellers” have the meanings set forth in the first paragraph
      of this Agreement.

     

    “Seller
      Indemnified Party” has the meaning set forth in Section
      7.5(a).

     

    “Sellers”
      has the meaning set forth in the first paragraph of this Agreement.

     

    “Sellers’
      Disclosure Schedules” has the meaning set forth in the first paragraph
      of Article III.

     

    “Seller’s
      Pro-Rata Portion” has the meaning set forth in Section
      7.8(d).

     

    “Seller
      Releasees” has the meaning set forth in Section
      8.7(b).

     

    “Sellers’
      Representative” has the meaning set forth in Section
      2.2(f).

     

    “Seller’s
      Required Consents” has the meaning set forth in
Section 3.3.

     

    “Significant
      Customer Contracts” has the meaning set forth in Section
      5.16(c).

     

    “State
      PUC” means any state public service or public utilities commission, or
      similar state regulatory agency or body that regulates the business of the
      Company or any of its Subsidiaries.

     

    “Subsidiary”
      means, with respect to any Person, any corporation, limited liability company,
      partnership, association, or other business entity of which (i) if a
      corporation, a majority of the total Equity Interest entitled (without regard
      to
      the occurrence of any contingency) to vote in the election of directors,
      managers, or trustees thereof is at the time owned or controlled, directly
      or
      indirectly, by that Person or one or more of the other Subsidiaries of that
      Person or a combination thereof or (ii) if a limited liability company,
      partnership, association, or other business entity (other than a corporation),
      a
      majority of the partnership or other similar Equity Interests thereof is at
      the
      time owned or controlled, directly or indirectly, by that Person or one or
      more
      Subsidiaries of that Person or a combination thereof and for this purpose,
      a
      Person or Persons own a majority ownership interest in such a business entity
      (other than a corporation) if such Person or Persons shall be allocated a
      majority of such business entity’s gains or losses or shall be or control any
      managing director or general partner of such business entity (other than a
      corporation).  The term “Subsidiary” shall include
      all Subsidiaries of such Subsidiary.

     

    

    
      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

    

     

    “Survival
      Period” has the meaning set forth in Section 7.3.

     

    “Tax”
      or “Taxes” means any federal, state, local, or foreign income,
      gross receipts, license, payroll, employment, excise, severance, stamp,
      occupation, premium, windfall profits, environmental (including taxes under
      Code
§59A), customs duties, capital stock, franchise, profits, withholding, social
      security (or similar), unemployment, disability, real property, personal
      property, sales, use, transfer, registration, value added, alternative or add-on
      minimum, estimated, or other tax of any kind whatsoever, including any interest,
      penalty, or addition thereto, whether disputed or not.

     

    “Tax
      Law” means any Legal Requirement directly or indirectly relating to
      Taxes.

     

    “Tax
      Return” means any return, declaration, report, claim for refund,
      information return, list or statement relating to Taxes, including any schedule
      or attachment thereto, and including any amendment thereof.

     

    “TBOC”
      means the Texas Business Organization Code, including the Texas Business
      Corporations Act, as referenced therein, to the extent applicable under the
      circumstances.

     

    “Third
      Party” means any Person other than the Sellers, Purchaser, the Company,
      or any Affiliate thereof.

     

    “Third-Party
      Claim” has the meaning set forth in Section 7.6(a).

     

    “Transaction
      Documents” means this Agreement and all other agreements and documents
      entered into by one or more of the Parties as contemplated by or in connection
      with this Agreement.

     

    “Transaction
      Expenses” has the meaning set forth in Section
      2.2(b)(i).

     

    “Working
      Capital” means the positive difference between the Current Assets and
      the sum of Current Liabilities and Other Liabilities of the
      Company.

     

    “Working
      Capital Target” means a positive $1,000,000.

     

    “Xfone
      Common Stock” means restricted shares of the Common Stock of Xfone,
      Inc., $0.001 Par Value.

     

    “Xfone
      Subscription Agreement” has the meaning set forth in Section
      2.2(c)(i).

     

    1.2           References
      and Titles.  All references in this Agreement to Annexes,
      Schedules, Articles, Sections, subsections, and other subdivisions refer to
      the
      corresponding Annexes, Schedules, Articles, Sections, subsections, and other
      subdivisions of this Agreement unless expressly provided
      otherwise.  All references to cash or monetary amounts refer to U.S.
      Dollars only unless specifically stated to be in the currency of another
      government.  Titles appearing at the beginning of any Articles,
      Sections, subsections, or other subdivisions of this Agreement are for
      convenience only, do not constitute any part of such Articles, Sections,
      subsections or other subdivisions, and shall be disregarded in construing the
      language contained therein.  The words “this Agreement,” “herein,”
“hereby,” “hereunder,” and “hereof,” and words of similar import, refer to this
      Agreement as a whole and not to any particular subdivision unless expressly
      so
      limited.  The words “this Section,” “this subsection,” and words of
      similar import, refer only to the Sections or subsections, respectively, hereof
      in which such words occur.  The word “including” (in its various
      forms) means “including without limitation”.  Pronouns in masculine,
      feminine, or neuter genders shall be construed to state and include any other
      gender and words, terms, and titles (including terms defined herein) in the
      singular form shall be construed to include the plural and vice versa, unless
      the context otherwise expressly requires.  Unless the context
      otherwise requires, all defined terms contained herein shall include the
      singular and plural and the conjunctive and disjunctive forms of such defined
      terms.

     

    

    
      
        
          
          

        

        
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    ARTICLE
      II

     

    CONTEMPLATED
      TRANSACTIONS.

     

    2.1           Transaction.

     

    On
      and
      subject to the terms and conditions of this Agreement, Purchaser agrees to
      purchase from the Sellers, and each of the Sellers agrees to sell, transfer,
      assign, convey and deliver to the Purchaser, all of the Company Shares owned
      of
      record by such Seller for the consideration specified below in this Article
      II.

     

    2.2           Purchase
      Price; Payment and Working Capital Adjustment.

     

    (a)           At
      Closing, and subject to adjustment pursuant to Section 2.2(d), Purchaser
      agrees to pay to Sellers an aggregate amount (the “Purchase
      Price”) equal to Forty Two Million and No/100 Dollars ($42,000,000.00),
      plus the positive or negative difference between the Estimated Working Capital
      and the Working Capital Target, plus any Levelland Equity and less any Levelland
      Debt that is not Levelland RDUP Debt.  In the event that the holders
      of less than all of the issued and outstanding Equity Interests shall be Sellers
      under this Agreement, the Purchaser shall set aside from the Net Purchase Price
      the Allocable Sale Price that would otherwise be attributable to such holders
      if
      they had become Sellers and the Purchaser will hold such amounts exclusively
      for
      distribution in accordance with Section 8.1 (the
“Non-Participating Shareholders Holdback”).  The
      Purchase Price shall be payable in cash as set forth in Section 2.2(b),
      subject to Section 2.2(c).

     

    (b)           Subject
      to Section 2.2(a) with regard to Non-Participating Shareholders, the Net
      Purchase Price shall be allocated among Sellers in accordance with each Seller’s
      Allocable Share as set forth on Schedule 2.2(b) (in each case, the
“Allocable Sale Price”).  The Purchase Price will be
      subject to adjustment as provided in Section 2.2(d) and (e) and in
Article VII below.  The Purchase Price will be paid as
      follows:

     

    (i)         The
      Purchaser shall pay, on behalf of the Company and the Sellers, all unpaid fees
      and expenses owed or to be owed by the Company or the Sellers to their
      attorneys, accountants, brokers, financial advisors and other representatives
      in
      connection with the transactions contemplated by this Agreement (the
“Transaction Expenses”) by wire transfer of immediately
      available funds to the accounts designated by the recipients
      thereof.  The Sellers will advise the Purchaser in writing of the
      amount of and related wire transfer information with respect to the Transaction
      Expenses at least two (2) Business Days prior to the Closing.

     

    

    
      
        
          
          

        

        
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    (ii)          Subject
      to Section 2.2(c), the Purchaser shall deliver to the Escrow Agent an
      amount of cash and shares of Xfone Common Stock with an aggregate value equal
      to
      fifteen percent (15%) of the Purchase Price (which in no event for the purposes
      of determining the Escrow Amount shall be less than Forty Two Million and No/100
      Dollars ($42,000,000.00) (the “Escrow Amount”) to be held under
      the Escrow Agreement to secure Sellers’ obligations under Section 2.2(d)
      and (e) and Article VII.

     

    (iii)          Subject
      to Section 2.2(c), the Purchaser shall pay the remaining balance of the
      Purchase Price (i.e., the Purchase Price minus the Transaction Expenses
minus the Escrow Amount) (the “Net Purchase Price”) less
      the Non-Participating Shareholders Holdback via wire transfer of immediately
      available funds and/or the delivery of shares of Xfone Common Stock to each
      Seller in an amount equal to such Seller’s Allocable Sale Price.

     

    (c)           i)           Purchaser
      may offer to the Sellers (the “Purchaser’s Offer”) the
      opportunity to reinvest all or part of their Allocable Sale Price in Xfone
      Common Stock and such offers shall be made no later than twenty (20) Business
      Days after the date of this Agreement.  Any Seller who wishes to
      reinvest all or part of its Allocable Sale Price in Xfone Common Stock may
      do so
      by giving written notice to the Purchaser within the time frame set out in
      the
      Purchaser’s offer but in no event later than twenty (20) days following the date
      of the Purchaser’s offer (the “Election
      Period”).  Such notice shall include what percentage of such
      Seller’s Allocable Sale Price it elects to reinvest in Xfone Common Stock and
      shall include a subscription agreement duly executed by the Seller in
      substantially the form set forth in the Purchaser’s Offer (the “Xfone
      Subscription Agreement”).  The Purchaser will advise the
      Sellers in writing of the portion of the Net Purchase Price and the portion
      of
      each Seller’s Allocable Sale Price being reinvested in Xfone Common Stock by all
      Sellers within in five (5) Business Days after the expiration of the Election
      Period.  The number of shares of Xfone Common Stock to be delivered at
      Closing to each electing Seller pursuant to the terms of the Xfone Subscription
      Agreements shall be determined by dividing such portion of the Allocable Sale
      Price such Seller has elected to reinvest in Xfone Common Stock by ninety-five
      percent (95%) (or such lesser percentage as provided in Purchaser’s Offer) of
      the average closing price on the American Stock Exchange (the
“AMEX”) of the Xfone Common Stock for the ten (10) consecutive
      trading days preceding the trading day immediately prior to the Closing Date
      and
      rounding the result to the nearest whole share.  In the event that
      Sellers elect in the aggregate to have more than the allowed thirty percent
      (30%) of the Purchase Price reinvested in Xfone Common Stock, then the number
      of
      shares of Xfone Common Stock to be issued to each electing Seller shall be
      ratably reduced, based on the number of shares of Xfone Common Stock requested
      to be issued to such participating Seller as compared to the number of shares
      of
      Xfone Common Stock requested to be issued to all participating
      Sellers.  On the day prior to Closing, Schedule 2.2(b) shall be
      amended to reflect, on a Seller by Seller basis, the portion of the Seller’s
      Allocable Sale Price that shall be payable in cash and the number of shares
      of
      Xfone Common Stock that shall constitute the remaining non-cash portion of
      such
      Seller’s Allocable Sale Price.

     

    

    
      
        
          
          

        

        
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    (ii)          At
      Closing, the shares of Xfone Common Stock issued to the Sellers shall be
      registered by the transfer agent of Purchaser in the names of the recipients
      as
      reflected in the Xfone Subscription Agreements.  On or prior to the
      Closing, the Purchaser shall apply to list all of the shares of Xfone Common
      Stock issuable hereunder on the AMEX and AMEX shall have approved such listing
      application subject only to official notice of issuance.  The
      Purchaser hereby agrees to use commercially reasonable efforts to maintain
      the
      listing of the Xfone Common Stock on the AMEX and will comply in all material
      respects with the Purchaser’s reporting, filing and other obligations under the
      AMEX rules.

     

    (d)           Not
      later than the 45th Business
      Day
      following the Closing, or the 5th Business
      Day
      following the determination by the Arbitrator of the Working Capital and any
      difference between the Working Capital and the Estimated Working Capital in
      accordance with the provisions of Section 2.2(e), the Purchaser shall pay
      to the Sellers, as an addition to the Purchase Price, an amount equal to their
      respective Allocable Shares of the positive difference, if any, between the
      Working Capital as of the Closing Date and the Estimated Working Capital and
      the
      Sellers shall pay to the Purchaser, as a reduction in the Purchase Price, their
      respective Allocable Shares of the negative difference, if any, between the
      Working Capital as of the Closing Date and the Estimated Working
      Capital.  The Purchaser shall make payments contemplated hereunder by
      the wire transfer of immediately available funds or Xfone Common Stock, as
      applicable, and the Sellers’ obligations hereunder shall be satisfied by
      application of funds or Xfone Common Stock, as applicable, from the Escrow
      Amount.

     

    (e)           (i)           On
      the day preceding the Closing, the Company shall deliver to the Purchaser a
      balance sheet of the Company as of such date, prepared in a manner consistent
      with the Most Recent Financial Statements, together with a calculation of the
      Estimated Working Capital and the result obtained by subtracting the Working
      Capital Target from the Estimated Working Capital, and such amounts shall be
      utilized to calculate the Purchase Price for the purposes of the
      Closing.  Not later than the 30th Business
      Day
      following the Closing, the Purchaser shall deliver to the Sellers a balance
      sheet of the Company as of the Closing Date, prepared in a manner consistent
      with the Most Recent Financial Statements, together with a calculation of the
      Working Capital as of the Closing and any amounts to be paid by Purchaser or
      Sellers, as the case may be, pursuant to Section 2.2(d).  If
      the Sellers shall agree with the Purchasers’ balance sheet and calculation of
      the Working Capital and any amounts to be paid, such amounts shall be paid
      as
      adjustments to the Purchase Price in accordance with Section
      2.2(d).  If the Sellers shall disagree with the Purchaser’s
      balance sheet or any of such calculations, the Parties shall use commercially
      reasonable efforts to resolve such disagreements by negotiations between the
      Sellers’ Representative and the President of the Purchaser within fifteen (15)
      Business Days of receipt of Purchaser’s calculation.  In the event
      that the Sellers’ Representative and the President of the Purchaser shall be
      unable to agree on the matters contemplated in the preceding sentence, they
      shall submit to binding arbitration of such matters by the managing partner
      of
      the Dallas office of the Independent Accounting Firm, or such Person as he
      or
      she shall designate (the “Arbitrator”).  The
      Arbitrator shall be provided with such information as he or she shall request
      of
      the Sellers’ Representative and the President of the Purchaser, and shall then
      prepare a balance sheet for the Company as of the Closing Date, with such
      preparation to be consistent with the methodologies used to prepare the balance
      sheet in the Most Recent Financial Statements, and shall further calculate
      the
      Working Capital and the positive of negative difference, if any, thereof from
      the Estimated Working Capital.  The Arbitrator shall not consider
      whether any Party has breached any representation or warranty, or adjust the
      balance sheet to be prepared or the Working Capital or the Estimated Working
      Capital to account therefore, such remedies being exclusively governed by
Article VII but shall advise the Parties of any such
      matters.  The determination of the Arbitrator shall be made within
      sixty (60) days after being selected and shall be binding upon the Parties,
      who
      shall share equally the fees and expenses of the Arbitrator and shall further
      indemnify, defend and hold harmless the Arbitrator from any claim by any such
      Party or their respective Affiliates arising from or related to the transactions
      contemplated in this Section 2.2(e).  Neither the Arbitrator
      nor his or her Affiliates shall be liable to any Party, or any Third Party,
      for
      any act or failure to act, other than for gross negligence or intentional
      misconduct.  WITHOUT LIMITING THE GENERALITY OF THE PRECEDING
      SENTENCE, NEITHER THE ARBITRATOR NOR HIS OR HER AFFILIATES SHALL BE LIABLE
      FOR
      CLAIMS OR DAMAGES ARISING FROM OR RELATED TO HIS OR HER OWN
      NEGLIGENCE.

     

    

    
      
        
          
          

        

        
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    (ii)                     The
      Purchaser will cause the Company to grant the Sellers’ Representative and its
      accountants, lawyers and representatives access at all times during normal
      business hours to (and shall be allowed to make copies of) the books and records
      of the Company and the Subsidiaries and to any personnel reasonably requested
      by
      such Persons, in each case in connection with the final determination of the
      Working Capital and the corresponding adjustment of the Purchase Price or any
      dispute relating thereto.  The Parties hereto agree that the procedure
      set forth herein with respect to the calculation of the Working Capital and
      the
      corresponding adjustment of the Purchase Price provided herein, are not intended
      to permit the introduction or application of different accounting methods,
      standards, policies, practices, classifications, estimation methodologies,
      assumptions, procedures or a different level of prudence for purposes of
      determining the Working Capital and the corresponding adjustment of the Purchase
      Price from those used to prepare the Company’s Financial
      Statements.

     

    (f)           A
      committee consisting of Chris Chelette, Robert Healea and Kevin Buxkemper and
      their respective designees (the committee being referred to herein as the
“Sellers’ Representative”) hereby is appointed, authorized, and
      empowered to act, on behalf of each Seller, in connection with this Agreement
      and the Escrow Agreement and such committee shall act on the affirmative vote
      of
      a majority of members of such committee. In the event that any action or
      decision shall be required of the Sellers under this Agreement or the Escrow
      Agreement, each of the Sellers agrees to act as determined by the vote of the
      Sellers holding a majority of the Allocable Shares of all Sellers, as determined
      by the Sellers’ Representative in its discretion.  The Purchaser shall
      be entitled to rely, without further inquiry, upon statements by the Sellers’
Representative regarding its authority and the determination of the Sellers
      with
      regard to any matter under this Agreement or the Escrow
      Agreement.  The Sellers’ Representative will not be entitled to any
      fee, commission or other compensation for the performance of its service
      hereunder, but will be entitled to the payment of all of its out-of-pocket
      expenses incurred as Sellers’ Representative, and in furtherance of the
      foregoing, may pay or cause to be paid or reimburse itself for the payment
      of
      any and all such expenses out of any amounts to be released from the Escrow
      Amount for the Sellers’ benefit.  In dealing with this Agreement, the
      Escrow Agreement and any instruments, agreements or documents relating thereto,
      and in exercising or failing to exercise all or any of the powers conferred
      upon
      the Sellers’ Representative hereunder or thereunder, (i) the Sellers’
Representative will not assume any, and will incur no, Liability whatsoever
      to
      any Seller because of any error in judgment or other act or omission performed
      or omitted hereunder or in connection with this Agreement or the Escrow
      Agreement, and (ii) the Sellers’ Representative will be entitled to rely on the
      advice of counsel, public accountants or other independent experts experienced
      in the matter at issue, and any error in judgment or other act or omission
      of
      the Sellers’ Representative pursuant to such advice will not subject the
      Sellers’ Representative to Liability to Purchaser, any Seller or any other
      Person.

     

    

    
      
        
          
          

        

        
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    2.3           The
      Closing.  The closing of the Contemplated Transactions (the
“Closing”) shall take place at the offices of Watkins Ludlam
      Winter & Stennis, P.A. in Jackson, Mississippi, commencing at 1:00 p.m.
      local time on the third Business Day commencing after the date on which the
      last
      of the conditions set forth in Sections 2.5 and 2.6 shall have
      been satisfied or waived (other than those conditions that by their nature
      are
      to be satisfied at the Closing, but subject to the satisfaction or waiver of
      those conditions), provided if such conditions are satisfied after December
      1,
      2007 but on or before December 26, 2007, then the Parties agree to close on
      December 31, 2007 to be effective at Purchaser’s option on December 31, 2007 or
      12:01 a.m. on January 1, 2008, but in no event later than Expiration Date or
      on
      such other date, time and place as the Company and Purchaser may mutually agree
      in writing, (such date on which the Closing actually occurs being referred
      to
      herein as the “Closing Date”).

     

    2.4           Distribution
      Prior to Closing.  Prior to the Closing, the Company
      shall:

     

    (a)           From
      time to time after the date of this Agreement, but no later than the fifth
      (5th) day
      preceding Closing, the Company shall distribute to its shareholders the assets
      described on Schedule 2.4, including but not limited to all of the
      Company’s membership interest in NTS Properties, the general partner of NTS
      Landlord and that certain promissory note, dated as of October 31, 1998, from
      NTS Landlord to Company (the “Pre-Closing
      Distribution”).

     

    (b)           The
      Pre-Closing Distribution shall be treated for all purposes as a redemption
      of
      that number of each record holder thereof’s Company Shares equal to the
      Company’s tax basis in the assets being distributed divided by that portion of
      the per share Allocable Share of the Purchase Price that would be allocated
      to
      such holder (including any portions being delivered in escrow) without first
      considering such redemption if all holders of Company Shares were
      Sellers.  The intent of the preceding sentence is to effect a
      redemption of Company Shares utilizing the Pre-Closing Distribution without
      increasing or reducing the Allocable Share of the Purchase Price otherwise
      payable to any Seller.

     

    

    
      
        
          
          

        

        
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      2.5           Conditions
        to Purchaser’s Obligation to Close.  The obligation of
        Purchaser to consummate the transactions to be performed by it in connection
        with the Closing is subject to satisfaction (or waiver) of the following
        conditions:

    

    (a)           The
      Sellers shall have obtained Seller’s Required Consents and the Company shall
      have obtained the Company’s Required Consents.

     

    (b)           The
      Required Telecommunications Notices and Consents shall have been
      obtained.

     

    (c)           The
      representations and warranties set forth in Article III and Article
      V shall be true and correct in all material respects at and as of (A) the
      date of this Agreement and (B) the Closing Date (after giving effect to any
      amendments or supplements to the Sellers’ Disclosure Schedules provided by
      Sellers and accepted by Purchaser as provided in Section 6.4) as
      though such representations and warranties were made on and as of the Closing
      Date, except for those representations and warranties that refer to facts
      existing at a specific date, which shall be true and correct in all material
      respects as of such date (except to the extent that such representations and
      warranties are qualified by the term “material,” or contain terms such as
“Material Adverse Change,” “Material Adverse Effect” or other terms of similar
      import or effect, in which case such representations and warranties shall be
      true and correct in all respects at and as of the Closing Date (after giving
      effect to any amendments or supplements to the Sellers’ Disclosure Schedules
      provided by Sellers and accepted by Purchaser as provided in Section
6.4) except for those representations and warranties that refer
      to
      facts existing at a specific date, which shall be true and correct in all
      respects as of such date).

     

    (d)           Each
      of the Sellers and the Company shall have performed and complied with all of
      their representative covenants hereunder in all material respects through the
      Closing, except to the extent that such covenants are qualified by the term
      “material,” or contain terms such as “Material Adverse Change,” “Material
      Adverse Effect” or other terms of similar import or effect, in which case each
      of the Sellers and the Company shall have performed and complied with all of
      such covenants in all respects through the Closing;

     

    (e)           There
      shall not be any judgment, order, decree, stipulation, injunction of charge
      in
      effect preventing consummation of any of the transactions contemplated by this
      Agreement.

     

    (f)           All
      waiting periods in respect of approvals or consents from Governmental
      Authorities under the Legal Requirements shall have expired or been
      terminated.

     

    (g)           There
      shall not have occurred and be continuing a Material Adverse Change since the
      date of this Agreement.

     

    (h)           Purchaser
      shall have received a certificate, validly executed by the principal executive
      officer of the Company for and on its behalf, with respect to the matters set
      forth in Section 2.5(c) and (d) as of the Closing Date unless the
      Purchaser has extended the Expiration Date pursuant to Section 6.8(h) in
      which event the certificate shall be as of January 15, 2008 with respect to
      the
      matters set forth in Section 2.5(c).

     

    (i)           Purchaser
      shall have received a certificate, validly executed by the Secretary of the
      Company, certifying as to (i) the correct form and effectiveness of the Articles
      of Incorporation and the Bylaws of the Company and each Subsidiary, including
      all amendments thereto;
      and (ii) the valid adoption of resolutions of the board of directors of the
      Company approving this Agreement and the consummation of the transactions
      contemplated hereby.

     

    

    
      
        
          
          

        

        
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    (j)           Purchaser
      shall have received a certificate of good standing of the Company and each
      Subsidiary from the Secretary of State of the State of Texas and any other
      jurisdiction where the Company and each Subsidiary is required to qualify to
      do
      business, each dated within ten (10) Business Days prior to the
      Closing.

     

    (k)           Purchaser
      shall have received from the principal executive officer and Secretary of the
      Company an updated capitalization certificate to reflect any changes to the
      information set forth in Section 5.2.

     

    (l)           Each
      Barbara Andrews, Jerry Hoover and Brad Worthington shall have executed and
      delivered a release in substantially the form attached hereto as Exhibit
      A.

     

    (m)           The
      Sellers’ Representative and Escrow Agent shall have entered into the escrow
      agreement substantially in the form of Exhibit B hereto (the
“Escrow Agreement”).

     

    (n)           The
      Company shall have fulfilled its obligations to pay any “stay pay” bonuses
      authorized by the Company’s board of directors, with the exception of those for
      Barbara Andrews, Brad Worthington and Jerry Hoover who by execution of this
      Agreement have agreed to forego their “stay pay” bonuses at Closing provided
      that an employment agreement with each is executed with the Purchaser or the
      Company for employment after the Closing.

     

    (o)           The
      Company and NTS Landlord shall have entered into an amended and restated Lease
      Agreement in a form attached hereto as Exhibit C (the “Lease
      Agreement”).

     

    (p)           Sellers
      holding in the aggregate ninety-five percent (95%) of the Company’s Equity
      Interests entitled to vote for election of the board shall be Parties to this
      Agreement at or before Closing and any other Equity Interest Equivalents shall
      have been cancelled or terminated with any consideration for such cancellation
      paid prior to the Closing.

     

    (q)           Telephone
      Electronics Corporation and Joseph D. Fail, Chris Chelette, Robert Healea,
      Joey
      Garner, Walter Frank shall have entered into a Non-Compete Agreement in form
      attached hereto as Exhibit D.

     

    (r)           The
      Abatement Matters shall have been completed by the Company as set forth in
      Section 6.9(c) and (d).

     

    (s)           Each
      Seller shall have duly executed and delivered an assignment of any and all
      rights such Seller has under the Stockholder Agreement, dated August 11, 1990,
      by and among the Company, Telephone Electronics Corporation and the stockholders
      party thereto (the “Assignment”).

     

    (t)           The
      Company shall have obtained and paid for directors’ and liabilities’ tail
      coverage as provided in Section 6.10.

     

    

    
      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

    

    

    Purchaser
      may in its sole and exclusive discretion waive any condition specified in this
      Section 2.5 if it executes a writing so stating at or prior to the
      Closing.  Notwithstanding anything in this Section 2.5 to the
      contrary, in the event of an extension of the Expiration Date by the Purchaser
      in accordance with Section 6.8(d), all of the conditions set forth above,
      other than those set forth in Sections 2.5(h)-(t), shall be deemed to
      have been satisfied or waived by the Purchaser.

     

    2.6           Conditions
      to Company’s and Sellers’ Obligations to Close.  The
      obligation of the Company and Sellers to consummate the transactions to be
      performed by it in connection with the Closing is subject to satisfaction (or
      waiver) of the following conditions:

     

    (a)           Purchaser
      shall have obtained Purchaser’s Required Consents and the Purchaser Shareholder
      Consent or the Purchaser Shareholder Vote, as the case may be, if
      required.

     

    (b)           The
      Required Telecommunications Notices and Consents shall have been
      obtained.

     

    (c)           The
      representations and warranties set forth in and Article IV shall be true
      and correct in all material respects at and as of (A) the date of this Agreement
      and (B) the Closing Date as though such representations and warranties were
      made
      on and as of the Closing Date, except for those representations and warranties
      that refer to facts existing at a specific date, which shall be true and correct
      in all material respects as of such date (except to the extent that such
      representations and warranties are qualified by the term “material,” or contain
      terms such as “Material Adverse Change,” “Material Adverse Effect” or other
      terms of similar import or effect, in which case such representations and
      warranties shall be true and correct in all respects at and as of the Closing
      Date except for those representations and warranties that refer to facts
      existing at a specific date, which shall be true and correct in all respects
      as
      of such date).

     

    (d)           Purchaser
      shall have performed and complied with all of its covenants hereunder in all
      material respects through the Closing, except to the extent that such covenants
      are qualified by the term “material,” or contain terms such as “Material Adverse
      Change,” “Material Adverse Effect” or other terms of similar import or effect,
      in which case Purchaser shall have performed and complied with all of such
      covenants in all respects through the Closing.

     

    (e)           There
      shall not be any judgment, order, decree, stipulation, injunction of charge
      in
      effect preventing consummation of any of the transactions contemplated by this
      Agreement.

     

    (f)           All
      waiting periods in respect of approvals or consents from Governmental
      Authorities under the Legal Requirements shall have expired or been
      terminated.

     

    (g)           Sellers
      shall have received a certificate, validly executed by the principal executive
      officer of the Purchaser for and on its behalf, with respect to the matters
      set
      forth in Section 2.6(c) and (d).

     

    (h)           Sellers
      shall have received a certificate, validly executed by the Secretary of the
      Purchaser, certifying as to the valid adoption of resolutions of the board
      of
      directors of the Purchaser and the Purchaser’s shareholders, if required,
      approving this Agreement and the consummation of the transactions contemplated
      hereby.

     

    

    
      
        
          
          

        

        
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    (i)           The
      Purchaser and Escrow Agent shall have entered into the Escrow
      Agreement.

     

    (j)           The
      Company and NTS Landlord shall have entered into the Lease
      Agreement.

     

    The
      Company and the Sellers, acting through the Sellers’ Representative, may in
      their sole and exclusive discretion waive any condition specified in this
Section 2.6 if by executing a writing so stating at or prior to the
      Closing.

     

    2.7           Items
      to be Delivered by the Sellers and the Company.

     

    (a)           At
      the Closing, each Seller shall deliver to Purchaser the following:

     

    (i)                     all
      of such Seller’s stock certificates representing Company Shares, together with a
      stock power duly endorsed for transfer to Purchaser in the form reasonably
      acceptable to Purchaser;

     

    (ii)          Seller’s
      Required Consents, if any;

     

    (iii)          the
      Assignment; and

     

    (iv)          such
      other documents, instruments and certificates as Purchaser or its counsel may
      reasonably request to consummate the Contemplated Transactions.

     

    (b)           At
      the Closing, the Company shall deliver to Purchaser the following:

     

    (i)                     the
      certificates required by Section 2.5(h), Section 2.5(i),
Section 2.5(j), and Section 2.5(k);

     

    (ii)          the
      Company’s Required Consents, if any, and the Required Telecommunications Notices
      and Consents; and

     

    (iii)          such
      other documents, instruments and certificates as Purchaser or its counsel may
      reasonably request to consummate the Contemplated Transactions.

     

    2.8           Items
      to be Delivered by Purchaser.  At the Closing, Purchaser
      shall deliver:

     

    (a)           the
      consideration to the Sellers specified in Article II;

     

    (b)           Purchaser’s
      Required Consents, if any;

     

    (c)           the
      certificates required by Section 2.6(g) and Section 2.6(h);
      and

     

    (d)           such
      other documents, instruments and certificates as Seller or the Company’s counsel
      may reasonably request to consummate the Contemplated Transactions.

     

    

    
      
        
          
          

        

        
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    Article
      III

     

    SELLER'S
      REPRESENTATIONS AND WARRANTIES
      CONCERNING TRANSACTION.

     

     

    Each
      Seller on its own behalf and not with respect to any other Seller represents
      and
      warrants to Purchaser that the statements contained in this
Article III or in this Agreement as made by such Seller are true and
      correct as of the date of this Agreement and will be correct and complete as
      of
      the Closing Date, except as set forth in the disclosure schedule of Sellers
      (as
      may be amended or supplemented as provided by Section 6.4) (the
“Sellers’ Disclosure Schedules”) attached to and made a part of
      this Agreement.

     

    3.1           Organization
      of Seller.  Seller (if a corporation or other entity) is duly
      organized, validly existing, and in good standing under the laws of the
      jurisdiction of its incorporation (or other formation).  Seller (if a
      natural person) is competent and over 21 years of age and is not subject to
      any
      bankruptcy or similar proceedings.

     

    3.2           Authorization
      of Transaction.  Seller has full power and authority
      (including full corporate or other entity power and authority if applicable)
      to
      execute and deliver this and the other Transaction Documents to which it is
      a
      party and to perform all of the obligations thereunder.  The
      Transaction Documents constitute the valid and legally binding obligation of
      Seller, enforceable in accordance with their terms and conditions except as
      limited by applicable bankruptcy, insolvency, moratorium, reorganization,
      fraudulent conveyance and similar laws affecting creditors’ rights generally and
      except to the extent that general equitable principles may affect the
      availability of certain remedies.  The execution, delivery and
      performance of this Agreement and all other agreements contemplated hereby
      have
      been duly authorized by Seller.

     

    3.3           Required
      Regulatory Approvals and Filings; Consents.  Except as set
      forth on Schedule 3.3 (the “Seller’s Required
      Consents”), and except for (i) any Filings or notices required under
      the TBOC, (ii) any consent or approval of or registration or Filing with the
      FCC
      or any State PUC or any municipal franchising authority having regulatory
      authority over the business of the Company and its Subsidiaries as conducted
      in
      any given jurisdiction and (iii) any notices to or consents of customers or
      other Persons required by or in connection with the foregoing, necessary to
      consummate the Contemplated Transactions in compliance with the Legal
      Requirements, including but not limited to Texas PUC
      Substantive Rule 26.130(k) and 47 C.F.R. Section 64.1120(e), (collectively,
      the
“Required Telecommunications Notices and Consents”), no
      authorization of or Filing with any Governmental Authority or any other Person
      on the part of a Seller is required in connection with the execution, delivery
      and performance of this Agreement and the other Transaction Documents or the
      consummation of the Contemplated Transactions, except for such Filings or
      authorizations that, if not made or obtained, would not have a Material Adverse
      Effect on the business, financial condition or operations of Company or would
      prevent the Parties from consummating the Contemplated
      Transactions.

     

    3.4           Non-contravention.  Except
      as set forth on Schedule 3.4, neither the execution and delivery of this
      Agreement by Seller, the other Transaction Documents to which it is a party,
      nor
      the consummation of the Contemplated Transactions, will (i) violate any Legal
      Requirement to which Seller is subject or any provision of its Organizational
      Documents, (ii) conflict with, result in a breach of, constitute a default
      under, result in the acceleration of, create in any party the right to
      accelerate, terminate, modify, or cancel, or require any notice under any
      Contract towhich Seller is a party or by which it is bound
      or to which any of its assets are subject, or (iii) result in the
      imposition or creation of a Lien upon or with respect to the Company
      Shares

    

    
      
        
          
          

        

        
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    3.5           Company
      Shares. Seller holds of record and owns
      beneficially the number of Company Shares set forth next to its name on
Schedule 3.5, free and clear of any restrictions on transfer (other than
      restrictions under the Securities Act and state securities laws), Taxes, Liens,
      options, warrants, purchase rights, Contracts, commitments, equities, claims,
      and demands and such Company Shares represent all of the Equity Interests or
      Equity Interest Equivalent held of record or beneficially by such
      Seller.  Except as set forth on Schedule 3.5, Seller is not a
      party to any option, warrant, purchase right, or other Contract or commitment
      (other than this Agreement) that could require Seller to sell, transfer, or
      otherwise dispose of any capital stock of the Company.  As of the date
      hereof, Seller has received all dividends, distributions and other sums to
      which
      Seller is entitled to receive from the Company as a holder of its Equity
      Interest in the Company other than the Pre-Closing
      Distribution.  Except as set forth on Schedule 3.5, Seller
      is not a party to any voting trust, proxy, or other agreement or understanding
      with respect to the voting of any capital stock of the Company.

     

    3.6           Brokers’
      Fees.  Seller has no Liability or obligation directly or
      indirectly to pay any fees or commissions to any broker, finder, or agent or
      any
      similar charges with respect to the Contemplated Transactions, except any fees
      due to RBC Daniels, and Sellers agree that any fees to be paid to RBC Daniels
      shall be paid at Closing from the Purchase Price due to Sellers.

     

    3.7           Knowledge,
      Access and Sophistication.

     

    (a)           Seller
      represents and warrants that Seller is an “accredited investor” within the
      meaning of Rule 501 of Regulation D of the Securities Act or has otherwise
      engaged a “purchaser representative” within the meaning of Rule 501 of
      Regulation D of the Securities Act in connection with the Contemplated
      Transactions and is capable of evaluating the merits and risks of the proposed
      sale of its Company Shares to Purchaser.

     

    (b)           Seller
      has been provided complete access to Company’s public and nonpublic information,
      including, but not limited to, the Company’s (i) assets, (ii) financial
      condition, (iii) business prospects, (iv) acquisition strategy, (v) business
      plan, and (vi) executive officers, in order to make an informed decision to
      sell
      the Company Shares to the Purchaser as contemplated herein.  Seller
      has asked any and all questions in the nature heretofore described, all
      questions have been answered to Seller’s total and complete satisfaction, and
      Seller has unilaterally declined to make any additional inquiries.

     

    3.8           Tax
      Matters.  Each Seller acknowledges that the Contemplated
      Transactions are taxable to the Sellers.  Sellers represent that each
      of them understands that he or she must rely solely on his or her advisors
      with
      respect to tax consequences of the Agreement and the transactions contemplated
      thereby, and that each Seller is relying on its own advisors as to such matters,
      and not on any statements by the Purchaser or Company or their agents with
      respect to the tax consequences of this Agreement.

     

    

    
      
        
          
          

        

        
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      3.9           No
        Other Seller Representations.  Except as expressly set forth
        in this Agreement and in any other of the Transaction Documents entered into
        by
        the Seller in connection with this Agreement, Seller makes no other
        representation or warranty of any kind in connection with or related to the
        provisions of this Agreement or the Contemplated
        Transactions.

    

     

    3.10           Jackson
      Walker.  Each Seller acknowledges and agrees that Jackson
      Walker L.L.P. has represented the Company in connection with the negotiation,
      documentation and consummation of the Contemplated Transactions, and has not
      represented any Seller in its individual capacity.

     

    ARTICLE
      IV

     

    PURCHASER’S
      REPRESENTATIONS AND WARRANTIES.

     

    Purchaser
      represents and warrants to Seller and the Company that the statements contained
      in this Article IV are true and correct as of the date of this
      Agreement, except as set forth in the disclosure schedule of Purchaser (the
      “Purchaser’s Disclosure Schedule”) attached to and made a part
      of this Agreement.

     

    4.1           Organization
      of Purchaser.  Purchaser is a corporation duly organized,
      validly existing, and in good standing under the Legal Requirements of the
      jurisdiction of its incorporation.

     

    4.2           Authorization
      of Transaction. Subject to receipt of the Purchaser Shareholder Consent
      or the Purchaser Shareholder Vote, as the case may be, if required, Purchaser
      has full corporate power and authority to execute and deliver this Agreement
      and
      the other Transaction Documents to which it is a party and to perform all of
      the
      obligations thereunder including any issuance of shares of Xfone Common Stock
      hereunder.  The Transaction Documents constitute the valid and legally
      binding obligation of Purchaser, enforceable in accordance with their terms
      and
      conditions except as limited by applicable bankruptcy, insolvency, moratorium,
      reorganization, fraudulent conveyance and similar laws affecting creditors’
rights generally and except to the extent that general equitable principles
      may
      affect the availability of certain remedies.  The execution, delivery,
      and performance of this Agreement and all other Transaction Documents to which
      it is a party contemplated hereby have been duly authorized by
      Purchaser.

     

    4.3           Required
      Regulatory Approvals and Filings; Consents.  Except as set
      forth on Schedule 4.3 (the “Purchaser’s Required
      Consents”), and except for the Required Telecommunications Notices and
      Consents, no authorization of or Filing with any Governmental Authority or
      any
      other Person on the part of Purchaser is required in connection with the
      execution, delivery and performance of this Agreement and the other Transaction
      Documents or the consummation of the Contemplated Transactions including any
      issuance of shares of Xfone Common Stock hereunder, except for such Filings
      or
      authorizations that, if not made or obtained, would not have a Material Adverse
      Effect on the business, financial condition or operations of Purchaser or would
      prevent the Parties from consummating the Contemplated
      Transactions.

     

     

    

    
      
        
          
          

        

        
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      4.4           Non-contravention.  Except
        as set forth on Schedule 4.4, neither the execution and delivery of
        this Agreement by Purchaser or the other Transaction Documents, nor the
        Contemplated Transactions including any issuance of shares of Xfone Common
        Stock
        hereunder, will (i) violate any Legal Requirements applicable to Purchaser
        or
        any provision of Purchaser’s Organizational Documents, or (ii) conflict with,
        result in a breach of, constitute a default under, result in the acceleration
        of, create in any party the right to accelerate, terminate, modify, or cancel,
        or require any notice under any Contract or other arrangement to which Purchaser
        is a party or by which it is bound or to which any of its assets are
        subject.

       

    

    4.5           Issuance
      of Shares.  To each Seller who receives Xfone Common Stock,
      the Purchaser represents as follows.  The shares of Xfone Common
      Stock, if any, to be issued pursuant to this Agreement will be duly authorized,
      validly issued, fully paid, and nonassessable free and clear of all liens other
      than restrictions on transfer imposed by federal and state securities
      laws.  The Purchaser has reserved from its duly authorized capital
      stock the maximum number of shares of Xfone Common Stock issuable pursuant
      to
      this Agreement.  Subject to and in reliance on the truth and accuracy
      of the Sellers’ representations and warranties set forth in this Agreement and
      in any Xfone Subscription Agreements, the offer, sale and issuance of the shares
      of Xfone Common Stock will be in compliance with all applicable federal and
      state securities laws and will be exempt from the registration requirements
      of
      the Securities Act and any applicable state securities laws and neither the
      Purchaser nor any authorized agent acting on its behalf will take any action
      hereafter that would cause the loss of such exemption.  Other than the
      approval of the Purchaser’s Board of Directors and shareholders, no further
      approval or authorization is required for the issuance and sale by the Purchaser
      of the shares of Xfone Common Stock issuable hereunder.

     

    4.6           Purchaser’s
      SEC Filings and Financial Statements.  To each Seller who
      receives Xfone Common Stock, the Purchaser represents as
      follows.  True and complete copies of all reports or registration
      statements it has filed with the SEC under the Securities Act, and the Exchange
      Act, for all periods subsequent to January 1, 2005 all in the form so filed
      are
      available to the Sellers by accessing the SEC’s website (collectively the
“Purchaser SEC Documents”).  Since January 1, 2005,
      the Purchaser has filed all required reports, schedules, forms, statements
      and
      other documents with the SEC.  As of their respective filing dates,
      the Purchaser SEC Documents complied in all material respects with the
      requirements of the Securities Act or the Exchange Act, as applicable, and
      none
      of the Purchaser SEC Documents filed under the Exchange Act contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary to make the statements made therein, in light of
      the
      circumstances in which they were made, not misleading, except to the extent
      corrected by a subsequently filed document with the SEC. None of the Purchaser
      SEC Documents filed under the Securities Act contained an untrue statement
      of
      material fact or omitted to state a material fact required to be stated therein
      or necessary to make the statements therein not misleading at the time such
      Purchaser SEC Documents became effective under the Securities Act. Purchaser’s
      financial statements, including the notes thereto, included in the Purchaser
      SEC
      Documents (the “Purchaser Financial Statements”) comply as to
      form in all material respects with applicable accounting requirements and with
      the published rules and regulations of the SEC with respect thereto, have been
      prepared in accordance with GAAP consistently applied (except as may be
      indicated in the notes thereto) and present fairly Purchaser’s consolidated
      financial position at the dates thereof and of its operations and cash flows
      for
      the periods then ended (subject, in the case of unaudited statements, to normal
      audit adjustments). Since the date of the most recent balance sheet included
      in
      the Purchaser Financial Statements, Purchaser has not effected any change in
      any
      method of accounting or accounting practice, except for any such change required
      because of a concurrent change in GAAP.

     

    

    
      
        
          
          

        

        
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    4.7           Financing.  The
      Purchaser expects to have sufficient funds and/or to receive sufficient
      financing to pay the Purchase Price in full and to fulfill its obligations
      under
      this Agreement on or before the Closing Date.

     

    4.8           Brokers’
      Fees.  Except as set forth on Schedule 4.8,
      Purchaser has no Liability or obligation to pay any fees or commissions to
      any
      broker, finder, or agent with respect to the Contemplated
      Transactions.

     

    4.9           Investment
      Representations.  Purchaser is an “accredited investor”
within the meaning of Rule 501 of Regulation D of the Securities
      Act.  Purchaser is acquiring the Company Shares for its own account
      for the purpose of investment and not with a view towards the resale, transfer
      or distribution of the Company Shares, nor with any intention of distributing
      the Company Shares in violation of the Securities Act or other applicable
      federal or state securities or blue sky laws.

     

    4.10           No
      Knowledge of Certain Conditions.  Purchaser is not actually
      aware of any condition or event that would constitute a breach of any
      representation or warranty made by any of the Sellers or the Company in this
      Agreement but has not, as of the date of this Agreement, performed any due
      diligence to verify the accuracy or completeness of the representations or
      warranties made by the Sellers or the Company under this Agreement.

     

    4.11           Due
      Diligence Investigation; No Representations or Warranties.

     

    (a)           Purchaser
      acknowledges and agrees that it has conducted and, except for the Seller’s and
      the Company’s representations and warranties expressly set forth herein,
      Purchaser is relying exclusively upon its own inspections and investigation
      of
      the Due Diligence Materials in order to satisfy itself as to the condition
      and
      suitability of the business, assets, real and personal properties, liabilities,
      results of operations, condition (financial and otherwise) and prospects of
      the
      Company and its Subsidiaries.

     

    (b)           Purchaser
      acknowledges and agrees that, except as expressly provided in this Agreement,
      the Company and each Seller makes no representations or warranties (express,
      implied, at common law, statutory or otherwise), including, without limitation,
      with respect to (i) the condition and suitability of the business, assets,
      real and personal properties, liabilities, results of operations, condition
      (financial or otherwise) and prospects of the Company and its Subsidiaries;
      (ii) the accuracy or completeness of the Due Diligence Materials now,
      previously or hereafter made available to Purchaser in connection with this
      Agreement, but the Sellers and Company have no Knowledge that any of the Due
      Diligence Materials are materially inaccurate or incomplete; and (iii) any
      oral communications made by or on behalf of Seller or by the Company or any
      of
      its Subsidiaries.

     

    4.12           No
      Other Purchaser Representations.  Except as expressly set
      forth in this Agreement and in any other of the Transaction Documents entered
      into by the Purchaser in connection with this Agreement, the Purchaser makes
      no
      other representation or warranty of any kind in connection with or related
      to
      the provisions of this Agreement or the transactions contemplated
      herein.

     

    

    
      
        
          
          

        

        
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    Article
      V

     

    REPRESENTATIONS
      AND WARRANTIES OF THE
      COMPANY.

     

     

    The
      Company represents and warrants to Purchaser that the statements contained
      in
      this Article V are true and correct as of the date of this
      Agreement, except as set forth in the Sellers’ Disclosure Schedule.

     

    5.1           Organization,
      Qualification, and Corporate Power.  The Company and each of
      its Subsidiaries is duly organized, validly existing, and in good standing
      under
      the laws of the jurisdiction of its incorporation.  The Company and
      each of its Subsidiaries is duly authorized to conduct business and is in good
      standing under the laws of each jurisdiction where such qualification is
      required.  The Company and each of its Subsidiaries has full corporate
      power and authority and all required Governmental Authorizations necessary
      to
      carry on the business in which it is engaged and to own and use the properties
      owned and used by it.  Schedule 5.1 lists the directors
      and officers of the Company and each of its Subsidiaries.  The Company
      and each of its Subsidiaries has made available to Purchaser correct and
      complete copies of its Organizational Documents as amended to
      date.  The minute books (containing the records of meetings of the
      shareholders, the members, the board of directors, the managers), the stock
      or
      membership certificate books, and the stock or member record books for the
      Company and each of its Subsidiaries are correct and
      complete.  Neither the Company or any of its Subsidiaries is in
      default under or in violation of any provision of its Organizational
      Documents.

     

    5.2           Capitalization.  (i)
      The entire authorized capital stock of the Company consists solely of 11,000,000
      shares of Company Shares, of which 1,962,029 are issued and outstanding and
      held
      of record by the Sellers as described on Schedule 3.5, and 702,878 are
      held in the treasury of the Company.  All of the issued and
      outstanding Company Shares have been duly authorized, are validly issued, fully
      paid, and non-assessable.  Except as set forth on Schedule 5.2,
      there are no outstanding or authorized Equity Interest Equivalents, options,
      warrants, purchase rights, subscription rights, conversion rights, exchange
      rights, or other contracts or commitments that could require the Company to
      issue, sell, or otherwise cause to become outstanding any of its Equity
      Interests.  Except as set forth on Schedule 5.2, there are no
      outstanding or authorized stock appreciation, phantom stock, profit
      participation, or other Equity Interests of any kind.

     

    5.3           Subsidiaries.
      Schedule 5.3 sets forth for each Subsidiary of the Company
      (i) its name and jurisdiction of incorporation, (ii) the total Equity
      Interest authorized to be issued by such entity, and (iii) the issued and
      outstanding Equity Interest of such entity, and (iv) the names of the
      holders of the Equity Interest of such entity.  Except for the
      Subsidiaries set forth on Schedule 5.3, the Company does not own or
      have any right to acquire, directly or indirectly, any Equity Interest in any
      Person.

     

    5.4           Non-contravention.  Except
      as set forth on Schedule 5.4, neither the execution and the delivery
      of this Agreement, nor the consummation of the Contemplated Transactions, will
      (i) violate any provision of the Organizational Documents of the Company or
      its
      Subsidiaries or any resolution adopted by the board of directors or managers
      or
      the shareholders or members of the Company or any Subsidiary;
      (ii) contravene, conflict with, result in a breach of, constitute a default
      under, result in the acceleration of, create in any Third Party or Affiliate
      the
      right to fines, penalties or damages, or to accelerate, terminate, modify,
      or
      cancel, or require any notice under any Contract (or result in the imposition
      of
      any Lien upon any of its assets); (iii) cause the Company to become subject
      to or liable for any Tax not disclosed in the Financial Statements; or
      (iv) contravene, conflict with or result in the violation of any
      Governmental Authorization, Legal Requirement or order applicable to the
      Company, or give any Governmental Authority the right to challenge any of the
      Contemplated Transactions, or revoke, withdraw, suspend, cancel, modify any
      Governmental Authorization necessary for the business of the Company as
      currently conducted.

     

    

    
      
        
          
          

        

        
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    5.5           Brokers’
      Fees.  Except as set forth on Schedule 5.5, the
      Company and its Subsidiaries have no Liability or obligation to pay any fees
      or
      commissions to any broker, finder, or agent with respect to the Contemplated
      Transactions, except for any fees to RBC Daniels which shall be paid at Closing
      from the Purchase Price due to the Sellers.

     

    5.6           Title
      and Sufficiency of Assets.  Except as set forth on
Schedule 5.6, the Company and its Subsidiaries have good and
      marketable title to, or a valid leasehold interest in, all of their respective
      properties and assets shown on the Most Recent Balance Sheet or acquired after
      the date thereof in the Ordinary Course of Business, free and clear of all
      Liens, except for Permitted Encumbrances, and except for properties and assets
      disposed of in the Ordinary Course of Business since the date of the Most Recent
      Balance Sheet.  Except with respect to the Metro Tower, such
      properties and assets are in good condition and repair and none are in need
      of
      repairs or maintenance except for routine maintenance and repairs.

     

    5.7           Licenses,
      Permits, Compliance.

     

    (a)           The
      Company and all of its Subsidiaries hold all Permits necessary to conduct their
      respective businesses as presently being conducted.  A list of all of
      the Permits held by the Company and its Subsidiaries is set forth Schedule
      5.7(a) including the expiration for each Permit.  A complete copy
      of each such Permit has been made available to the Purchaser.  Except
      as set forth in Schedule 5.7(a) including expiration date: (i) such
      Permits are in full force and effect, (ii) no violations are or have been
      alleged with respect of any thereof, (iii) no proceeding is pending or, to
      the Knowledge of the Company, threatened, against the Company or any of its
      Subsidiaries in connection with the right to operate under the Permits, or
      that
      could reasonably be expected to result in any fines, penalties or other losses
      that are not reserved for in the Company Financial Statements, and
      (iv) provided the Required Telecommunications Notices and Consents are
      obtained, the consummation of the Contemplated Transactions will not result
      in
      any fines or penalties or the non-renewal, revocation or the termination of
      any
      such Permit.

     

    (b)           The
      Company and its Subsidiaries are the authorized legal holders or otherwise
      have
      rights to all Communications Licenses utilized by or necessary to the Company
      and its Subsidiaries in the conduct of their respective businesses.  A
      true, correct and complete list including expiration date and complete copy
      thereof of the Communications Licenses is set forth on Schedule 5.7(b),
      and the Communications Licenses constitute all of the licenses from the FCC,
      the
      State PUCs or any other Governmental Authority that regulates telecommunications
      in each applicable jurisdiction that are necessary or required for the operation
      of the businesses of the Company and its Subsidiaries as now conducted other
      than any such licenses from any municipal franchising authority the absence
      of
      which would not result in any fines, penalties or other losses.  All
      of the Communications Licenses were duly obtained and are valid and in full
      force and effect, unimpaired by any condition, except those conditions that
      are
      contained within or referred to on the face of such Communications Licenses.
      As
      of the date of this Agreement, no action by or before the FCC, any State PUC
      or
      any other Governmental Authority that regulates telecommunications in each
      applicable jurisdiction is pending or, to the Knowledge of the Company,
      threatened in which the requested remedy is (i) the revocation, suspension,
      cancellation, rescission or modification or refusal to renew any of the
      Communications Licenses, or (ii) the imposition of any fines, penalties
      and/or forfeitures.  As of the date of this Agreement, the Universal
      Service Administration Company has not initiated any inquiries, audits or other
      proceedings against the Company or its Subsidiaries and, to the Knowledge of
      the
      Company, no such actions are threatened which, in each case, could result in
      fines, penalties or other losses, if not cured or otherwise responded to in
      the
      Ordinary Course of Business.

     

    

    
      
        
          
          

        

        
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    5.8           Financial
      Statements.  Attached hereto as Schedule 5.8 are the
      following financial statements (collectively the “Financial
      Statements”): (i) audited consolidated balance sheets and statements of
      income, changes in shareholders’ equity, and cash flow for the fiscal years
      ended July 31, 2004, July 31, 2005 and July 31, 2006 for the Company and its
      Subsidiaries; and (ii) unaudited consolidated balance sheets and statements
      of
      income, changes in shareholders’ equity, and cash flow (the “Most Recent
      Financial Statements”) as of and for the ten-months ended May 31, 2007
      (the “Most Recent Fiscal Month End”) for the Company and its
      Subsidiaries.  The Financial Statements taken as a whole (including
      the notes thereto) have been prepared in accordance with GAAP throughout the
      periods covered thereby in all material respects, and except as set forth on
      Schedule 5.8, present fairly the financial condition and the results of
      operations of the Company and its Subsidiaries as of such dates and for such
      periods in accordance with GAAP, and are consistent with the books and records
      of the Company and its Subsidiaries; provided, however, that the Most Recent
      Financial Statements are subject to normal year-end adjustments (which will
      not
      be material in the aggregate) and lack footnotes and other presentation
      items.

     

    5.9           Events
      Subsequent to Most Recent Financial Statements.  Except as
      set forth on Schedule 5.9 or except (i) as expressly required, permitted
      or contemplated under this Agreement, (ii) as required, permitted or
      contemplated in connection with the consummation of the Contemplated
      Transactions, (iii) as otherwise required by any Legal Requirement or by any
      Governmental Authority provided that notice of any such requirement by any
      Legal
      Requirement or by any Governmental Authority be promptly provided to the
      Purchaser, or (iv) as set forth in Section 2.4, since the Most
      Recent Financial Statements the Company and its Subsidiaries have conducted
      its
      business only in the Ordinary Course of Business, there has not been any
      Material Adverse Change with respect to the Company and its Subsidiaries on
      a
      consolidated basis and, without limiting the generality of the
      foregoing:

     

    (a)           the
      Company and its Subsidiaries have not sold, leased, transferred, or assigned
      any
      assets, tangible or intangible, outside the Ordinary Course of
      Business;

     

    (b)           none
      of the Company or any of its Subsidiaries has entered into any Material
      Agreement outside the Ordinary Course of Business;

     

    

    
      
        
          
          

        

        
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    (c)           none
      of the Company or any of its Subsidiaries has imposed any Lien upon any of
      their
      respective assets, tangible or intangible;

     

    (d)           none
      of the Company or any of its Subsidiaries has made any capital expenditures
      outside the Ordinary Course of Business or its budget;

     

    (e)           none
      of the Company or any of its Subsidiaries has not made any capital investment
      in, or any loan to, any other Person outside the Ordinary Course of Business
      or
      its budget;

     

    (f)           none
      of the Company or any of its Subsidiaries has created, incurred, assumed, or
      guaranteed any indebtedness for borrowed money and capitalized lease
      obligations;

     

    (g)           none
      of the Company or any of its Subsidiaries has transferred, assigned, or granted
      any license or sublicense of any rights under or with respect to any
      Intellectual Property outside the Ordinary Course of Business;

     

    (h)           the
      Company has not declared, set aside, or paid any dividend or made any
      distribution with respect to its Equity Interests (whether in cash or in kind)
      or redeemed, purchased, or otherwise acquired any of its Equity
      Interests;

     

    (i)           none
      of the Company or any of its Subsidiaries has experienced any damage,
      destruction, or loss (whether or not covered by insurance) to its
      property;

     

    (j)           none
      of the Company or any of its Subsidiaries has made any loan to, or entered
      into
      any other transaction with, any of its directors, officers or employees outside
      the Ordinary Course of Business;

     

    (k)           none
      of the Company or any of its Subsidiaries has entered into any employment
      contract or collective bargaining agreement, written or oral, or modified the
      terms of any such existing Contract;

     

    (l)           none
      of the Company or any of its Subsidiaries has granted any increase in the
      compensation or paid any bonus or additional compensation to any of its
      directors, officers, and employees;

     

    (m)           none
      of the Company or any of its Subsidiaries has adopted, amended, modified, or
      terminated any bonus, profit sharing, incentive, severance, or other plan,
      contract, or commitment for the benefit of any of its directors, officers,
      and
      employees (or taken any such action with respect to any other Employee Benefit
      Plan);

     

    (n)           none
      of the Company or any of its Subsidiaries has made any other change in
      employment terms for any of its directors, officers, and employees outside
      the
      Ordinary Course of Business;

     

    (o)           none
      of the Company or any of its Subsidiaries has redeemed, purchased, or otherwise
      acquired directly or indirectly any of its Equity Interest;

     

    

    
      
        
          
          

        

        
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    (p)           made
      a change in the Company’s or any Subsidiary’s authorized or issued capital
      stock; grant of any stock option or right to purchase shares of capital stock
      of
      the Company or any of its Subsidiaries; issuance of any security convertible
      into such capital stock; grant of any registration rights; purchase, redemption,
      retirement, or other acquisition by the Company or any of its Subsidiaries
      of
      any shares of any such capital stock; or declaration or payment of any dividend
      or other distribution or payment in respect of shares of capital
      stock;

     

    (q)           made
      an amendment to the Organizational Documents of the Company or any
      Subsidiary;

     

    (r)           cancelled
      or waived any claims or rights with a value to the Company or its Subsidiaries
      in excess of $10,000 for any individual claim or right or $150,000 in the
      aggregate;

     

    (s)           made
      any material change in the accounting methods used by the Company or its
      Subsidiaries; or

     

    (t)           none
      of the Company or any of its Subsidiaries has committed or made any agreement
      (whether written or oral) to any of the foregoing.

     

    5.10           Undisclosed
      Liabilities.  The Company and its Subsidiaries, taken as a
      whole, have no Liabilities except for (i) Liabilities set forth or reserved
      against in the Financial Statements, (ii) Liabilities that have arisen
      after the Most Recent Fiscal Month End in the Ordinary Course of Business or
      which are within the current year budget, (iii) Liabilities to be performed
      under existing Material Agreements and Permits as listed in Schedule 5.7,
      (iv) Liabilities that do not exceed in the aggregate $50,000 under
      contracts that are not Material Agreements, (v) Liabilities set forth on
Schedule 5.10, (vi) Liabilities relating to the Levelland Project
      approved by Purchaser and (vii) liabilities relating to the physical condition,
      including any environmental liabilities, of Metro Tower.

     

    5.11           Legal
      Compliance.  Except as set forth on Schedule 5.11
      or Schedule 5.27, (i) the Company and its Subsidiaries are in
      compliance with all applicable Legal Requirements, (ii) no action, suit,
      proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
      is currently pending, or to the Company’s Knowledge, threatened against any of
      them alleging any failure so to comply.

     

    5.12           Tax
      Matters.

     

    (a)           (i) The
      Company and its Subsidiaries have filed (on a timely basis) all Tax Returns
      that
      any one or group of them is required to file, (ii) all such Tax Returns
      were correct and complete in all material respects, (iii) all Taxes due and
      owing by the Company and its Subsidiaries (whether or not shown on any Tax
      Return) have been paid, (iv) none of the Company or any of its Subsidiaries
      is currently the beneficiary of any extension of time to file any Tax Return,
      and (v) there are no Liens for Taxes (other than Taxes not yet due and
      payable) upon any of the assets of the Company or its Subsidiaries.

     

    (b)           Schedule
      5.12(b) lists all federal, state, local, and foreign Tax Returns filed with
      respect to the Company and its Subsidiaries for taxable periods ended on or
      after December 31, 2003, indicates those Tax Returns that have been audited,
      and
      indicates those Tax Returns that currently are the subject of
      audit.  The Company has made available to Purchaser correct and
      complete copies of all Tax Returns, examination reports, and statements of
      deficiencies assessed against, or agreed to by the Company or any of its
      Subsidiaries since December 31, 2003.  None of the Company or any of
      its Subsidiaries has waived any statute of limitations in respect of Taxes
      or
      agreed to any extension of time with respect to a Tax assessment or
      deficiency.  The charges, accruals, and reserves with respect to Taxes
      on the respective books of the Company and its Subsidiaries and Company
      Financial Statements are adequate (determined in accordance with GAAP) and
      are
      at least equal to the Liability of the Company and its Subsidiaries for
      Taxes.

     

    

    
      
        
          
          

        

        
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    (c)           None
      of the Company or any of its Subsidiaries is a party to any Income Tax
      allocation or sharing agreement.

     

    (d)           None
      of the Company or any of its Subsidiaries has been a member of an Affiliated
      Group with any Third Party with respect to the Filing of a consolidated Tax
      Return.

     

    5.13           Real
      Property, Network.

     

    (a)           Schedule 5.13(a)
      sets forth the address of each parcel of Owned Real Property of the Company
      and
      its Subsidiaries.  Except as set forth on
Schedule 5.13(a), the Company or its Subsidiaries have good fee
      simple title to all of the Owned Real Property (including all rights, title,
      privileges and appurtenances pertaining or relating thereto) free and clear
      of
      any Liens, except for Permitted Encumbrances and except for defects in title
      which, individually or in the aggregate, would not reasonably be expected to
      have Material Adverse Effect;

     

    (b)           Schedule 5.13(b)
      sets forth the address of each parcel of Leased Real Property of the Company
      and
      its Subsidiaries, including each collocation or similar agreement, and a true
      and complete list including its expiration date and any renewal options of
      all
      Leases for each such Leased Real Property (including the date and name of the
      parties to such Lease document).  The Company has provided to
      Purchaser a true and complete copy of each such Lease document, and in the
      case
      of any oral Lease, a written summary of the material terms of such
      Lease.  Except as set forth on Schedule 5.13(b), with
      respect to each of the Leases:

     

    (i)           each
      such Lease is legal, valid, binding, enforceable and in full force and effect
      except as the same may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or similar laws affecting the rights of creditors
      generally, or by general equitable principles;

     

    (ii)           the
      Contemplated Transactions will not require a consent or payment or result in
      a
      breach of or default under such Lease, and will not otherwise cause such Lease
      to cease to be legal, valid, binding, enforceable and in full force and effect
      on identical terms following the Closing;

     

    (iii)           the
      Company’s, or any of its Subsidiaries’, possession and quiet enjoyment of the
      Leased Real Property under such Lease has not been disturbed and there are
      no
      disputes with respect to such Lease;

     

    

    
      
        
          
          

        

        
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    (iv)           none
      of the Company or any of its Subsidiaries, nor any other party to the Lease,
      is
      in breach of or default under such Lease, and no event has occurred or
      circumstance exists that, with the delivery of notice, the passage of time
      or
      both, would constitute such a breach or default, or permit the termination,
      modification or acceleration of rent under such Lease except for such breaches,
      defaults or events which have been cured or as to which requisite waivers have
      been obtained;

     

    (v)           no
      security deposit or portion thereof deposited with respect to such Lease has
      been applied in respect of a breach of or default under such Lease that has
      not
      been redeposited in full;

     

    (vi)           none
      of the Company or any of its Subsidiaries owes, or will owe in the future,
      any
      brokerage commissions or finder’s fees with respect to such Lease;

     

    (vii)           none
      of the Company or any of its Subsidiaries has subleased, licensed or otherwise
      granted in writing any Person the right to use or occupy the Leased Real
      Property or any portion thereof; and

     

    (viii)                      none
      of the Company or any of its Subsidiaries has collaterally assigned or granted
      any other Lien in such Lease or any interest therein.

     

    (ix)           the
      Leased Real Property identified on Schedule 5.13(b) (the
“Real Property”), comprises all of the real property used in
      connection with the Company’s and its Subsidiaries respective businesses, as
      currently conducted, including all collocation and other rights of occupancy
      at
      a Third Party’s facilities; and none of the Company or any of its Subsidiaries
      is a party to any Contract or option to purchase or Lease any real property
      or
      interest therein other than the Real Property.

     

    (c)           The
      Company has made available to Purchaser a true and complete copy of all material
      certificates of occupancy, permits, licenses, franchises, approvals and
      authorizations (collectively, the “Real Property Permits”) of
      all Governmental Authorities, boards of fire underwriters, associations or
      any
      other entity having jurisdiction over the Real Property that are required to
      use
      or occupy the Real Property or operate the Company’s and its Subsidiaries’
respective businesses as currently conducted thereon and all such Real Property
      Permits, have been issued and are in full force and
      effect.  Schedule 5.13(c) lists all material Real Property
      Permits held by the Company or any of its Subsidiaries with respect to each
      parcel of Real Property.  None of the Company or any of its
      Subsidiaries has received any notice from any Governmental Authority or other
      entity having jurisdiction over the Real Property threatening a suspension,
      revocation, modification or cancellation of any Real Property
      Permit.

     

    (d)           Schedule
      5.13(d) sets forth the following information relating to the network
      of the Company and its Subsidiaries: (i) all switches and switch locations
      of the Company, (ii) all material inventory of the Company and its
      Subsidiaries of telecommunications equipment, (iii) a description of fibers
      and fiber miles owned or leased by the Company and its Subsidiaries,
      (iv) the ATM/IP backbone of the Company and its Subsidiaries, route and
      circuit type, (v) any pending asset sale of any of the foregoing,
      (vi) any Contract by the Company or its Subsidiaries with municipalities
      governing access to municipal rights of way involving payments in excess of
      $50,000 in any one year and (vii) any all licenses to embedded software
      owned by Third Parties associated with the network and its
      operation.  A description of each of the network facilities has been
      provided to the Purchaser.  Each such network facility is in good
      operating condition and repair, ordinary wear and tear excepted and such
      embedded software is functioning as intended except as provided on Schedule
      5.13(d).

     

    

    
      
        
          
          

        

        
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    5.14           Intellectual
      Property.

     

    (a)           Except
      as set forth on Schedule 5.14(a), each of the Company and its
      Subsidiaries owns and possesses or has the right to use pursuant to a valid
      and
      enforceable license, sublicense, agreement, or permission all material
      Intellectual Property used by it.  Each item of Intellectual Property
      which the Company or any of its Subsidiaries has the right to use pursuant
      to a
      valid and enforceable license, sublicense, agreement, or permission immediately
      prior to the Closing will be available for use by the Company or its Subsidiary
      on identical terms and conditions immediately subsequent to
      Closing.

     

    (b)           To
      the Company’s Knowledge, none of the Company or any of its Subsidiaries (i) has
      misappropriated any Intellectual Property rights of Third Parties or infringed
      upon any Intellectual Property rights of any Third Party, nor has the Company
      or
      any of its Subsidiaries received any notice of any claim of any such
      infringement or misappropriation that is currently pending or made within the
      three (3) years preceding the date of the execution of this Agreement and (ii)
      is knowingly utilizing pirated or other unauthorized copies of software,
      including, without limitation, off-the-shelf software.  To the
      Company’s Knowledge, no Third Party has infringed upon or misappropriated any of
      its Intellectual Property rights, or those of its Subsidiaries.

     

    (c)           Schedule
      5.14(c) identifies each patent and trademark that has been issued to the
      Company or its Subsidiaries with respect to any of its Intellectual Property,
      identifies each pending patent application, trademark application or other
      application for registration that the Company or its Subsidiaries have made
      with
      respect to any of its Intellectual Property.  The Company has made
      available to Purchaser correct and complete copies of all of the items listed
      on
Schedule 5.14(c).  With respect to each item of Intellectual
      Property required to be identified on Schedule 5.14(c):

     

    (i)                     the
      item is not subject to any outstanding injunction, judgment, order, decree,
      ruling, or charge;

     

    (ii)          no
      action, suit, proceeding, hearing, complaint, claim, demand or to the Company’s
      Knowledge, investigation, is pending or is threatened in writing that challenges
      the legality, validity, enforceability, use, or ownership of the item;
      and

     

    (iii)          no
      loss or expiration of the item is threatened in writing or pending except for
      patents expiring at the end of their statutory terms.

     

     

    

    
      
        
          
          

        

        
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      5.15           Contracts.Schedule 5.15
        lists the following pending Contracts to which the Company or any of its
        Subsidiaries is a party (collectively, the “Material
        Agreements”):

    (a)           any
      Contract (or group of related Contracts) for the lease of personal property
      to
      or from any Person providing for lease payments in excess of $10,000 per
      annum;

     

    (b)           any
      Contract for the furnishing or receipt of services (or group of related
      Contracts), the performance of which involves consideration in excess of $25,000
      per annum;

     

    (c)           any
      Contract (or group of related Contracts) under which it has created, incurred,
      assumed, or guaranteed any indebtedness for borrowed money, or any capitalized
      lease obligation or pledged any assets, in excess of $5,000 or under which
      it
      has imposed a Lien on any of its assets, tangible or intangible;

     

    (d)           any
      Contract concerning any partnership or joint venture with the Company or any
      of
      its Subsidiaries;

     

    (e)           any
      non-compete agreement;

     

    (f)           any
      collective bargaining agreement;

     

    (g)           any
      Contract for the employment of any individual on a full-time, part-time,
      consulting, or other basis providing annual compensation in excess of $50,000
      or
      providing severance benefits;

     

    (h)           any
      Contract under which the consequences of a default or termination could
      reasonably be expected to have a Material Adverse Effect;

     

    (i)           any
      settlement, conciliation or similar Contract, the performance of which will
      involve payment after the Closing Date of consideration in excess of
      $25,000;

     

    (j)           any
      Contract under which the Company or one of its Subsidiaries has advanced or
      loaned any other Person amounts in the aggregate exceeding $25,000;

     

    (k)           any
      Contract with any Affiliate or any current officer, director, or shareholder
      of
      the Company or any of its Affiliates;

     

    (l)           any
      Contract (or group of related contracts) that provides for any discount for
      services not in the Ordinary Course of Business;

     

    (m)           Contracts
      with customers, suppliers or employees which provide for discounts, penalties
      or
      incentive payments that are in excess of $50,000 per annum and that are not
      in
      the Ordinary Course of Business;

     

    (n)           any
      other Contract (or group of related Contracts), the performance of which
      involves consideration in excess of $50,000.

     

    The
      Company has made available to Purchaser a correct and complete copy of each
      written Material Agreement (as amended to date) listed on
Schedule 5.15 and a written summary setting forth the terms and
      conditions of each oral Material Agreement referred to on
Schedule 5.15.  With respect to each Material
      Agreement:  (i) the Material Agreement is valid, binding and
      enforceable against the Company or its Subsidiary, as the case may be, and
      shall
      so remain after Closing without the necessity of any consent, waiver, payment
      or
      notice, except as the same may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or similar laws affecting the rights of creditors
      generally, or by general equitable principles; (ii) excluding matters relating
      to Performance Targets not yet met, none of the Company or any of its
      Subsidiaries is in breach of or default under, and no event has occurred that
      with notice or lapse of time would constitute a breach of or default under,
      or
      permit termination, modification, or acceleration, under any Material Agreement
      except for such breaches, defaults or events which have been cured; and (iii)
      excluding matters relating to Performance Targets not yet met, the Company
      and
      its Subsidiaries have in all material respects performed or is performing all
      obligations required to be performed by them, respectively, under each Material
      Agreement.

     

    

    
      
        
          
          

        

        
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    5.16           Customers
      and Suppliers.

     

    (a)           Schedule
      5.16(a) list the five (5) largest suppliers and customers of the Company and
      its Subsidiaries, on a consolidated basis, for each of the two (2) most recent
      fiscal years.

     

    (b)           Except
      as set forth on Schedule 5.16(b), since the date of the Most Recent
      Balance Sheet, no supplier or customer listed on Schedule 5.16(a) has
      indicated in writing that it shall stop, or decrease the rate of, supplying
      or
      purchasing materials, products or services to or from the Company or its
      Subsidiaries.

     

    (c)           Schedule
      5.16(c) lists all customer contracts of the Company
      and its Subsidiaries that have generated $2,000 or more in revenue in any month
      since January 1, 2006 (“Significant Customer
      Contracts”).  The Company has made available a complete
      copy (including all amendments) of each Significant Customer
      Contract.

     

    The
      Company nor any of its Subsidiaries has entered into any binding agreement
      with
      respect to any Significant Customer Contract that could adversely affect the
      Company or its Subsidiaries’ ability to enforce its rights under such
      Significant Customer Contract.  The Company has made available copies
      of all written Significant Customer Contracts (and all amendments and
      modifications thereto) to Purchaser prior to the execution of this
      Agreement.  Each Significant Customer Contract represents the entire
      agreement between the Company and its Subsidiaries and any other party to such
      Significant Customer Contract.

     

    Except
      as
      set forth in Schedule 5.16(b) or Schedule 5.16(c) or
      as otherwise reserved against as an allowance for doubtful accounts in the
      Financial Statements, since 120 days prior to the date of this Agreement, (i)
      no
      significant customer purchasing in the aggregate $25,000 in products and
      services over the past twelve (12) months has terminated or indicated in writing
      that it will terminate its relationship with the Company or its Subsidiaries,
      and (ii) the Company or its Subsidiaries has not received any written or oral
      communication from any significant customer party to a Significant Customer
      Contract purchasing in the aggregate $25,000 in products and services over
      the
      past twelve (12) months to the effect that such significant customer is
      experiencing financial difficulties which reasonably could be expected to affect
      adversely full and timely payment by such customer for services rendered by
      the
      Company or its Subsidiaries.

     

    

    
      
        
          
          

        

        
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    5.17           Inventories.  Except
      as set forth on Schedule 5.17 or as provided for on the Most Recent
      Balance Sheet, the inventory of the Company and its Subsidiaries consists of
      items of a quality and quantity usable and saleable in the Ordinary Course
      of
      Business, and the values of obsolete materials and materials below standard
      quality have been written down on its books of account on a consistent bases
      to
      realizable market value, or adequate reserves have been provided therefore
      in
      the Company Financial Statements.

     

    5.18           Notes
      and Accounts Receivable.  Except as set forth on
Schedule 5.18, all notes and accounts receivable of the Company and
      its Subsidiaries are reflected properly on the Company’s books and records, and,
      are (i) valid receivables and reflect a bona fide obligation for the payment
      of
      goods or services and (ii) except in the Ordinary Course of Business subject
      to
      no setoffs or counterclaims.

     

    5.19           Powers
      of Attorney; Authorized Signatories; Bank
      Accounts.Schedule 5.19 lists:  (i) the names and
      addresses of all Persons holding powers of attorney on behalf of the Company
      or
      its Subsidiaries; and (ii) the names of all banks and other financial
      institutions in which the Company or one of its Subsidiaries currently has
      one
      or more bank accounts or safe deposit boxes, along with the names of all Persons
      authorized to draw on such accounts or to have access to such safe deposit
      boxes.  The Company has made available to Purchaser the account
      numbers for each of the bank accounts identified on Schedule
      5.19.

     

    5.20           Litigation.  Except
      as set forth on Schedule 5.20, there is no action, suit, claim or
      proceeding of any nature pending or to the Company’s Knowledge, threatened in
      writing against the Company or any Subsidiary or their respective properties
      or
      any Person or entity whose Liability the Company or any Subsidiary may have
      retained or assumed, either contractually or by operation of
      law.  There is no investigation or other proceeding pending or
      threatened in writing against the Company or any Subsidiary, any of their
      respective properties or any Person or entity whose Liability the Company or
      any
      Subsidiary may have retained or assumed, either contractually or by operation
      of
      law, by or before any Governmental Authority.

     

    5.21           Warranties.  Except
      as set forth on Schedule 5.21 and excluding matters relating to
      Performance Targets, no claim or demand based on any warranty with respect
      to
      any service or product provided or performed by the Company or its Subsidiaries
      is pending or has been threatened in writing.

     

    5.22           Employees.

     

    (a)           Except
      as set forth on Schedule 5.22(a), with respect to the business of the
      Company and its Subsidiaries:

     

    (i)           there
      is no collective bargaining agreement or relationship with any labor
      organization;

     

    (ii)          no
      labor organization or group of employees has filed any representation petition
      or made any written demand for recognition, and no union organizing or
      decertification efforts are underway or have been threatened in writing, and
      no
      labor strike, work stoppage, slowdown, or other material labor dispute has
      occurred or has been threatened in writing;

     

    

    
      
        
          
          

        

        
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    (iii)          there
      are no pending worker’s compensation claims that could reasonably be expected to
      have a Material Adverse Effect on the Company;

     

    (iv)          there
      is no employment-related charge, complaint, grievance, investigation, inquiry
      or
      obligation of any kind, pending or to the Company’s Knowledge, threatened in any
      forum, relating to an alleged violation or breach by the Company or any of
      its
      Subsidiaries (or their respective officers or directors) of any employment
      related Legal Requirement.

     

    (b)           Except
      as set forth on Schedule 5.22(b), there are no written employment
      Contracts or severance Contracts or any Contracts which would require the
      payment of any amounts due to the consummation of the Contemplated Transactions
      with any present or former director, officer, or employee of the Company or
      any
      of its Subsidiaries.  Company has made available to Purchaser true and
      correct copies of all such Contracts.

     

    (c)           Schedule
      5.22(c) contains a true and complete list of the names and titles of each
      director, officer, manager and other employee of the Company and each of its
      Subsidiaries as of the date of this Agreement.  The Company has made
      available to Purchaser the salary, wages, bonuses of each director, officer,
      manager and employee identified on Schedule 5.22(c).

     

    (d)           None
      of the Company or its Subsidiaries has implemented any plant closing or mass
      layoff of employees that could implicate the Worker Adjustment and Retraining
      Notification Act of 1988, as amended, or any similar foreign, state, or local
      law, regulation, or ordinance, and no such action will be implemented without
      advance notification and consent of the Purchaser.

     

    (e)           The
      Company (i) is in material compliance with all applicable foreign, federal,
      state and local laws, rules and regulations respecting employment, employment
      practices, terms and conditions of employment and wages and hours, in each
      case,
      with respect to its employees; (ii) has withheld and reported all amounts
      required by law or by agreement to be withheld and reported with respect to
      wages, salaries and other payments to its employees; (iii) is not liable for
      any
      arrears of wages or any taxes or any penalty for failure to comply with any
      of
      the foregoing; and (iv) is not liable for any payment to any trust or other
      fund
      governed by or maintained by or on behalf of any governmental authority, with
      respect to unemployment compensation benefits, social security or other benefits
      or obligations for its employees (other than routine payments to be made in
      the
      ordinary Course of Business).

     

    5.23           Transactions
      with Affiliates.Schedule 5.23 contains a description (by name,
      amount and type) of all Contracts with or commitments to present shareholders,
      directors, officers or Affiliates of the Company  (or its
      shareholders, directors, officers or employees).

     

    

    
      
        
          
          

        

        
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    5.24           Employee
      Benefits.

     

    (a)           Schedule
      5.24(a) contains a complete and accurate list of each Employee Benefit Plan.
      The Company has made available to Purchaser correct and complete copies of:
      (i)
      all documents embodying each Employee Benefit Plan including (without
      limitation) all amendments thereto and all related trust documents,
      administrative service agreements, group annuity contracts, and group insurance
      contracts; (ii) the most recent annual actuarial valuations, if any, prepared
      for each Employee Benefit Plan; (iii) the three (3) most recent annual reports
      (Form Series 5500 and all schedules and financial statements attached thereto),
      if any, required under ERISA or the Code in connection with each the Employee
      Benefit Plan; (iv) the most recent summary plan description together with the
      summary(ies) of material modifications thereto, if any, required under ERISA
      with respect to each the Employee Benefit Plan; (v) all Internal Revenue Service
      (“IRS”) determination, opinion, notification and advisory
      letters, and all applications and correspondence to or from the IRS or the
      United States Department of Labor (“DOL”) with respect to any
      such application or letter, if any; (vi) all communications material to any
      employee or employees of the Company relating to any amendments, terminations,
      establishments, increases or decreases in benefits, acceleration of payments
      or
      vesting schedules or other events under an Employee Benefit Plan which would
      result in any material liability to the Company; and (vii) all material
      correspondence to or from any governmental agency relating to any the Employee
      Benefit Plan.

     

    (b)           Except
      as set forth on Schedule 5.24(c), (i) the Company has performed in all
      material respects all obligations required to be performed by it under, is
      not
      in material default or violation of, and has no knowledge of any material
      default or violation by any other party to each Employee Benefit Plan, and
      each
      Employee Benefit Plan has been established and maintained in all material
      respects in accordance with its terms and in compliance with all applicable
      laws, statutes, orders, rules and regulations, including but not limited to
      ERISA and the Code; (ii) each Employee Pension Benefit Plan intended to qualify
      under Section 401(a) of the Code has either received a favorable determination,
      opinion, notification or advisory letter from the IRS with respect to its
      qualified status under the current provisions of the Code or is within its
      remedial amendment period under the Code and applicable treasury regulations
      and
      IRS pronouncements in which to apply for such a letter, (iii) no “prohibited
      transaction,” within the meaning of Section 4975 of the Code or Sections 406 and
      407 of ERISA, and not otherwise exempt under Section 4975 of the Code or Section
      408 of ERISA (or any administrative class exemption issued thereunder), has
      occurred with respect to any Employee Benefit Plan; (iv) there are no actions,
      suits or claims pending, or, to the Knowledge of the Company or Sellers,
      threatened (other than routine claims for benefits) against any Employee Benefit
      Plan or against the assets of any Employee Benefit Plan; (v) there are no
      audits, inquiries or proceedings pending or, to the Knowledge of the Company
      or
      Sellers, threatened by the IRS or DOL with respect to any Employee Benefit
      Plan;
      (vi) the Company  is not subject to any penalty or tax with respect to
      any Employee Benefit Plan under Section 502(i) of ERISA or Sections 4975 through
      4980 of the Code; and (vii) each Employee Benefit Plan that provides for the
      deferral of compensation within the meaning of Section 409A of the Code and
      has
      been operated in good faith compliance with the requirements of Section 409A
      of
      the Code and the pronouncements and rulings thereunder since the effective
      date
      of such requirements or the adoption of the plan, if later.

     

    

    
      
        
          
          

        

        
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    (c)           All
      contributions (including all employer contributions and employee salary
      reduction contributions) that are due have been made to each such Employee
      Benefit Plan that is an Employee Pension Benefit Plan.  All premiums
      or other payments that are due have been paid with respect to each such Employee
      Benefit Plan that is an Employee Welfare Benefit Plan.  There are no
      material Liabilities with respect to the Employee Benefits Plans that are
      required to be reflected in the Financial Statements in accordance with GAAP
      which have not been so reflected, and with respect to the Most Recent Financial
      Statements, subject to normal year-end adjustments.

     

    (d)           The
      Company has never maintained, established, sponsored, participated in, or
      contributed to, any (i) Employee Benefit Plan subject to Title IV of ERISA
      or
      Section 412 of the Code; (ii) “multiemployer plan” within the meaning of Section
      (3)(37) of ERISA; or (iii) multiemployer plan, or any plan described in Section
      413 of the Code.

     

    (e)           No
      Employee Welfare Benefit Plan provides, or reflects or represents any liability
      to provide, retiree life insurance, retiree health or other retiree employee
      welfare benefits to any person for any reason, except as may be required by
      COBRA or other applicable statute, and the Company has never represented,
      promised or contracted (whether in oral or written form) to any employee (either
      individually or to employees as a group) or any other person that such
      employee(s) or other person would be provided with retiree life insurance,
      retiree health or other retiree employee welfare benefit, except to the extent
      required by statute.

     

    5.25           Guaranties.  Except
      as set forth on Schedule 5.25, none of the Company or its Subsidiaries is
      a guarantor or surety of any other Person.

     

    5.26           Insurance.Schedule
      5.26 contains a complete list and description (including the expiration
      date, premium amount and coverage thereunder) of all policies of insurance
      and
      bonds presently maintained by, or providing coverage for, the Company or its
      Subsidiaries, or any of their officers, directors or employees as of the Closing
      Date.  All material terms, obligations and provisions of each of such
      policies binding on the Company or its Subsidiaries have been complied with,
      all
      premiums due thereon have been paid, and no notice of cancellation with respect
      thereto has been received.  Except as set forth on Schedule
      5.26, none of the Company or its Subsidiaries will as of the Closing Date
      have any Liability for premiums or for retrospective premium adjustments for
      any
      period prior to the Closing Date.  The Company has made available to
      Purchaser a true, correct and complete copy of each such insurance policy and
      bond or summary thereof.

     

    5.27           Environmental
      Matters.

     

    (a)           Except
      as set forth on Schedule 5.27 and except with respect to the Metro Tower,
      the Company and its Subsidiaries are in compliance with all Environmental
      Requirements.

     

    (b)           Except
      as set forth on Schedule 5.27 and except with respect to the Metro Tower,
      the Company has not received any notice, report or other information regarding
      any actual or alleged violation of Environmental Requirements, or any
      liabilities or potential liabilities (whether accrued, absolute, contingent,
      unliquidated or otherwise), including any investigatory,
      remedial or corrective obligations, relating to the Company or its Subsidiaries
      or their respective facilities arising under Environmental
      Requirements.

     

    

    
      
        
          
          

        

        
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    (c)           None
      of the Company or any Subsidiary has operated any underground storage tanks
      at
      any property that the Company or any Subsidiary has at any time owned, operated,
      occupied or leased.  To the Knowledge of the Company, no Hazardous
      Materials are present in, on or under any property, including the land and
      the
      improvements, ground water and surface water thereof, that the Company or any
      Subsidiary has at any time owned, operated, occupied or leased.

     

    (d)           Except
      as set forth on Schedule 5.27 and except with respect to the Metro Tower,
      neither the Company or any Subsidiary has transported, stored, used,
      manufactured, disposed of, released or exposed its employees or others to
      Hazardous Materials in violation of any Environmental Requirements, nor has
      the
      Company or any Subsidiary disposed of, transported, sold, or manufactured any
      product containing a Hazardous Material (any or all of the foregoing being
      collectively referred to herein as “Hazardous Materials
      Activities”) in violation of any Environmental
      Requirements.  Except with respect to the Metro Tower, the Company has
      no Knowledge of any fact or circumstance that is reasonably likely to involve
      the Company or any Subsidiary in any environmental litigation or impose upon
      the
      Company or any Subsidiary any environmental Liability.

     

    (e)           Except
      with respect to the Metro Tower, the Company and each of its Subsidiaries
      currently holds all environmental approvals, permits, licenses, clearances
      and
      consents (the “Environmental Permits”) necessary for the
      conduct of Hazardous Material Activities by them, respectively, and other
      businesses of the Company or any Subsidiary as such activities and businesses
      are currently being conducted.

     

    (f)           Except
      with respect to the Metro Tower, no action, proceeding, revocation proceeding,
      amendment procedure, writ, injunction or claim is pending or, to the Knowledge
      of the Company, threatened concerning any Environmental Permit, Hazardous
      Material or any Hazardous Materials Activity of the Company or any
      Subsidiary.

     

    5.28           Certain
      Payments.  No director, officer, agent, or employee of the
      Company or its Subsidiaries, or to the Company’s Knowledge any other Person
      associated with or acting for or on behalf of the Company or its Subsidiaries,
      has directly or indirectly (a) made any contribution, gift, bribe, rebate,
      payoff, influence payment, kickback, or other payment to any Person, private
      or
      public, regardless of form, whether in money, property, or services (i) to
      obtain favorable treatment in securing business, (ii) to pay for favorable
      treatment for business secured, (iii) to obtain special concessions or for
      special concessions already obtained, for or in respect of the Company or its
      Subsidiaries or any Affiliate of the Company or its Subsidiaries, or (iv) in
      violation of any Legal Requirement, (b) established or maintained any fund
      or
      asset that has not been recorded in the books and records of the
      Company.

     

    5.29           Disclosure.  The
      representations and warranties contained in this Article V and the
      Seller’s Disclosure Schedules, when taken as a whole in the context made, do not
      contain any untrue statement of a fact or omit to state any fact necessary
      in
      order to make the statements and information contained in this Article V
      and the Seller’s Disclosure Schedules not misleading.

     

    

    
      
        
          
          

        

        
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    Article
      VI

     

    PRE
      CLOSING OBLIGATIONS

     

    6.1           General.  Each
      of the Parties will use commercially reasonable efforts to take all actions
      and
      to do all things proper or advisable in order to consummate and make effective
      the Contemplated Transactions.

     

    6.2           Regulatory
      Matters and Approvals.  Each of the Parties will give any
      notices to, make any Filings with, and use commercially reasonable efforts
      to
      obtain any Required Consents and to comply any Legal Requirements associated
      with the consummation of the Contemplated Transactions, including obtaining
      any
      authorizations, consents, and approvals of Governmental Authorities and any
      consents or approvals referred to in Article III and Article V
      above, necessary to consummate the Contemplated Transactions in accordance
      with
      the Legal Requirements.  In furtherance and not in limitation of the
      foregoing, each of the parties hereto will use all commercially reasonable
      efforts to (i) make or cause to be made the applications or Filings required
      to
      be made by Purchaser or the Company or any of their respective Subsidiaries
      with
      respect to any Legal Requirements or Required Consents, including any Filings
      with the FCC, any State PUC, or any municipal franchising authority necessary
      to
      obtain the Required Telecommunications Notices and Consents, (ii) provide such
      notices to other Persons, including customers of the Company, as shall be
      required to obtain the Required Telecommunications Notices and Consents or
      to
      consummate the Contemplated Transactions in accordance with the Legal
      Requirements, (iii) share equally as between Purchaser and the Company any
      fees
      and expenses in connection with the preparation, submission and prosecution
      of
      any notices, applications or Filings associated with the Required
      Telecommunications Notices and Consents, including all reasonably fees and
      expenses of counsel to the Company and (iv) comply as expeditiously as
      practicable with any request under or with respect to such Legal Requirements
      for additional information, documents or other materials received from any
      Governmental Authority, including the FCC or any State PUC or any municipal
      franchise authority in connection with such applications or Filings or the
      Contemplated Transactions.  Each party hereto shall promptly inform
      the others of any communications from any Governmental Authority regarding
      any
      of the Contemplated Transactions or any of the Legal Requirements.

     

    6.3           Operation
      of Business.  Except (i) as expressly required, permitted or
      contemplated under this Agreement, (ii) as required, permitted or contemplated
      in connection with the consummation of the Contemplated Transactions,(iii)
      as
      otherwise required by any Legal Requirement or by any Governmental Authority,
      or
      (iv) as set forth in Section 2.4, from and after the date of this
      Agreement, the Company and its Subsidiaries (x) will not engage in any practice,
      take any action, or enter into any transaction outside the Ordinary Course
      of
      Business; (y) shall, through the Closing Date, use commercially reasonable
      efforts to preserve its business and the assets and maintain its existing
      Contracts and Permits and to preserve its relationships with customers,
      employees, lessors and any other Persons having business relations with the
      Company and its Subsidiaries; and (z) without limiting the generality of the
      foregoing:

     

    (a)           none
      of the Company or any of its Subsidiaries will authorize or effect any change
      in
      its Organizational Documents;

     

    

    
      
        
          
          

        

        
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    (b)           none
      of the Company or any of its Subsidiaries will grant any options, warrants,
      or
      other rights to purchase or obtain any of its capital stock or issue, sell,
      or
      otherwise dispose of any of its capital stock (except upon the conversion or
      exercise of options, warrants, and other rights currently
      outstanding);

     

    (c)           the
      Company will not declare, set aside, or pay any dividend or distribution with
      respect to its stock (whether in cash or in kind), or redeem, repurchase, or
      otherwise acquire any of its capital stock outside the Ordinary Course of
      Business;

     

    (d)           none
      of the Company or any of its Subsidiaries will issue any note, bond, or other
      debt security or create, incur, assume, or guarantee any indebtedness for
      borrowed money or capitalized lease obligation outside the Ordinary Course
      of
      Business;

     

    (e)           none
      of the Company or any of its Subsidiaries will impose any Lien upon any of
      its
      assets outside the Ordinary Course of Business;

     

    (f)           none
      of the Company or any of its Subsidiaries will make any capital investment
      in,
      make any loan to, or acquire the securities or assets of any other Person
      outside the Ordinary Course of Business;

     

    (g)           none
      of the Company or any of its Subsidiaries will make any change in employment
      terms for any of its directors, officers, and employees outside the Ordinary
      Course of Business; and

     

    (h)           incur
      any Liability or make any investment with respect to the Levelland Project
      without the prior written consent of the Purchaser;

     

    (i)           the
      Company and its Subsidiaries will not commit to any of the foregoing or any
      action in violation of Section 5.9 of this Agreement.

     

    Through
      the Closing Date, the Company and its Subsidiaries shall not (except to the
      extent that Purchaser has consented in advance in writing thereto): (i) provide
      service or agree to provide service to any customer at rates that are different
      than those that were in effect for such customer (or would have been in effect
      for any new customer) as of January 1, 2007, (ii) offer any promotions or
      special incentives or arrangements to customers that were not being offered
      to
      all customers at January 1, 2007, including, but not limited to, any promotions
      or special incentives or arrangements with respect to pricing or usage, or
      (iii)
      amend or modify any Significant Customer Contract except for renewals thereof
      in
      accordance with then existing market conditions and in the Ordinary Course
      of
      Business.  The Company and its Subsidiaries shall maintain in full
      force and effect all of its existing casualty, liability, and other insurance
      in
      amounts not less than those in effect on the date hereof, except for changes
      in
      such insurance that are made in the Ordinary Course of Business.

     

    6.4           Notice
      of Developments.  The Purchaser shall promptly notify the
      Sellers of the occurrence or non-occurrence of any fact or event which would
      be
      reasonably likely to cause any condition set forth in Section 2.6 not to
      be satisfied.  The Sellers shall promptly notify the Purchaser
      of  the occurrence or non-occurrence of any fact or event which would
      be reasonably likely to cause any condition set forth in Section 2.5 not
      to be satisfied.  Each Party will give prompt
      written notice to the others of any material adverse development causing a
      breach of any of its own representations and warranties Article III,
Article IV and Article V.  In this regard, each of the
      Company and the Sellers may, on two (2) occasions no later than three (3)
      Business Days prior to the Closing, supplement or amend the Seller’s Disclosure
      Schedule with respect to any matter arising after the date of this Agreement,
      which, if existing as of the date of this Agreement, would have been required
      to
      be set forth or described in such Party’s schedules in order to make any
      representation or warranty set forth in this Agreement true and correct as
      of
      such date.  Any such amendment or supplement to the Sellers’
Disclosure Schedules shall be deemed to have been made on and as of the
      Effective Date for all purposes hereunder.  Within ten (10) Business
      Days of Purchaser’s receipt of any such amendment or supplement to the Sellers’
Disclosure Schedules, the Purchaser shall notify Sellers in writing of its
      determination of whether such amendment or supplement to the Sellers’ Disclosure
      Schedules would constitute a Material Adverse Change for purposes of Section
      2.5(g).  In the event that the Purchaser determines that such
      amendment or supplement to the Sellers’ Disclosure Schedules does not constitute
      a Material Adverse Change for purposes of Section 2.5(g), elects to waive
      such closing condition with respect to such amendment or supplement to the
      Sellers’ Disclosure Schedules or the Purchaser fails to deliver such notice
      within the required time period, Purchaser shall not have the right to or a
      claim for indemnification under Article VII with respect to such
      amendment or supplement to the Sellers’ Disclosure Schedules.  Not in
      limitation of the rights of the Purchaser to determine whether an amendment
      or
      supplement to Sellers’ Disclosure Schedules constitutes a Material Adverse
      Change, it is agreed that any amendment or supplement (or any amendment or
      supplement which when combined with any prior amendment or supplement) that
      discloses Liabilities or Damages in the aggregate or reductions in payments
      to
      the Company by more than $250,000 shall be deemed to be a Material Adverse
      Change unless Purchaser, in its sole discretion, shall agree in writing to
      accept such amendment or supplement.

     

    

    
      
        
          
          

        

        
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    6.5           Exclusivity.  During
      the term of this Agreement, none of the Company, the Sellers, nor any of their
      respective affiliates, representatives, officers, employees, directors, or
      agents will (i) solicit, initiate, or encourage the submission of any proposal
      or offer from any Person relating to the acquisition of all or substantially
      all
      of the Equity Interests or assets of the Company (including any acquisition
      structured as a merger, consolidation, recapitalization, purchase or sale of
      assets or capital stock, share exchange, or any similar transaction or business
      combination involving the Company (collectively a “Sale of the
      Company”)); or (ii) furnish any information with respect to, assist, or
      participate in or in any other manner facilitate any effort or attempt by any
      Person to do or seek to do any of the foregoing.  The Company shall
      notify Purchaser immediately if any Person makes any proposal, offer, inquiry,
      or contact with respect to any of the foregoing.

     

    6.6           Risk
      of Customer Loss.  In the event that notice to customers is
      required to obtain the Required Telecommunications Notices and Consents, then
      the Purchaser shall bear the entire risk of any loss of customers or business
      resulting therefrom and that no such loss or losses, nor the resulting effect
      upon the business, results of operations, financial condition or prospects
      of
      the Company shall constitute a Material Adverse Change in the Company’s
      business, financial condition or prospects, be deemed to have the effect of
      causing a breach in the representations or warranties of the Sellers and the
      Company under Articles III and V, whether or not disclosed in the
      Disclosure Schedule hereto, or otherwise excuse Purchaser’s obligation to
      consummate the Contemplated Transactions in accordance with this
      Agreement.

     

    

    
      
        
          
          

        

        
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    6.7           Public
      Disclosure.  The Parties hereto agree that prior to the
      Closing Date, none of them will make or engage in any press release, publicity
      or other public disclosure of the matters which are the subject of this
      Agreement without the prior written consent of Purchaser and the Company, unless
      such party believes in good faith upon consultation with counsel that such
      press
      release, publicity or other public disclosure is required by law or legal
      process, in which event such party will give Purchaser and the Company as much
      advance notice thereof as is practicable under the circumstances and will give
      good faith consideration to any comments made with respect thereto by the other
      Parties hereto prior to the time when such press release, publicity or other
      public disclosure is made.

     

    6.8           AMEX
      and Shareholder Approval; Information Statement.

     

    (a)           In
      the event Purchaser’s shareholders are required to approve the Contemplated
      Transactions and the Purchaser elects or is required to hold a special meeting
      of its shareholders, Purchaser shall, as soon as reasonably practicable, prepare
      and file with the SEC, and will use all commercially reasonable efforts to
      have
      cleared by the SEC and thereafter mail (or otherwise make available in
      compliance with the SEC rules and regulations) to its shareholders as promptly
      as practicable, a proxy statement and a form of proxy, in connection with the
      vote of Purchaser’s shareholders with respect to the approval of this Agreement,
      the Contemplated Transactions and the issuance of shares of Xfone Common Stock
      with a value of up to thirty percent (30%) of the Purchase
      Price.  Purchaser shall include in such proxy statement the
      recommendation of the Board of Directors of Purchaser that shareholders vote
      in
      favor of this Agreement, the Contemplated Transactions and the issuance of
      shares of Xfone Common Stock hereunder.  The proxy statement shall
      comply as to form in all material respects with the rules and regulations
      promulgated by the SEC under the Securities Act and the Exchange Act,
      respectively.

     

    (b)           In
      the event Purchaser’s shareholders are required to approve the Contemplated
      Transactions, then as promptly as practicable after the determination that
      approval of the Purchaser’s shareholders is required, the Purchaser shall, in
      accordance with applicable law, the rules and regulations of the AMEX and the
      Tel Aviv Stock Exchange, and the Purchaser’s charter and bylaws, obtain and
      provide to the Sellers copies of the written consent or consents of the
      Purchaser’s shareholders or minutes from a duly called, properly noticed and
      convened special meeting of shareholders, approving this Agreement, the
      Contemplated Transactions and the issuance of shares of Xfone Common Stock
      with
      a value of up to thirty percent (30%) of the Purchase Price.  Such
      consent or consents shall be signed by the holders of a majority of the shares
      of Xfone Common Stock that are entitled to vote or as may otherwise be required
      by the rules and regulation of AMEX and the Tel Aviv Stock Exchange, other
      applicable law or the Purchaser’s charter and bylaws (the
“PurchaserShareholder Consent”) or if approval
      was obtained at a special meeting of Purchaser’s shareholders, the minutes of
      such meeting shall be certified by the Secretary of the Purchaser (the
“PurchaserShareholder Vote”).

     

    (c)           In
      the event Purchaser Shareholder Consent is obtained, the Purchaser shall
      promptly prepare, file with the SEC and mail to its shareholders an information
      statement which shall include notice of the Purchaser Shareholder Consent to
      those shareholders who have not consented in writing and who, if the action
      had
      been taken at a meeting, would have been entitled
      to notice of the meeting if the record date for such meeting had been the date
      of the Purchaser Shareholder Consent. The information statement shall comply
      as
      to form in all material respects with the rules and regulations promulgated
      by
      the SEC under the Securities Act and the Exchange Act,
      respectively.

     

    

    
      
        
          
          

        

        
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    (d)           If,
      on or before January 15, 2008 (x) the shares of Xfone Common Stock shall not
      have been approved for listing on AMEX and (y) the Purchaser Shareholder Vote
      is
      required by applicable rules and regulations and has not been obtained or will
      likely not be obtained on or before January 15, 2008, then upon written notice
      provided by the Purchaser to the Company and the Sellers’ Representative on or
      before three (3) Business Days prior to the January 15, 2008, the Expiration
      Date may be extended from January 15, 2008 to a date no later than February
      15,
      2008 provided that all of the following conditions have been met on or before
      January 15, 2008:

     

    (i)           Except
      for the Purchaser Shareholder Consent and the Purchaser Shareholder Vote and
      the
      payment of the Purchase Price, all of the conditions to the Company’s and
      Sellers’ obligations to close set forth in Section 2.6 shall have been
      satisfied or waived in writing by the Company and the Sellers’ Representative in
      their sole and exclusive discretion; and

     

    (ii)           Definitive
      agreements providing Purchaser with the financing or financings sufficient
      to
      pay the Purchase Price in full and to fulfill its obligations under this
      Agreement shall have been executed and delivered by Purchaser and all lenders,
      investors, or other counterparties thereto (“Financing
      Documents”) and such Financing Documents either (x) do not contain any
      conditions to any of such lenders’, investors’ or other counterparties’
obligations to close other than the closing of this Agreement or (y) all of
      such
      conditions to closing have been satisfied or waived in writing by such lenders,
      investors and other counterparties thereto; and

     

    (iii)           The
      Company and the Sellers’ Representative shall have received the written
      consent(s), voting agreement(s) or other commitment(s) of the holders of record
      of a majority of the shares of Xfone Common Stock outstanding and entitled
      to
      vote in connection with the Purchaser Shareholder Vote; and

     

    (iv)           The
      Purchaser shall have prepared, filed and cleared with the SEC, and mailed (or
      otherwise made available in compliance with the SEC rules and regulations)
      to
      its shareholders of record, a proxy statement and a form of proxy, in connection
      with the vote of Purchaser’s shareholders with respect to the approval of this
      Agreement, the Contemplated Transactions, the issuance of shares of Xfone Common
      Stock with a value of up to thirty percent (30%) of the Purchase Price and
      any
      other matters required by the rules and regulations of AMEX, other applicable
      law or the Purchaser’s charter and bylaws, and such proxy statement shall
      include the recommendation of the Board of Directors of Purchaser that
      shareholders vote in favor of all of such matters and shall  provide
      for a meeting date no later than five (5) Business Days prior to February 15,
      2008.

     

    

    
      
        
          
          

        

        
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    6.9           Metro
      Tower Inspection and Abatement Matters.

     

    (a)           During
      sixty (60) Business Days after the date of this Agreement (“Inspection
      Period”), Purchaser and its agents shall have the right to enter upon
      Metro Tower upon one (1) Business Day prior notice to the Company and to
      perform, at Purchaser’s expense, such economic, surveying, engineering,
      topographic, environmental, marketing and other tests, studies and
      investigations as Purchaser may deem appropriate.  During the
      Inspection Period, the officers of the Company shall make themselves available
      to Purchaser and the Company shall make available to Purchaser, its employees,
      agents, auditors, engineers, attorneys, potential lessees and other designees
      who shall disclose all matters which they are actually aware of with respect
      to
      the Metro Tower and will answer pertinent questions concerning the Metro Tower
      to the best of their knowledge.  During the Inspection Period, the
      Company shall make available for inspection and/or copying, originals or copies
      of any existing architectural and engineering studies, surveys, title insurance
      policies, zoning and site plan materials, correspondence, environmental audits
      and reviews, books, records and other materials or information relating to
      the
      Metro Tower.

     

    (b)           On
      or before the expiration of the Inspection Period, Purchaser shall notify the
      Sellers and the Company in writing of any matters with respect to the Metro
      Tower that Purchaser is unwilling to accept (collectively,
“Objections”).  Neither the Sellers nor the Company
      shall be obligated to incur any expenses to cure, remove or discharge, any
      Objections unless the Sellers’ Representative and the Company agree to cure,
      remove or discharge such Objections as hereinafter provided.  The
      Sellers’ Representative and the Company shall notify Purchaser within five (5)
      Business Days after receipt of notice of Objections whether the Sellers and
      the
      Company agree to cure, remove or discharge such Objections.  If the
      Sellers’ Representative and the Company notify Purchaser in writing within such
      five (5) Business Day period that they agree to cure, remove or discharge such
      Objections, the Company shall correct such Objections on or before the Closing
      Date to the reasonable satisfaction of Purchaser. If the Sellers’ Representative
      and the Company do not notify Purchaser within such five (5) Business Day period
      of their agreement to cure, remove or discharge such Objections, the Sellers’
Representative and the Company shall be deemed to have elected not to cure,
      remove or discharge such Objections, and Purchaser shall, within ten (10)
      Business Days after the Seller’s notice not to cure the Objections or, if no
      such notice by Sellers is provided, within fifteen (15) Business Days after
      the
      expiration of the Inspection Period, elect either (1) to waive such Objections,
      or (2) to terminate this Agreement, in which case, notwithstanding anything
      contained in Section 7.2, no liquidated Damages shall be due and payable
      by any Party and the Parties shall be released from all further obligations
      hereunder except those which expressly survive a termination of this
      Agreement.

     

    (c)           Within
      one hundred and twenty (120) calendar days of the date of this Agreement, the
      Company agrees to repair, cure, remove or discharge each matter set forth on
      Schedule 6.9(c) in the manner described on Schedule 6.9(c)
      (“Abatement Matters”).  The Company shall provide
      notice to Purchaser of the date of completion of the Abatement Matters and
      shall
      afford Purchaser the opportunity to inspect and accept such Abatement Matters
      as
      provided in Section 6.9(d).

     

    

    
      
        
          
          

        

        
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    (d)           After
      receipt of notice of completion of the Abatement Matters, Purchaser shall have
      the right to enter upon Metro Tower upon one (1) Business Day prior notice
      to
      the Company and to inspect the Abatement Matters.  If the Company does
      not receive from Purchaser a written objection to the Company’s notice of
      completion prior to the close of business on the fifteenth (15th) Business
      Day
      following delivery thereof, Purchaser shall be deemed to have waived any
      objections to the Abatement Matters, the condition to closing set forth in
      Section 2.5(r) shall be deemed to have been satisfied and the Parties
      shall proceed to Closing as contemplated by this Agreement.  If
      Purchaser shall reasonably determine that the Abatement Matters have not been
      completed as described on Schedule 6.9(c), it shall deliver written
      notice of any objection it may have to the Company and the Sellers’
Representative prior to the close of business on the fifteenth (15th) Business
      Day
      following delivery by the Company of its notice of completion of the Abatement
      Matters.  Such notice shall detail with specificity any failure of the
      Abatement Matters to meet the requirements of Schedule 6.9(c), and the
      Company shall then either (i) resolve the matters described in Purchaser’s
      notice of objection and thereafter, recommence the process contemplated by
      the
      last sentence of Section 6.9(c) and this Section 6.9(d) or (ii)
      submit the matter or matters to binding arbitration by an engineer or engineers
      with subject matter expertise in the repairs that are the subject of Purchaser’s
      objection notice.  The arbitrator or arbitrators shall be mutually
      agreed upon by the Sellers’ Representative, the Company and Purchaser, or,
      failing such agreement shall be RBG Engineering.  If an arbitrator or
      arbitrators shall determine that the Abatement Matters, or any of them, have
      not
      been completed in the manner contemplated by Schedule 6.9(c), the Company
      shall promptly complete same and recommence the process contemplated in the
      last
      sentence of Section 6.9(c) and this Section 6.9(d), but shall, in
      the meantime, be solely responsible for the fees and expenses of any of the
      arbitrators making an adverse determination against the Sellers’ Representative
      and the Company.  Purchaser shall be responsible for the fees and
      expenses of any arbitrators concluding that notwithstanding a Purchaser
      objection, the repairs in question meet the requirements of Schedule
      6.9(c).  If all of the arbitrators shall determine that the
      repairs in their respective subject matter of expertise have been completed
      in
      accordance with Schedule 6.9(c), they shall so notify the Sellers’
representative, the Company and Purchaser.  Upon receipt of the notice
      contemplated in the preceding sentence, the condition to closing set forth
      in
Section 2.5(r) shall be deemed to have been satisfied and the Parties
      shall proceed to Closing as contemplated by this Agreement.

     

    6.10           Insurance.
      The Sellers covenant and agree to cause the Company to purchase such directors’
and officers’ liability tail coverage for a period of at least six years and
      shall pay for such tail coverage before Closing or, if the amount of such
      payment is included in the Transaction Expenses payable as provided in
Section 2.2(b)(i), at Closing.

     

    6.11           Levelland
      Segregated Account.  The Company covenants and agrees that
      any and all funds whatsoever spent. used or otherwise applied to expenditures
      related to or in connection with the Levelland Project will first be deposited
      into the Levelland Segregated Accounts.

     

     

    

    
      
        
          
          

        

        
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      ARTICLE
        VII

       

      REMEDIES
        FOR BREACHES OF THIS AGREEMENT.

       

      7.1           Termination
        Events.  This Agreement may, by written notice, be terminated
        prior to Closing as follows:

    (a)           by
      either Purchaser or Sellers’ Representative if a material breach of any
      provision of this Agreement has been committed by the other party and such
      breach has not been waived or cured or is not capable of being cured within
      20
      Business Days;

     

    (b)           (i)
      by Purchaser if any of the conditions in Section 2.5 has not been
      satisfied as of the Closing Date or if satisfaction of such a condition is
      or
      becomes impossible (other than through the failure of Purchaser to comply with
      its obligations under this Agreement) and Purchaser has not waived such
      condition on or before the Closing Date; or (ii) by the Sellers’ Representative,
      if any of the conditions in Section 2.6 has not been satisfied on or
      before the Closing Date or if satisfaction of such a condition is or becomes
      impossible (other than through the failure of Sellers to comply with their
      obligations under this Agreement) and Sellers have not waived such condition
      on
      or before the Closing Date;

     

    (c)           by
      mutual consent of Purchaser and Sellers’ Representative;

     

    (d)           by
      either Purchaser or Sellers’ Representative if the Closing has not occurred
      (other than through the failure of any party seeking to terminate this Agreement
      to comply fully with its obligations under this Agreement) on or before the
      Expiration Date, or such later date as the Parties may agree upon in
      writing;

     

    (e)           by
      Purchaser or Sellers’ Representative or the Company upon payment of the
      liquidated Damages set forth in Section 7.2; or

     

    (f)           by
      Purchaser as provided in Section 6.9(b).

     

    7.2           Effect
      of Termination.  If this Agreement is terminated pursuant to
Section 7.1, all further obligations of the Parties under this
      Agreement will terminate, except that the obligations in Sections 6.7 and
9.6 will survive; provided, however, that if this Agreement is
      terminated
      pursuant to Section 7.1(a), (b) or (e), the Parties
      agree that it would be difficult or impossible to establish the actual Damages
      of the termination and agree that the terminating Party with respect to
      termination under Section 7.1(a) or (b) or the
      nonterminating Party with respect to termination under Section
7.1(e) shall be entitled to liquidated Damages equal to one million
      dollars ($1,000,000.00) as its sole and exclusive remedy, unless the Purchaser
      is entitled to terminate this Agreement because of a breach of this Agreement
      by
      the Sellers or Company as provided in Section 7.1(a) or (b)
      or Sellers’ Representative or the Company terminate this Agreement pursuant to
Section 7.1(e) and there is entered into an agreement for a Sale
      of the Company (as defined in Section 6.5 hereof) within eighteen (18)
      months of the termination, then in such event the Purchaser shall be entitled
      to
      additional liquidated Damages, if any, equal to 5% of the cash purchase price
      paid, plus the fair market value of any securities delivered in respect of
      the
      purchase price (as determined by the Company’s Board of Directors in its
      reasonable discretion) less any liquidated Damages previously
      paid.  To the extent that any such subsequent transaction shall call
      for deferred payments, Purchaser shall, at the time of such payments, receive
      5%
      thereof as additional liquidated Damages.  Such liquidated damage
      amount is not a penalty but has been agreed upon as a reasonable substitution
      for actual indirect and consequential Damages due to the
      termination.  Notwithstanding the foregoing, Sellers shall not be
      obligated to pay nor shall any amounts become due under this Section 7.2
      resulting from a failure of the conditions set forth in Section 2.5(p) to
      occur or resulting from the exercise of Sellers’
      right to amend or supplement the Sellers’ Disclosure Schedules as set forth in
Section 6.4.  No liquidated Damages shall be due and payable by
      any Party upon a termination pursuant to Section 7.1(c), (d) or
(f).

     

    

    
      
        
          
          

        

        
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    7.3           Survival
      of Representations, Warranties and Covenants.  The
      representations and warranties of the Parties contained in Article III,
Article IV and in Article V and fraud shall survive the
      Closing and continue in full force and effect during the period ending on the
      second anniversary thereof (the “Survival
      Period”).  Notwithstanding the foregoing, with respect to
      matters covered by Section 5.12 (Tax Matters), the Survival Period shall
      continue in full force and effect during the period ending on the day after
      the
      applicable statute of limitations and, with respect to matters covered by
Section 3.1 (Organization of Seller), Section 3.2 (Authorization
      of Transaction), Section 3.4 (Non-contravention), Section 3.5
      (Company Shares) and Section 5.2 (Capitalization), the Survival Period
      shall continue in full force and effect indefinitely after the
      Closing.

     

    7.4           Indemnification
      Provisions for Purchaser’s Benefit.

     

    (a)           In
      the event a Seller breaches any of its representations, warranties, or covenants
      contained in this Agreement (after giving effect to any amendment or supplement
      to the Sellers’ Disclosure Schedules accepted by Purchaser pursuant to
Section 6.4), provided that Purchaser makes a written claim for
      indemnification against the Sellers pursuant to Section 7.6 within the
      applicable Survival Period, then such Seller shall indemnify Purchaser, each
      of
      its parents and Subsidiaries, and their respective officers, directors,
      shareholders, employees, agents and successors (the “Purchaser
      Indemnified Party”), from and against any Adverse Consequences such
      Purchaser Indemnified Party shall suffer caused by the breach; provided,
      however, that except for breaches of the Sellers’ respective representations and
      warranties set forth in Section 3.1, 3.2, 3.4 and 3.5, no Seller shall
      have any obligation hereunder to indemnify any Purchaser Indemnified Party
      from
      and against any Adverse Consequences in an amount exceeding such Seller’s
      Allocable Share of the then remaining Escrow Amount; provided further that
      no
      Seller shall be obligated to indemnify for Adverse Consequences pursuant to
      this
Section 7.4(a) arising from breaches of Section 3.1, 3.2, 3.4 and
      3.5 in excess of such Seller’s Allocable Share of the Purchase Price (after
      taking into account any other amounts payable by the Seller under this
Article VII).

     

    (b)           In
      the event that the Company breaches any of its representations, warranties
      or
      covenants contained in this Agreement (after giving effect to any amendment
      or
      supplement to the Sellers’ Disclosure Schedules accepted by Purchaser pursuant
      to Section 6.4 and without giving effect to materiality terms such as
“material,” “Material Adverse Change,” or “Material Adverse Effect”), provided
      that Purchaser makes a written claim for indemnification against the Sellers
      pursuant to Section 7.6 within the applicable Survival Period, then each
      Seller shall indemnify the Purchaser Indemnified Parties, severally and not
      jointly, from and against such Seller’s Allocable Share of any Adverse
      Consequences such Purchaser Indemnified Party shall suffer in excess of $250,000
      in the aggregate (the “Deductible”), caused by the breach;
      provided, however, that except for breaches of Section 5.2, Sellers shall
      not have any obligation hereunder to indemnify any Purchaser Indemnified Party
      from and against any Adverse Consequences in an amount exceeding the Seller’s
      Allocable Share of the then remaining Escrow Amount; provided further that
      the
      Deductible shall not apply to Adverse Consequences arising
      from breaches of Section 5.5 or Section 5.12; provided further
      that no Seller shall be obligated to indemnify for Adverse Consequences pursuant
      to this Section 7.4(b) arising from breaches of Section 5.2 in
      excess of such Seller’s Allocable Share of the Purchase Price (after taking into
      account any other amounts payable by the Seller under this Article
      VII).

     

    

    
      
        
          
          

        

        
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    (c)           In
      the event the Purchaser, in connection with its obligations under Section
      8.1, is required by a settlement of claim or judgment approved by the
      Sellers’ Representative or a final, non-appealable judgment of a court with
      jurisdiction over the matter to pay an amount in excess of the Non-Participating
      Shareholders Holdback, provided that Purchaser makes a written claim for
      indemnification against the Sellers pursuant to Section 7.6 within the
      applicable Survival Period, then each Seller shall indemnify the Purchaser
      Indemnified Parties, severally and not jointly, from and against such Seller’s
      Allocable Share of such excess plus any Damages directly related thereto;
      provided, however, that Sellers shall not have any obligation hereunder to
      indemnify any Purchaser Indemnified Party from and against any such excess
      in an
      amount exceeding the Seller’s Allocable Share of the then remaining Escrow
      Amount.

     

    7.5           Indemnification
      Provisions for Seller’s Benefit.

     

    (a)           In
      the event Purchaser breaches any of its representations, warranties, or
      covenants contained in this Agreement, and provided that any Seller Indemnified
      Party (defined below), as the case may be, makes a written claim for
      indemnification against Purchaser pursuant to Section 7.6 within the
      applicable Survival Period, then Purchaser shall indemnify the Sellers, and
      each
      of their respective parents and Subsidiaries, and their respective officers,
      directors, shareholders, employees, agents and successors (the “Seller
      Indemnified Party”) from and against the entirety of any Adverse
      Consequences such Seller Indemnified Party shall suffer caused by the breach;
      provided that in the event of breaches of Section 4.5 or 4.6, then
      the Seller’s remedies shall be limited to rescission of the sale of all of the
      shares of Xfone Common Stock received by such Seller at Closing pursuant to
      such
      Seller’s Xfone Subscription Agreement and the payment by Purchaser to such
      Seller of cash in the amount equal to what such Seller would have received
      had
      such Seller elected not to reinvest its Allocable Sale Price in Xfone Common
      Stock.

     

    (b)           Purchaser
      will indemnify, defend and hold harmless each Seller Indemnified Party, from
      and
      against any Adverse Consequences to the extent arising from or relating to
      the
      ownership of the Company or the conduct of its business or the business of
      its
      Subsidiaries at any time from and after the Closing, except to the extent that
      any such Seller Indemnified Party has indemnified Purchaser for such Adverse
      Consequence pursuant to Section 7.4.

     

     

    

    
      
        
          
          

        

        
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      7.6           Indemnification
        Procedures.

       

      (a)           Any
        Party that is or may be entitled to indemnification under this
Article VII (the “Indemnified Party”) will promptly
        after (i) the receipt of notice by an Indemnified Party of the commencement
        of
        any claim of Third Parties covered by this Article VII (a
“Third-Party Claim”) or (ii) the discovery by the Indemnified
        Party of the Liability, facts or circumstances giving rise to a claim for
        indemnification, the Indemnified Party shall notify in writing thereof (a
        “Claim Notice”) the Party who is or may be obligated to provide
        such indemnification
        (the “Indemnifying Party”) in writing of any matter that
        relates or may relate to a claim for indemnification under this Article
        VII.  Such Claim Notice shall include (x) a reasonable
        description of the basis for such claim (to the extent then known) and, to
        the
        extent then known, the amount (or estimate of the amount) of the Adverse
        Consequences for which indemnification is being claimed and (y) a reference
        to the Section or Article of this Agreement under which indemnification is
        being
        claimed.  The omission of any Indemnified Party to so notify the
        Indemnifying Party of any such action shall not relieve the Indemnifying
        Party
        from any Liability which it may have to such Indemnified Party under this
        Article VII unless, and only to the extent that, such omission
        results in the Indemnifying Party being actually prejudiced as a result
        thereof.

    

     

    (b)           If
      an Indemnifying Party disputes its Liability, in whole or in part, for any
      claim
      as set forth in a Claim Notice it shall, within fifteen (15) days of its receipt
      of the Claim Notice, deliver to the Indemnified Party a written statement
      setting forth in reasonable detail the basis for the dispute (the
“Dispute Statement”).  In the event an Indemnifying
      Party does not dispute a claim as set forth in a Claim Notice or only disputes
      a
      portion thereof, then the amount of the claim described in the Claim Notice,
      or
      the portion thereof not disputed with particularity in a Dispute Statement,
      shall be deemed to be admitted and any Adverse Consequences incurred by the
      Indemnified Party resulting therefrom (subject to the limitations on
      indemnification set forth in this Article VII) shall be due and payable
      from the then remaining Escrow Amount to the Indemnified Party by the
      Indemnifying Party.  In the event an Indemnifying Party delivers a
      timely Dispute Statement, then the Parties agree to use good faith efforts
      to
      resolve the matter within thirty (30) Business Days of the Dispute
      Statement.  The portion of the claim described in the Claim Notice
      that is disputed by the Indemnifying Party shall not be due and payable until
      the Parties resolve such matter or upon a final decision of a court of competent
      jurisdiction or a written agreement by the Parties.

     

    (c)           The
      Indemnifying Party may contest and defend in good faith a Third-Party Claim,
      provided such contest is made without cost or prejudice to the Indemnified
      Party, and provided that within fifteen (15) days after the Indemnifying Party’s
      receipt of the Claim Notice (or sooner if required to avoid prejudicing the
      rights of the Indemnified Party), the Indemnifying Party notifies the
      Indemnified Party of its desire to defend and contest such claim.  The
      Indemnified Party will reasonably cooperate with the Indemnifying Party in
      its
      investigation and response to any Third-Party Claim.  If the
      Indemnifying Party does not so notify the Indemnified Party of its desire to
      contest and defend the Third-Party Claim, (a) it will nonetheless be
      entitled to participate in any proceeding regarding a Third-Party Claim for
      which the Indemnifying Party may have indemnification obligations hereunder,
      and
      (b) the Indemnifying Party will reimburse the Indemnified Party on demand for
      any payment actually made by the Indemnified Party at any time after the Closing
      with respect to any Adverse Consequences to which the obligation of indemnity
      relates (subject to the limitations on indemnification set forth in this
Article VII).

     

    (d)           Notwithstanding
      the provisions set forth in Section 7.6(a), the Indemnified Party shall
      have the right to retain its own counsel and the Indemnifying Party will remain
      responsible for any Adverse Consequences (including the payment of the
      Indemnified Party’s reasonable attorneys’ fees and expenses) that the
      Indemnified Party may incur to the fullest extent provided in this Article
      VII, if (i) the Indemnifying Party does not actively and diligently defend
      the Third-Party Claim, or (ii) the Indemnified Party’s counsel shall have
      advised the Indemnified Party in writing, with a copy to the Indemnifying Party,
      that there is a conflict of interest that could make it inappropriate under
      applicable standards of professional conduct to have common counsel or that
      there are one or more legal or equitable defenses available to the Indemnified
      Party that are different from or in addition to those available to the
      Indemnifying Party.

     

    

    
      
        
          
          

        

        
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    7.7           Other
      Indemnification Provisions.

     

    (a)           All
      indemnification payments actually made by or on behalf of the Parties under
      this
Article VII will be deemed to be adjustments to the Purchase
      Price.  The Parties acknowledge and agree that a Party making any
      indemnification payment under this Article VII shall be entitled to
      file an amendment to its Tax Returns to reflect such adjustments to the Purchase
      Price.

     

    (b)           Each
      Seller hereby agrees that it will not make any claim for indemnification against
      the Company or its Subsidiaries by reason of the fact it was a holder of an
      Equity Interest, directly or indirectly, of the Company (whether such claim
      is
      for judgments, Damages, penalties, fines, costs, amounts paid in settlement,
      losses, expenses, or otherwise and whether such claim is pursuant to any
      statute, Organizational Document, Contract, or otherwise) with respect to any
      action, suit, proceeding, complaint, claim, or demand brought by Purchaser
      against Seller (whether such action, suit, proceeding, complaint, claim, or
      demand is pursuant to this Agreement, applicable law, or
      otherwise).

     

    (c)           The
      amount of any Adverse Consequence for which indemnification is provided under
      this Article VII shall be net of (i) any amounts actually recovered by
      the Indemnified Party, under insurance policies in effect and applicable to
      such
      Adverse Consequence; (ii) Tax benefits to an Indemnified Party and (iii) any
      amounts actually recovered by the Indemnified Party pursuant to any
      indemnification by or indemnification agreement with any Third
      Party.

     

    (d)           No
      Party shall be entitled to indemnification under this Article VII with
      respect to any Adverse Consequence that is attributable to any fraud, gross
      negligence or willful misconduct by such Party or any of its
      Affiliates.

     

    (e)           The
      indemnities herein are intended solely for the benefit of the Persons expressly
      identified in this Article VII (and their permitted successors and
      assigns) and are in no way intended to, nor shall they, constitute an agreement
      for the benefit of, or be enforceable by, any other Person.

     

    (f)           THE
      PARTIES EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO RECOVER PUNITIVE, EXEMPLARY,
      SPECIAL, CONSEQUENTIAL OR SIMILAR DAMAGES IN ANY ACTION ARISING OUT OF OR
      RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY;
PROVIDED, HOWEVER, THAT THIS SECTION 7.7(i) SHALL NOT LIMIT
      A PARTY’S RIGHT TO RECOVERY UNDER ARTICLE VII FOR ANY SUCH DAMAGES TO THE
      EXTENT SUCH PARTY IS REQUIRED TO PAY SUCH DAMAGES TO A THIRD PARTY IN CONNECTION
      WITH A MATTER
      FOR WHICH SUCH PARTY IS OTHERWISE ENTITLED TO INDEMNIFICATION UNDER ARTICLE
      VII.

     

    

    
      
        
          
          

        

        
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    7.8           Exclusive
      Remedy; Escrow.

     

    (a)           IN
      THE ABSENCE OF FRAUD, EXCEPT AS PROVIDED IN SECTION 7.1 and 7.2,
      THE RIGHT OF THE PARTIES TO ASSERT INDEMNIFICATION CLAIMS AND RECEIVE INDEMNITY
      PAYMENTS UNDER THIS ARTICLE VII IS THE SOLE AND EXCLUSIVE RIGHT AND
      REMEDY EXERCISABLE BY THE PARTIES WITH RESPECT TO ANY LOSSES ARISING OUT OF
      ANY
      BREACH BY ANY PARTY OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT
      OF
      SUCH PARTY SET FORTH IN THIS AGREEMENT OR OTHERWISE RELATING TO THE CONTEMPLATED
      TRANSACTIONS.  NO PARTY WILL HAVE ANY OTHER REMEDY (STATUTORY,
      EQUITABLE, COMMON LAW OR OTHERWISE) AGAINST ANY OTHER PARTY WITH RESPECT TO
      SUCH
      MATTERS, AND ALL SUCH OTHER REMEDIES ARE HEREBY WAIVED.  THE PARTIES
      RECOGNIZE AND AGREE THAT THE INDEMNITIES CONTAINED IN THIS ARTICLE VII
      MAY HAVE THE EFFECT OF INDEMNIFYING A PARTY FOR ITS OWN NEGLIGENCE OR GROSS
      NEGLIGENCE.

     

    (b)           As
      security for the Sellers’ obligations, if any, under Section 2.2(d) and
(e) and this Article VII, the Sellers agree that an amount equal
      to fifteen percent (15%) of the Purchase Price (which for these purposes shall
      be no less than Forty Two Million and No/100 Dollars ($42,000,000.00) (i.e.
      15%
      of the cash for those Sellers receiving cash only and 15% of the cash and Xfone
      Common Stock for the Sellers who have elected to reinvest a portion of their
      Allocable Sale Price in Xfone Common Stock) shall be deposited with the Escrow
      Agent and held pursuant to the Escrow Agreement as provide in Section
      2.2(b)(ii).  It is understood and agreed that any Xfone Common
      Stock deposited with the Escrow Agent by any Seller shall be issued and
      outstanding on the books of Purchaser, and such Seller shall be the owner
      thereof and retain all rights commensurate with the ownership of common stock,
      including, without limitation, the right to dividends and the right to vote
      such
      shares, but such shares shall be registered in the Escrow Agent’s name until the
      Escrow Agreement is terminated.

     

    (c)           The
      Parties hereby acknowledge and agree that except with respect to breaches of
      Section 3.1, 3.2, 3.4, 3.5 and 5.2, the then remaining portion of the
      Escrow Amount shall be the sole and exclusive source of recovery for any of
      Sellers’ obligations under Section 2.2(d) and (e) and this
Article VII.  For purposes of satisfying Sellers’ obligations
      under Section 2.2(d) and (e) and this Article VII, any
      shares of Xfone Common Stock constituting a portion of the Escrow Amount that
      are withdrawn by a Purchaser Indemnified Party shall be valued at the same
      price
      as they were valued at as of the Closing Date.  The Escrow Amount
      shall be governed by the terms of this Agreement and the Escrow
      Agreement.

     

    (d)           Each
      Seller shall only be responsible for such Seller’s Allocable Share of any
      amounts due to Purchaser under Section 2.2(d) and (e) or due to
      any Purchaser Indemnified Party as provided in this Article VII
      (“Seller’s Pro-Rata Portion”).  For any Seller who
      has deposited cash and Xfone Common Stock, such Seller’s Pro-Rata Portion shall
      be satisfied from the cash and Xfone Common Stock in the same proportions as
      the
      cash or Xfone Common Stock deposited in the Escrow Amount on the Closing Date
      for such Seller.

     

    

    
      
        
          
          

        

        
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    Article
      VIII

     

    POST-CLOSING
      COVENANTS & OTHER
      AGREEMENTS

     

     

    8.1           Non-Participating
      Shareholders.  In the event that the Purchaser is unable to
      acquire all of the outstanding Equity Interests of the Company at Closing
      pursuant to this Agreement, Purchaser covenants and agrees that it shall within
      one hundred and eighty (180) days of the Closing Date effectuate a merger,
      combination or other legally permissible transaction to acquire the balance
      of
      any such outstanding Equity Interests in the Company held by any Third Party
      (a
“Non-Participating Shareholder”) in accordance with all
      applicable Legal Requirements.  Purchaser covenants and agrees that
      the purchase price consideration for all such Equity Interests held by such
      Non-Participating Shareholder shall be in cash, and shall be equal in amount
      to
      what otherwise would have been the sum of such Equity Interest holder’s
      Allocable Sale Price up to an amount, in the aggregate, equal to the
      Non-Participating Shareholders Holdback.

     

    8.2           Indemnification.  After
      the Closing, Purchaser will not take, and will cause the Company and its
      Subsidiaries not to take, any action to alter, reduce, impair or otherwise
      diminish or that would otherwise breach, violate, contravene, conflict with,
      result in a breach of, or constitute a default under (i) any exculpatory or
      indemnification provisions now existing in the Organizational Documents of
      the
      Company and its Subsidiaries for the benefit of any individual who served as
      a
      director or officer of the Company and/or its Subsidiaries at any time prior
      to
      the Closing or (ii) any provision of the directors’ and officers’ liability tail
      coverage purchased by the Company as provided in Section
      6.10.

     

    8.3           Employee
      Benefits.  Purchaser covenants and agrees that for a period
      of at least one (1) year after the Closing that Purchaser shall cause the
      Company to provide the Company’s employees with medical, dental and other health
      insurance and benefits that are no less favorable in coverage, costs, amounts
      and participation rights than in effect immediately prior to the
      Closing.

     

    8.4           Further
      Assurances.  In case at any time after the Closing any
      further actions are necessary to carry out the purposes of any of the
      Contemplated Transactions, each of the Parties will take such further actions
      (including the execution and delivery of such further instruments and documents)
      as any other Party may reasonably request (unless the requesting Party is
      entitled to indemnification therefor under
Article VII).

     

    8.5           Third
      Party Beneficiaries.  The Non-Participating Shareholders and
      the officers and directors of the Company and its Subsidiaries and each of
      the
      Seller Indemnified Parties shall be third party beneficiaries of Articles
      VII and Article VIII to the extent of the obligations of the
      Purchaser or any Indemnifying Party thereunder.  The Company Releasees
      and the Seller Releasees shall be third party beneficiaries of Section
      8.7(a) and Section 8.7(b) respectively.  Jackson Walker
      L.L.P. is a third party beneficiary of Section 3.10.

     

     

    

    
      
        
          
          

        

        
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      8.6           Metro
        Tower Disclaimer.

       

      (a)           Purchaser
        acknowledges that agents and representatives of Purchaser inspected and examined
        the Metro Tower to the extent deemed necessary by Purchaser in order to
        enable
        Purchaser to evaluate its condition and Purchaser and its agents and
        representatives are qualified to make such inspection.

    

     

    (b)           PURCHASER
      HEREBY AGREES THAT THE METRO TOWER SHALL BE ACQUIRED BY PURCHASER IN AN “AS-IS,
      WHERE IS” CONDITION, WITH ALL FAULTS, AND WITHOUT REPRESENTATIONS AND WARRANTIES
      OF ANY KIND (EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW) OTHER THAN
      AS
      SET FORTH IN SECTION 5.13.  NOTWITHSTANDING ANYTHING IN THIS
      AGREEMENT, SELLERS HAVE NOT MADE, AND EXPRESSLY AND SPECIFICALLY DISCLAIM,
      AND
      PURCHASER ACCEPTS THAT SELLERS HAVE DISCLAIMED, ANY REPRESENTATIONS, GUARANTIES
      OR WARRANTIES OF OR RELATING TO THE METRO TOWER OTHER THAN AS SET FORTH IN
      SECTION 5.13, INCLUDING WITHOUT LIMITATION, OF OR RELATING TO: (A) THE
      USE, INCOME, POTENTIAL EXPENSES, MAINTENANCE, OPERATION, CHARACTERISTICS OR
      CONDITION OF THE METRO TOWER OR ANY PORTION THEREOF, INCLUDING WITHOUT
      LIMITATION, WARRANTIES OF SUITABILITY, MERCHANTABILITY, DESIGN OR FITNESS FOR
      ANY SPECIFIC PURPOSE OR A PARTICULAR PURPOSE, OR GOOD AND WORKMANLIKE
      CONSTRUCTION, OR (B) THE NATURE, MANNER, CONSTRUCTION, CONDITION, STATE OF
      REPAIR, OR LACK OF REPAIR OF THE EQUIPMENT, WHETHER OR NOT OBVIOUS, VISIBLE
      OR
      APPARENT.

     

    (c)           Other
      than with respect to the matters set forth in Section 5.13 or in the
      event that the Company intentionally fails to disclose a matter of which the
      Company or Sellers were actually aware as required by Section 6.9,
      Purchaser hereby expressly assumes all risks, liabilities, damages and costs
      (and agrees that Sellers shall not be liable for any special, direct, indirect,
      consequential, or other damages) that result or arise from or relate to the
      ownership, use, condition, location, maintenance, repair or operation of the
      Metro Tower after Closing.  Purchaser acknowledges that any condition
      of the Metro Tower that Purchaser discovers or desires to correct or improve
      shall be at Purchaser’s sole expense.

     

    8.7           Releases.

     

    (a)           Each
      Seller hereby severally releases and forever discharges the Company, and each
      of
      its officers, directors, shareholders, employees and their successors and
      assigns (collectively, “Company Releasees”) of and from any and
      all claims, causes or rights of action, demands and damages of every kind and
      nature which such Seller may now have, whether known or unknown, anticipated
      or
      unanticipated and whether accrued or hereafter to accrue, against Company
      Releasees, caused by or arising out of or in any way related to the
      following:  (i) the business, affairs, actions or omissions of
      the Company and/or the officers or directors or any other employee or
      independent contractor of the Company through the date of Closing; and
      (ii) such Seller’s direct or beneficial ownership or interests in the
      Company.  Each Seller will forever refrain and desist from, either
      directly or indirectly, instituting, prosecuting, or asserting against Company
      Releasees, or any of them, any further claim, demand, action, cause of action
      or
      suit of any kind or nature on account of matters hereby
      released.  Notwithstanding anything in this Section 8.7(a) to
      the contrary, nothing contained in this Section 8.7(a) will operate to
      release, releave or otherwise limit (x) the rights of such Seller, whether
      by contract, at law, in equity or otherwise, in any capacity other than as
      a
      shareholder of the Company and (y) any obligations of Purchaser
      arising under this Agreement, including, without limitation, Article
      VII.  This release is conditioned on consummation of the
      Closing.

     

    

    
      
        
          
          

        

        
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    (b)           The
      Company releases and forever discharges each Seller and each of its officers,
      directors, employees and their successors and assigns (collectively,
“Seller Releasees”) of and from any and all claims, causes or
      rights of action, demands and damages of every kind and nature which the Company
      may now have, whether known or unknown, anticipated or unanticipated and whether
      accrued or hereafter to accrue, against the Seller Releasees, caused by or
      arising out of or in any way related to the following:  (i) the
      business, affairs, actions or omissions of the Company and/or the officers
      or
      directors or  any other employee or independent contractor of the Company
      through the date of Closing; and (ii) such Seller’s direct or beneficial
      ownership or interests in the Company.  The Company will forever
      refrain and desist from, either directly or indirectly, instituting,
      prosecuting, or asserting against Seller Releasees, or any of them, any further
      claim, demand, action, cause of action or suit of any kind or nature on account
      of matters hereby released.  Notwithstanding anything in this
Section 8.7(b) to the contrary, nothing contained in this Section
      8.7(b) will operate to release, releave or otherwise limit (x) the
      obligations of such Seller, whether by contract, at law, in equity or otherwise,
      in any capacity other than as a shareholder of the Company and (y) any
      obligations of such Seller arising under this Agreement, including, without
      limitation, Article VII.  This release is conditioned on
      consummation of the Closing..

     

    ARTICLE
      IX

     

    MISCELLANEOUS.

     

    9.1           No
      Third-Party Beneficiaries.  Except as specifically provided
      herein, this Agreement shall not confer any rights or remedies upon any Person
      other than the Parties and their respective successors and permitted
      assigns.

     

    9.2           Succession
      and Assignment.  This Agreement shall be binding upon and
      inure to the benefit of the Parties named herein and their respective successors
      and permitted assigns.  No Party may assign either this Agreement or
      any of its rights, interests, or obligations hereunder without the prior written
      approval of the other Parties hereto.

     

    9.3           Notices.  Any
      notice or claim given or made pursuant to or with respect to this Agreement
      shall be in writing and shall be deemed to have been properly given for all
      purposes (i) if sent by a nationally recognized overnight carrier for next
      Business Day delivery, on the first Business Day following deposit of such
      notice with such carrier unless such carrier confirms such notice was not
      delivered, then on the day such carrier actually delivers such notice, or (ii)
      if personally delivered, on the actual date of delivery, or (iii) if sent by
      certified U.S. Mail, return receipt requested postage prepaid, on the fifth
      Business Day following the date of mailing, or (iv) if sent by facsimile,
      then on the actual date of delivery (as evidenced by a facsimile confirmation);
      provided, that a copy of the facsimile and confirmation is also sent by regular
      U.S. Mail, addressed as follows:

     

    

    
      
        
          
          

        

        
          -57-

          
            

          

        

        
          
          

        

      

    

    

    If
      to
      Purchaser:                                

     

    
      	 	 	Xfone,
              Inc.

      	 	 	Britannia
              House

      	 	 	960
              High Road

      	 	 	London,
              N129RY

      	 	 	United
              Kingdom

      	
               

            	
              Attention:

            	
              Guy
                Nissenson

            

    

    
      	
               

            	
              Telephone:

            	
              +44
                208-446-9494

            

    

    
      	
               

            	
              Facsimile:

            	
              +44
                208-446-7010

            

      	 	
              Email:

            	
              guy@Xfone.com

            

    

     

    and

     

    
      	 	 	Xfone
              USA, Inc.

      	 	 	2506
              Lakeland Drive, Suite 100

      	 	 	Flowood,
              MS  39232

      	 	Attention:  	Wade
              Spooner

      	
               

            	
              Telephone:

            	
              (601)
                664-1108

            

    

    
      	
               

            	
              Facsimile:

            	
              (601)
                664-1190

            

    

    
      	
               

            	
              Email:

            	
              wspooner@expetel.com

            

    

     

    with
      a mandatory

    copy
      to:                               

     

    
      
        	 	 	The
                Oberon Securities, LLC

        	 	 	79
                Madison Ave., 6th
                Floor

        	 	 	New
                York, NY 10016

        	 	Attention:  	Adam
                Breslawsky

        	
                 

              	
                Telephone:

              	
                212-386-7052

              

      

      
        	
                 

              	
                Facsimile:

              	
                212-447-7212

              

      

      
        	
                 

              	
                Email:

              	
                adam@oberonsecurities.com

              

      

                                

    

     

    and:

     

    
      
        
          	 	 	Watkins
                  Ludlam Winter & Stennis, P.A.

          	 	 	633
                  North State Street (39202)

          	 	 	P.
                  O. Box 427

          	 	 	Jackson,
                  MS 39205-0427

          	 	Attention:  	Gina
                  M. Jacobs

          	
                   

                	
                  Telephone:

                	
                  
                    601-949-4705

                  

                

        

        
          	
                   

                	
                  Facsimile:

                	
                  601-949-4804

                

        

        
          	
                   

                	
                  Email:

                	
                  
                    gjacobs@watkinsludlam.com

                  

                

        

                                  

      

    

    

    If
      to the
      Company:                

     

    
      
        
          
            	 	 	NTS
                    Communications Inc.

            	 	 	5307
                    W. Loop 289, Suite 200

            	 	 	Lubbock,
                    Texas  79414

            	 	Attention:  	Chief
                    Executive Officer

            	
                     

                  	
                    
                      Facsimile:

                    

                  	
                    
                      806-788-3398

                    

                  

          

          

            
              
                
                

              

              
                -58-

                
                  

                

              

              
                
                

              

            

        

      

    

    with
      a
      mandatory

     

    
      	
               

            	
              copy
                to:

            	
              Jackson
                Walker L.L.P.

            

    

     
      901 Main Street, Suit 6000

     
      Dallas, Texas  75202

     
      Fax No.:  (214) 953-5822

     
      Attention:  Jeffrey M. Sone

     

    If
      to the
      Seller:                     To
      the Seller at the address set forth

    on
      the Signature Page
      hereto.

    

    Any
      Party
      may change the address to which notices, requests, demands, claims, and other
      communications hereunder are to be delivered by giving the other Parties notice
      in the manner herein set forth.

     

    9.4           Amendments
      and Waivers.  No amendment of any provision of this Agreement
      shall be valid unless the same shall be in writing and signed by all of the
      Parties hereto.  No waiver by any Party of any provision of this
      Agreement or any default, misrepresentation, or breach of warranty or covenant
      hereunder, whether intentional or not, shall be valid unless the same shall
      be
      in writing and signed by the Party making such waiver nor shall such waiver
      be
      deemed to extend to any prior or subsequent default, misrepresentation, or
      breach of warranty or covenant hereunder or affect in any way any rights arising
      by virtue of any prior or subsequent such default, misrepresentation, or breach
      of warranty or covenant.

     

    9.5           Severability.  If
      any provision of this Agreement is held to be illegal, invalid or unenforceable
      under present or future laws, such provision shall be fully severable and this
      Agreement shall be construed and enforced as if such illegal, invalid or
      unenforceable provision never comprised a part hereof; and the remaining
      provisions hereof shall remain in full force and effect and shall not be
      affected by the illegal, invalid or unenforceable provision or by its severance
      herefrom.  Furthermore, in lieu of such illegal, invalid or
      unenforceable provision, there shall be added automatically as part of this
      Agreement a provision as similar in its terms to such illegal, invalid or
      unenforceable provision as may be possible and be legal, valid and
      enforceable.

     

    9.6           Expenses.  Except
      as otherwise provided in this Agreement, Purchaser, Sellers, the Company and
      each Affiliate thereof shall bear its own costs and expenses (including legal
      fees and expenses) incurred in connection with this Agreement and the
      Contemplated Transactions.

     

    9.7           Construction.  The
      Parties have participated jointly in the negotiation and drafting of this
      Agreement.  In the event an ambiguity or question of intent or
      interpretation arises, this Agreement shall be construed as if drafted jointly
      by the Parties and no presumption or burden of proof shall arise favoring or
      disfavoring any Party by virtue of the authorship of any of the provisions
      of
      this Agreement.  The Parties intend that each representation,
      warranty, and covenant contained herein shall have independent
      significance.

     

    

    
      
        
          
          

        

        
          -59-

          
            

          

        

        
          
          

        

      

    

    

    9.8           CONSULTATION
      WITH INDEPENDENT COUNSEL.  EACH SELLER ACKNOWLEDGES THAT THIS
      AGREEMENT CONTAINS LEGALLY BINDING PROVISIONS AND THAT NEITHER THE COMPANY
      NOR
      THE PURCHASER HAVE ENGAGED ANY COUNSEL TO PROVIDE LEGAL SERVICES FOR SELLER’S
      BENEFIT IN CONNECTION WITH THE NEGOTIATION AND EXECUTION OF THIS
      AGREEMENT.  EACH SELLER SIGNING THIS AGREEMENT REPRESENTS TO THE
      COMPANY AND THE PURCHASER THAT IT HAS CONSULTED, OR HAS HAD AN OPPORTUNITY
      TO
      CONSULT, WITH COUNSEL (SEPARATE FROM THE COMPANY’S COUNSEL AND PURCHASER’S
      COUNSEL) IN NEGOTIATING AND EXECUTING THIS AGREEMENT AND THAT IT HAS EITHER
      CONSULTED WITH ITS OWN COUNSEL OR CONSCIOUSLY DECIDED NOT TO CONSULT WITH ITS
      OWN COUNSEL.

     

    9.9           Governing
      Law; Choice of Forum.  This Agreement shall be construed in
      accordance with and governed by the internal law of the State of Mississippi
      (without reference to its rules and to conflict of laws).  Each Party
      hereby irrevocably waives any right that such Party otherwise might have to
      transfer such action or proceeding (or any claims within such action or
      proceeding) to any court other than the court selected by the Parties in
      accordance with Section 9.10.  The Parties hereby consent
      to and grant to any such court jurisdiction over the Persons of such Parties
      and
      over the subject matter of any such dispute and agree that delivery or mailing
      of any process or other papers in the manner provided herein, or in such other
      manner as may be permitted by law, shall be valid and sufficient service
      thereof.

     

    9.10           Consent
      to Jurisdiction; Venue.

     

    (a)           The
      Parties hereto submit to the personal jurisdiction of the courts of the States
      of Texas or Mississippi and the Federal courts of the United States sitting
      in
      Lubbock County, Texas, or Hinds County, Mississippi, and any appellate court
      from any such state or Federal court, and hereby irrevocably and unconditionally
      agree that all claims, actions and proceedings arising out of or relating to
      this Agreement may be heard and determined in such courts or, to the extent
      permitted by law, in such Federal court.  The Parties hereto agree
      that a final nonappealable judgment in any such claim, action or proceeding
      shall be conclusive and may be enforced in any other jurisdiction by suit on
      the
      judgment or in any other manner provided by law.

     

    (b)           Each
      of the Parties hereto irrevocably and unconditionally waives, to the fullest
      extent it may legally and effectively do so, any objection which it may now
      or
      hereafter have to the laying of venue of any suit, action or proceeding arising
      out of or relating to this Agreement or any related matter in any Texas or
      Mississippi state or Federal court located in Dallas or Lubbock County, Texas,
      or Hinds or Rankin County, Mississippi, and the defense of an inconvenient
      forum
      to the maintenance of such claim in any such court.

     

    

    
      
        
          
          

        

        
          -60-

          
            

          

        

        
          
          

        

      

    

    

    
      9.11           Incorporation
        of Annexes, and Schedules.  The Annexes, and Schedules
        referred to or identified in this Agreement are incorporated herein by reference
        and made a part hereof.

       

      9.12           Entire
        Agreement.  This
        Agreement (including the Schedules of even date herewith and the other documents
        referred to herein) constitutes the entire agreement between the Parties
        and
        supersedes any prior understandings, agreements, or representations by or
        between the Parties, written or oral, to the extent they relate in any way
        to
        the subject matter hereof.

    

     

    9.13           Counterparts.  This
      Agreement may be executed in multiple counterparts, each of which shall be
      deemed an original and all of which together shall constitute one and the same
      instrument.  Facsimile signatures shall be given the same effect as
      original signatures.

     

    [Remainder
      of Page Intentionally Left Blank]

    

    

    
      
        
          
          

        

        
          -61-

          
            

          

        

        
          
          

        

      

    

    

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

     

    PURCHASER:

     

    XFONE,
      INC.

     

    By: 
      /s/ Guy
      Nissenson                                                               

    Printed
      Name:  Guy
      Nissenson                                                                 

    Title:  President
      and
      CEO                                                                     

     

    COMPANY:

     

    NTS
      COMMUNICATIONS, INC.

     

    By: /s/
      Barbara
      Baldwin                                                            

    Printed
      Name:  Barbara
      Baldwin                                                               

    Title: 
      President and
      CEO                                                                         

     

    

    
      
        
          
          

        

        
          -62-

          
            

          

        

        
          
          

        

      

    

    

      
        	
                SELLERS:  

              
	 	 	 
	
                Address:

              	 	
                TELEPHONE
                  ELECTRONICS CORPORATION

              
	 	 	 
	 	 	
                By:
                  /s/ Joseph D. Fail

              
	 	 	
                Printed
                  Name: Joseph D. Fail

              
	
                Attention:

              	 	
                Title:
                  President

              
	
                Facsimile:

              	 	 
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	 /s/
                Barbara
                Baldwin
	 	 	
                Barbara
                  A. Baldwin

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	 
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	 
	 	 	
                Kevin
                  E. Buxkemper

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	 
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	/s/
                David
                W. Cleveland
	 	 	
                David
                  W. Cleveland

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	 
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	/s/
                Jerry
                E. Hoover
	 	 	
                Jerry
                  E. Hoover

              
	 	 	 
	
                Attention:

              	 	/s/
                Martha
                S. Hoover
	
                Facsimile:

              	 	
                Martha
                  S. Hoover

              
	 	 	 

      

      

      
        
          
          

        

        
          -63-

          
            

          

        

        
          
          

        

      

      
        	
                Address:

              	 	 
	 	 	/s/
                Brad
                Worthington
	 	 	
                Brad
                  Worthington

              
	 	 	 
	
                Attention:

              	 	/s/
                Tracy
                Worthington
	
                Facsimile:

              	 	
                Tracy
                  Worthington

              
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	
                DAVID
                  FATE MOORE TRUST

              
	 	 	 
	 	 	
                By:  /s/
                  Barbara
                  Baldwin

              
	 	 	
                Printed
                  Name: Barbara
                  Baldwin

              
	
                Attention:

              	 	
                Title:
                  Trustee

              
	
                Facsimile:

              	 	 
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	
                SHAWN
                  TROY WALLACE TRUST

              
	 	 	 
	 	 	
                
                  By:  /s/
                    Barbara
                    Baldwin

                

              
	 	 	
                
                  Printed
                    Name: Barbara
                    Baldwin

                

              
	
                Attention:

              	 	
                
                  Title:
                    Trustee

                

              
	
                Facsimile:

              	 	 
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	 
	 	 	
                Dawn
                  Lin Ambrose

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	 
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	 
	 	 	
                Joyce
                  Craft

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	 
	 	 	 

      

      

      
        
          
          

        

        
          -64-

          
            

          

        

        
          
          

        

      

      
        	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	 
	 	 	
                Richard
                  A. Crosswhite

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	
                Sandra
                  V. Crosswhite

              
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	 
	 	 	
                Larry
                  J. Elliott

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	
                Mary
                  C. Elliott

              
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	 
	 	 	
                Frank
                  R. Farrar

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	
                Polly
                  C. Farrar

              
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	 
	 	 	
                Nelson
                  Fox

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	
                Deborah
                  C. Fox

              
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	 
	 	 	
                Jean
                  C. Jones

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	 

      

      

      
        
          
          

        

        
          -65-

          
            

          

        

        
          
          

        

      

      
        	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	 
	 	 	 
	 	 	
                Don
                  McLeod

              
	 	 	 
	
                Attention:

              	 	 
	
                Facsimile:

              	 	
                Ethel
                  McLeod

              
	 	 	 
	 	 	 
	 	 	 
	
                Address:

              	 	
                DRY
                  CREEK CATTLE COMPANY, LTD.

              
	 	 	 
	 	 	
                By:

              
	 	 	
                Printed
                  Name:

              
	
                Attention:

              	 	
                Title:

              
	
                Facsimile:

              	 	 
	 	 	 

      

      
        
          
          

        

        
          -66-

          
            

          

        

        
          
          

        

      

    

     

     EXHIBITS
      

     

     

    
      

    

    

    Exhibit
      A

    

    RELEASE

     

    This
      Release (this “Release”) is entered into by the undersigned officers of the
      Company (as defined herein) (the “Officers”), effective as of the _____ day of
      _______________ 200__ in connection with the Contemplated Transactions under
      the
      terms and provisions of that certain Stock Purchase Agreement dated August
      ____,
      2007 (the “Stock Purchase Agreement”) by and among NTS Communications, Inc., a
      Texas corporation (the “Company”), XFone, Inc., a Nevada corporation (the
“Purchaser”), and the Shareholders of the Company identified on the signature
      page of the Stock Purchase Agreement.  Capitalized terms not expressly
      defined in this Release shall have the meanings ascribed to them in the Stock
      Purchase Agreement.

     

    WHEREAS,
      execution of this Release by each of the Officers is a condition precedent
      to
      the Closing of the Stock Purchase Agreement and as such is a material inducement
      to the Purchaser in order for it to enter into the Stock Purchase Agreement;
      and

     

    WHEREAS,
      the Purchaser would not have closed the Stock Purchase Agreement (the “Closing”)
      without the execution of this Release by each and everyone of the undersigned
      Officers; and

     

    WHEREAS,
      each Officer has agreed to execute this Release.

     

    NOW,
      THEREFORE, as additional consideration for the Stock Purchase Agreement and
      the
      covenants, representations, agreements and undertakings contained herein and
      other good and valuable consideration, the receipt and sufficiency of all of
      which is hereby acknowledged and intending to be legally bound, the undersigned
      parties do hereby severally agree as follows:

     

    1.           Recitals.  Each
      of the above referenced recitals is true and correct and incorporated into
      this
      Release by this reference.

     

    2.           Release
      by Each Officer.  Each Officer hereby severally releases and
      forever discharges the Company, the Purchaser and each of their respective
      officers, directors, shareholders, employees and their successors and assigns
      (collectively, “Releasees”) of and from any and all claims, causes or rights of
      action, demands and damages of every kind and nature which such Officer may
      now
      have, whether known or unknown, anticipated or unanticipated and whether accrued
      or hereafter to accrue, against Releasees, caused by or arising out of or in
      any
      way related to the following:  (i) the business, affairs, actions
      or omissions of the Company and/or the officers or directors or any other
      employee or independent contractor of the Company through the date of Closing;
      and (ii) any amounts due from the Company to such Officer for serving as an
      officer, director or employee of the Company through the date of Closing
      including any bonuses due to such Officer arising from the consummation of
      the
      Contemplated Transactions under the Stock Purchase Agreement, other than base
      salary and benefits for the pay period ending immediately after the Effective
      Date and the reimbursement of reimbursable business expenses for the pay period
      ending immediately after the Effective Date.  Notwithstanding anything
      in this Release to the contrary, nothing contained in this Release will operate
      to release, relieve or otherwise limit the rights of such Officer to (a) file
      claims with and otherwise
      pursue recovery under the Company’s director’s and officer’s liability insurance
      or require indemnification and reimbursement from the Company for acts taken
      in
      their capacity as an Officer of the Company as specifically allowed under the
      articles of incorporation and bylaws of the Company, each as amended and/or
      restated and in force at the date of closing under the Stock Purchase Agreement
      or (b) any obligations of the Purchaser arising under the Stock Purchase
      Agreement, including, without limitation, Article VII and Section 8.2 of the
      Stock Purchase Agreement or (c) any obligations of the Company to such Officer
      arising under the Employment Agreement with such Officer executed as of the
      Closing Date or (d) file claims or seek reimbursement or recovery for
      reimbursable business expenses or under any Employee Benefit Plan in which
      such
      Officer participates.

     

    

    
      
        
          
          

        

        
          -67-

          
            

          

        

        
          
          

        

      

    

    

     

    3.           Compromise.  Each
      Officer agrees that this Release is a compromise of doubtful and disputed claims
      through the date of Closing, and that the consideration recited herein is not
      to
      be construed as an admission of any liability whatsoever by Releasees and that
      Releasees expressly deny any such liability.

     

    4.           Scope
      of Release.  Each Officer agrees that the consideration for this
      release was delivered to secure full, complete, and final discharge of Releasees
      from any and all matters hereby released as set forth in Section 2
      hereof, and each Officer agrees that such claims, demands, actions, or causes
      of
      action are wholly and forever satisfied and extinguished.

     

    5.           Covenant
      Not to Sue.  Each Officer will forever refrain and desist from,
      either directly or indirectly, instituting, prosecuting, or asserting against
      Releasees, or any of them, any further claim, demand, action, cause of action
      or
      suit of any kind or nature on account of matters hereby released as set forth
      in
Section 2 hereof.

     

    6.           No
      Prior Assignment.  Each Officer specifically acknowledges,
      covenants, represents and warrants that there has been no assignment of any
      right or claim released hereby.

     

    7.           Authority.  Each
      Officer represents and warrants that each is fully competent and authorized
      to
      execute this Release, and that upon execution this Release will be valid and
      binding upon each of them.  Each Officer represents and warrants that
      the undersigned constitute all of the officers of the Company.

     

    8.           Acknowledgment.  Each
      Officer represents and warrants that the terms of this Release have been read,
      voluntarily accepted, understood by each such Officer or explained to each
      such
      Officer by its attorney(s), and agreed to and approved by its
      attorney(s).  Each Officer further represents and warrants that it has
      relied upon its own judgment, knowledge and belief as to the nature and extent
      of any damages which may have been suffered or sustained, or may be sustained
      in
      the future, with regard to the items released hereby under Section 2
      hereof.

     

    9.           Entire
      Agreement.  This Release constitutes the entire agreement between
      the parties with respect to the releases contemplated hereby. All previous
      or
      contemporaneous agreements, understandings, representations, warranties and
      statements, oral or written are hereby superceded. Any alterations or additions
      shall be effective only if reduced to writing, dated and signed by the party
      against whom the enforcement thereof is or may be sought.

     

    

    
      
        
          
          

        

        
          -68-

          
            

          

        

        
          
          

        

      

    

    

    10.           Waiver.  No
      waiver of a breach of any of the terms, covenants or conditions of this Release
      by any party shall be construed or held to be a waiver of any succeeding or
      preceding breach of the same or any other term, covenant or condition herein
      contained.  No waiver of any default by any party hereunder shall be
      implied from any omissions by either party to take any action on account of
      such
      default.  If such default persists or is repeated, and no express
      waiver shall affect a default other than as specified in such
      waiver.

     

    11.           Severability.  If
      any term, provision, covenant or condition of this Release is held to be
      invalid, void or otherwise unenforceable to any extent by any court of competent
      jurisdiction, the remainder of this Release shall not be affected thereby,
      and
      each term, provision, covenant or condition of this Release shall be valid
      and
      enforceable to the fullest extent permitted by law.

     

    12.           Successors.  Subject
      to the restriction on assignment provided herein, all terms of this Release
      shall be binding upon, inure to the benefit of, and be enforceable by the
      parties hereto and their respective heirs, legal representatives, successors
      and
      permitted assigns.

     

    13.           Assignment.  No
      party hereto shall assign their respective rights, obligations or interest
      under
      this Release in any manner.

     

    14.           Headings.  The
      captions and paragraph headings used in this Release are inserted for
      convenience of reference only and are not intended to define, limit or affect
      the interpretation or construction of any term or provision hereof.

     

    15.           Counterparts.  This
      Release may be executed in multiple copies, each of which shall be deemed an
      original, but all of which shall constitute one agreement binding on all
      parties.

     

    16.           Facsimile
      Signatures.  In order to expedite the Contemplated Transactions
      under the Stock Purchase Agreement, telecopied signatures may be used in place
      of original signatures on this Release.  All parties hereto intend to
      be bound by the signatures on the telecopied document, are aware that other
      parties will rely on the telecopied signatures, and hereby waive any and all
      defenses to the enforcement of the terms of this Release based on the form
      of
      signature.

     

    17.           Governing
      Law.  This Release shall be governed, construed and enforced in
      accordance with the laws of the State of Texas.

     

    18.           Effective
      Date.  The terms and provisions of this Release shall be effective
      upon Closing of the Stock Purchase Agreement.

     

    

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    

    
      
        
          
          

        

        
          -69-

          
            

          

        

        
          
          

        

      

    

    

    IN
      WITNESS WHEREOF, each Officer set forth below has executed this Release as
      of
      the date first set forth above.

     

    
      	
               

            	
              OFFICERS:

            

    

    

    

    
      	
               

            	
              ____________________________________

            

    

    
      	
               

            	
              Barbara
                Andrews, President and CEO

            

    

    

    

    
      	
               

            	
              ____________________________________

            

    

    
      	
               

            	
              Jerry
                Hoover, Executive Vice President

            

    

    
      	
               

            	
              and
                Treasurer

            

    

    

    

    
      	
               

            	
              ____________________________________

            

    

    
      	
               

            	
              Brad
                Worthington, Executive Vice
                President

            

    

    
      	
               

            	
              and
                Secretary

            

    

    

    

    

    

    
      
        
          
          

        

        
          -70-

          
            

          

        

        
          
          

        

      

    

    

    Exhibit
      B

    

    

    ESCROW
      AGREEMENT

     

    This
      Escrow Agreement, dated as of _______________, 200__ (the “Closing Date”), among
      XFone, Inc., a Nevada corporation (“Purchaser”) and _________________________,
      an individual resident of ________________ (the “Sellers’ Representative”) for
      each of the persons and entities listed on Exhibit A hereto who were selling
      Shareholders of NTS Communications, Inc. (the “NTS Sellers”), and
[Trustmark National Bank], as escrow agent (“Escrow
      Agent”).

     

    This
      is
      the Escrow Agreement referred to in the Stock Purchase Agreement dated
      _____________________ (the “Stock Purchase Agreement”) among Purchaser, the
      Company and the NTS Sellers.  Capitalized terms used in this agreement
      without definition shall have the respective meanings given to them in the
      Stock
      Purchase Agreement.

     

    In
      order
      to provide Purchaser security for obligations under Section 2.2(d) and (e)
      of
      the Stock Agreement for working capital adjustments and rights of
      indemnification that the Purchaser possesses under Article VII of the Stock
      Purchase Agreement, the NTS Sellers and the Purchaser have agreed that the
      cash
      and the XFone Common Stock (“XFone Common Stock”) as set forth in Exhibit “A”
for each of the NTS Sellers, which constitutes part of the Purchase Price under
      the Stock Purchase Agreement, shall be deposited with the Escrow Agent by
      Purchaser to be held and administered by Escrow Agent in accordance with the
      terms and conditions herein set forth.

     

    The
      parties, intending to be legally bound, hereby agree as follows:

     

    1.           ESTABLISHMENT
      OF ESCROW

     

    (a)           Deposit.  The
      Purchaser hereby deposits in escrow the amount of cash and number of shares
      of
      XFone Common Stock set out opposite the names of the NTS Sellers on Exhibit
“A”
attached to this Agreement (collectively, the “Escrow Fund”).  The
      XFone Common Stock shall be registered in the name of the Escrow Agent or its
      nominee.  For all purposes, the value of the XFone Common Stock shall
      be valued at the value as set forth on Exhibit “A.”  For purposes of
      clarity, such value shall be the average per share closing price on the American
      Stock Exchange of XFone Common Stock for the ten (10) consecutive trading days
      preceding the trading day immediately prior to the Closing Date.  As
      used herein, the “Pro-Rata Share” refers to each NTS Seller’s percentage of the
      total Escrow Fund as of the dated hereof as set forth on Exhibit “A” hereto
      which shall equal each such NTS Seller’s Allocable Shares as set forth in the
      Stock Purchase Agreement.  For any NTS Seller that has had cash and
      XFone Common Stock deposited into the Escrow Fund on it behalf, such NTS
      Seller’s Pro-Rata Share shall be satisfied from the cash and XFone Common Stock
      in the same proportions as the cash or XFone Common Stock originally deposited
      in the Escrow Fund on the date hereof for such NTS Seller, all as set forth
      in
      Exhibit “A,” except that such NTS Seller’s Pro-Rata Share of fees or other
      amounts due to the Escrow Agent pursuant to Section 4(h) shall be satisfied
      in
      cash.

     

    

    
      
        
          
          

        

        
          -71-

          
            

          

        

        
          
          

        

      

    

    

    (b)           Escrow
      Fund.  Escrow Agent hereby acknowledges receipt of the Escrow Fund
      as provided in Section 1(a).  The Escrow Fund (as increased by all
      income, property and Earnings resulting therefrom) (“Escrow Fund”) shall be held
      and administered by the Escrow Agent for the benefit of the NTS Sellers and
      Purchaser on the terms set out herein.

     

    (c)           Investment
      of Escrow Funds.  Except as Purchaser and Sellers’ Representative
      may from time to time jointly instruct Escrow Agent in writing, the cash portion
      of the Escrow Fund shall be invested from time to time, to the extent possible,
      in United States Treasury bills having a remaining maturity of ninety (90)
      days
      or less and repurchase obligations secured by such United States Treasury bills,
      with any remainder being deposited and maintained in a money market deposit
      account with Escrow Agent until disbursement of the entire Escrow Fund. Escrow
      Agent is authorized to liquidate in accordance with its customary procedures
      any
      portion of the Escrow Fund consisting of investments to provide for payments
      required to be made under this Agreement.  Interest, dividends,
      earnings and gains on the Escrow Fund are hereinafter referred to collectively
      as the “Earnings.”

     

    (d)           Voting
      Rights of Shares in Escrow.  The NTS Sellers shall retain all
      rights with respect to the XFone Common Stock commensurate with the ownership
      of
      common stock, including, without limitation, the right to dividends and the
      right to vote such shares.  All voting rights with respect to the
      XFone Common Stock composing a part of the Escrow Fund may be exercised by
      the
      NTS Seller who deposited such XFone Common Stock in escrow, and the Escrow
      Agent
      shall from time to time execute and deliver to each NTS Seller such proxies,
      consents, or other documents as may be necessary to enable such NTS Seller
      to
      exercise such rights with respect to its XFone Common Stock.

     

    (e)           Distributions
      on Escrow Fund.  All Earnings made on the cash portion of the
      Escrow Fund shall be deemed to be that of the NTS Sellers, in accordance with
      their respective Pro-Rata Share of the cash portion of the Escrow Fund, for
      income tax purposes, but shall be received by the Escrow Agent and constitute
      part of the Escrow Fund.

     

    (f)           Taxes
      and Charges on Escrow Fund.  For those NTS Sellers who have
      provided the Escrow Agent with a properly completed Internal Revenue Service
      W-9
      Form indicating that no taxes are to be withheld, the Escrow Agreement by no
      later than March 15 of each year shall pay to such NTS Seller an amount equal
      to
      30% of such NTS Seller’s Pro-Rata share of the Earnings from the cash portion of
      the Escrow Fund.  The NTS Sellers, with respect to their respective
      Pro-Rata Share of the Escrow Fund, shall maintain the Escrow Fund free and
      clear
      of all liens and encumbrances and shall, promptly upon request by the Escrow
      Agent, pay and discharge all taxes, assessments, and governmental charges
      imposed on or with respect to the Escrow Fund.

     

    (g)           Acceptance
      of Escrow.  Escrow Agent hereby agrees to act as escrow agent and
      to hold, safeguard, administer and disburse the Escrow Fund pursuant to the
      terms and conditions hereof.

     

    (h)           Notice
      of Claim.  Purchaser shall be entitled to recover under this
      Escrow Agreement in respect of (i) any working capital adjustment as provided
      in
      Section 2.2(d) of the Stock Purchase Agreement (“Working Capital Adjustment”);
      or (ii) any Adverse Consequences (as
      provided in Article VII of the Stock Purchase Agreement) and, during the Escrow
      Period, may give notice in writing in the form attached hereto as Appendix
      A
      (“Pending Claims Notice”) to the Escrow Agent and the Sellers’ Representative of
      any claim on which any Working Capital Adjustment is asserted or Adverse
      Consequences may be based, which Pending Claims Notice shall include a brief
      description of the nature of the claim, the identity of the party by whom it
      is
      being asserted, and an estimate of the amount of Adverse Consequences that
      may
      be sustained by Purchaser (the “Estimated Adverse
      Consequences”).

     

    

    
      
        
          
          

        

        
          -72-

          
            

          

        

        
          
          

        

      

    

    

     

    2.           DISTRIBUTIONS
      FROM ESCROW FUND

     

    (a)           Purchaser
      Request.  If Purchaser submits a notice and request to the
      Sellers’ Representative and Escrow Agent in substantially the form attached as
      Appendix B stating that (i) a Working Capital Adjustment has been determined
      to
      be due to Purchaser by the NTS Sellers in accordance with Section 2.2(d) of
      the
      Stock Purchase Agreement and the dollar amount due to Purchaser by virtue of
      the
      Working Capital Adjustment; or (ii) Adverse Consequences (as defined in the
      Stock Purchase Agreement) has been determined in accordance with Article VII
      of
      the Stock Purchase Agreement and specifying the dollar amount of the Adverse
      Consequences, then on the 30th Business Day following such notice, Escrow Agent
      shall release as directed in said notice an amount from the Escrow Fund equal
      to
      the amount of the Working Capital Adjustment or Adverse Consequences, as the
      case may be, and applying such amount to each NTS Seller’s Pro-Rata share of the
      Working Capital Adjustment or Adverse Consequences, as the case may be, unless
      the Escrow Agent has received a Counter-Notice (as defined herein) from the
      Sellers’ Representative that the requested release from the Escrow Fund is
      disputed.

     

    (b)           If
      a counter-notice (“Counter-Notice”) is given with respect to a request for
      distributions from the Escrow Fund, then the Escrow Agent shall make a
      distribution from the Escrow Fund only in accordance with (i) joint written
      instructions of Purchaser and the Sellers’ Representative or (ii) a final
      non-appealable order of a court of competent jurisdiction or, in the case of
      a
      Working Capital Adjustment, the binding determination of the Arbitrator pursuant
      to Section 2.2(e) of the Stock Purchase Agreement.  Any court order or
      arbitrator order shall be accompanied by a legal opinion by counsel for the
      presenting party satisfactory to the Escrow Agent to the effect that the order
      is final and non-appealable.  Escrow Agent shall act on such court or
      arbitrator order and legal opinion without further question.

     

    (c)           Notwithstanding
      anything to the contrary contained in this Agreement, the Escrow Agent shall
      make distributions from the Escrow Fund in accordance with the joint written
      instructions of Purchaser and the Sellers’ Representative.

     

    3.           DURATION
      AND TERMINATION OF ESCROW

     

    (a)           On
      the second anniversary date of this Agreement (“Escrow Period”), the Escrow
      Agent shall retain an amount of the then remaining Escrow Fund (taken on a
      Pro-Rata Share from each NTS Seller’s portion of the Escrow Fund) equal to the
      aggregate dollar value of the Estimated Adverse Consequences for all outstanding
      Pending Claims Notices, if any, received during the Escrow Period and the
      remainder of each NTS Seller’s portion of the Escrow Fund (including all
      Earnings) shall be disbursed to each NTS Seller to the address as provided
      in
Exhibit
      “A” hereto.  After the resolution of all outstanding Pending Claims
      Notices received during the Escrow Period, the Escrow Agent shall promptly
      deliver the balance, if any, of the Escrow Fund (including all Earnings) to
      each
      NTS Seller to the address provided in Exhibit “A”.

     

    

    
      
        
          
          

        

        
          -73-

          
            

          

        

        
          
          

        

      

    

    

     

    (b)           The
      Escrow Agreement shall terminate and be of no further force or effect on the
      first to occur of (i) the close of business on the date on which the Escrow
      Agent delivers to Purchaser and/or the NTS Sellers, as the case may be, the
      entire Escrow Fund (and any Earnings thereon) in accordance with the terms
      of
      this Agreement or (ii) December 31, 2020, at which time this Escrow Fund shall
      terminate and any Escrow Fund remaining shall be interpled with the registry
      or
      custody of any court of competent jurisdiction and thereupon the Escrow Agent
      shall be discharged of all further duties under this Agreement.

     

    4.           DUTIES
      OF ESCROW AGENT

     

    (a)           Escrow
      Agent shall not be under any duty to give the Escrow Fund held by it hereunder
      any greater degree of care than it gives its own similar property and shall
      not
      be required to invest any funds held hereunder except as directed in this
      Agreement.  Uninvested funds held hereunder shall not earn or accrue
      interest.

     

    (b)           Escrow
      Agent shall not be liable, except for its own gross negligence or willful
      misconduct and, except with respect to claims based upon such gross negligence
      or willful misconduct that are successfully asserted against Escrow Agent,
      the
      others hereto shall jointly and severally indemnify and hold harmless Escrow
      Agent (and any successor Escrow Agent) from and against any and all losses,
      liabilities, claims, actions, damages and expenses, including reasonable
      attorneys’ fees and disbursements, arising out of and in connection with this
      Agreement.

     

    (c)           Escrow
      Agent shall be entitled to rely upon any order, judgment, certification, demand,
      notice, instrument or other writing delivered to it hereunder without being
      required to determine the authenticity or the correctness of any fact stated
      therein or the propriety or validity of the service thereof. Escrow Agent may
      act in reliance upon any instrument or signature believed by it to be genuine
      and may assume that the person purporting to give receipt or advice or make
      any
      statement or execute any document in connection with the provisions hereof
      has
      been duly authorized to do so. Escrow Agent may conclusively presume that the
      undersigned representative of any party hereto which is an entity other than
      a
      natural person has full power and authority to instruct Escrow Agent on behalf
      of that party unless written notice to the contrary is delivered to Escrow
      Agent.

     

    (d)           Escrow
      Agent may act pursuant to the advice of counsel with respect to any matter
      relating to this Agreement and shall not be liable for any action taken or
      omitted by it in good faith in accordance with such advice.

     

    (e)           Escrow
      Agent does not have any interest in the Escrow Fund deposited hereunder but
      is
      serving as escrow holder only and having only possession thereof. Any payments
      of income from this Escrow Fund shall be subject to withholding regulations
      then
      in force with respect to United States taxes. The parties hereto will provide
      Escrow Agent with appropriate Internal Revenue Service Forms W-9 for tax
      identification number certification, or non-resident
      alien certifications.  Section 4(e) and Section 4(b) shall survive
      notwithstanding any termination of this Agreement or the resignation of Escrow
      Agent.

     

    

    
      
        
          
          

        

        
          -74-

          
            

          

        

        
          
          

        

      

    

    

     

    (f)           Escrow
      Agent makes no representation as to the validity, value, genuineness or the
      collectibility of any security or other document or instrument held by or
      delivered to it.

     

    (g)           Escrow
      Agent (and any successor Escrow Agent) may at any time resign as such by
      delivering the Escrow Fund to any successor Escrow Agent jointly designated
      by
      the other parties hereto in writing, or to any court of competent jurisdiction,
      whereupon Escrow Agent shall be discharged of and from any and all further
      obligations arising in connection with this Agreement. The resignation of Escrow
      Agent will take effect on the earlier of (a) the appointment of a successor
      (including a court of competent jurisdiction) or (b) the day which is 30 days
      after the date of delivery of its written notice of resignation to the other
      parties hereto. If at that time Escrow Agent has not received a designation
      of a
      successor Escrow Agent, Escrow Agent’s sole responsibility after that time shall
      be to retain and safeguard the Escrow Fund until receipt of a designation of
      successor Escrow Agent or a joint written disposition instruction by the other
      parties hereto or a final non-appealable order of a court of competent
      jurisdiction.

     

    (h)           In
      the event of any disagreement between the other parties hereto resulting in
      adverse claims or demands being made in connection with the Escrow Fund or
      in
      the event that Escrow Agent is in doubt as to what action it should take
      hereunder, Escrow Agent shall be entitled to retain the Escrow Fund until Escrow
      Agent shall have received (i) a final non-appealable order of a court of
      competent jurisdiction or arbitrator directing delivery of the Escrow Fund
      or
      (ii) a written agreement executed by the other parties hereto directing delivery
      of the Escrow Fund, in which event Escrow Agent shall disburse the Escrow Fund
      in accordance with such order or agreement. Any court or arbitrator order shall
      be accompanied by a legal opinion by counsel for the presenting party
      satisfactory to Escrow Agent to the effect that the order is final and
      non-appealable. Escrow Agent shall act on such court order and legal opinion
      without further question.

     

    (i)           Purchaser
      and the NTS Sellers shall pay Escrow Agent compensation (as payment in full)
      for
      the services to be rendered by Escrow Agent hereunder in the amount of
      $____________ at the time of execution of this Agreement and $__________
      annually thereafter and agree to reimburse Escrow Agent for all reasonable
      expenses, disbursements and advances incurred or made by Escrow Agent in
      performance of its duties hereunder (including reasonable fees, expenses and
      disbursements of its counsel). Any such compensation and reimbursement to which
      Escrow Agent is entitled shall be borne 50% by Purchaser, and 50% by the NTS
      Sellers with each NTS Seller responsible for its Pro-Rata Share of such 50%
      which may be deducted from each NTS Seller’s cash portion of its share of the
      Escrow Fund.

     

    (j)           No
      printed or other matter in any language (including, without
      limitation,  prospectuses, notices, reports and promotional material)
      that mentions Escrow Agent’s name or the rights, powers, or duties of Escrow
      Agent shall be issued by the other parties hereto or on such parties’ behalf
      unless Escrow Agent shall first have given its specific written consent
      thereto.

     

    

    
      
        
          
          

        

        
          -75-

          
            

          

        

        
          
          

        

      

    

    

    5.           LIMITED
      RESPONSIBILITY

     

    This
      Agreement expressly sets forth all the duties of Escrow Agent with respect
      to
      any and all matters pertinent hereto. No implied duties or obligations shall
      be
      read into this agreement against Escrow Agent. Escrow Agent shall not be bound
      by the provisions of any agreement among the other parties hereto except this
      Agreement.

     

    6.           OWNERSHIP
      FOR TAX PURPOSES

     

    Each
      NTS
      Seller will be treated as the owner of its respective portion of the Escrow
      Fund, and each NTS Seller will report all income, if any, that is earned on,
      or
      derived from, each NTS Seller’s portion of the Escrow Fund as their income, in
      such proportions, in the taxable year or years in which such income is properly
      includible and pay any taxes attributable thereto.

     

    7.           NOTICES

     

    All
      notices, consents, waivers and other communications under this Agreement must
      be
      in writing and will be deemed to have been duly given when (a) delivered by
      hand (with written confirmation of receipt), (b) sent by telecopier (with
      written confirmation of receipt) provided that a copy is mailed by registered
      mail, return receipt requested, or (c) when received by the addressee, if
      sent by a nationally recognized overnight delivery service (receipt requested),
      in each case to the appropriate addresses and telecopier numbers set forth
      below
      (or to such other addresses and telecopier numbers as a party may designate
      by
      notice to the other parties):

     

    IF
      TO
      COMPANY OR SHAREHOLDER REPRESENTATIVE, TO:

     

    

    
      
        	
                 

              	
                Attention:

              	
              

      

      
        	
                 

              	
                Telephone:

              	
              

      

      
        	
                 

              	
                Facsimile:

              	
              

      

      
        	
                 

              	
                Email:

              	
              

      

                                    

    

     

     

      IF
        TO
        PURCHASER, TO:

    

     

    XFone,
      Inc.

    Britannia
      House

    960
      High
      Road

    London,
      N129RY

    United
      Kingdom

    
      	
               

            	
              Attention:

            	
              Guy
                Nissenson

            

    

    
      	
               

            	
              Telephone:

            	
              +44
                208-446-9494

            

    

    
      	
               

            	
              Facsimile:

            	
              +44
                208-446-7010

            

    

    
      	
               

            	
              Email:

            	
              guy@xfone.com

            

    

     

    

    
      
        
          
          

        

        
          -76-

          
            

          

        

        
          
          

        

      

    

    

    
      	
               

            	
               

            

    

    
      and

       

    

    XFone
      USA, Inc.

    2506
      Lakeland Drive, Suite 100

    Flowood,
      MS  39232 
      
        	
                 

              	
                Attention:

              	
                Wade
                  Spooner

              

      

      
        	
                 

              	
                Telephone:

              	
                
                  (601)
                    664-1108

                

              

      

      
        	
                 

              	
                Facsimile:

              	
                
                  (601)
                    664-1190

                

              

      

      
        	
                 

              	
                Email:

              	
                
                  wspooner@xfone.com

                

              

      

       

    

    and

     

    Watkins
      Ludlam Winter & Stennis, P.A.

    633
      North
      State Street (39202)

    P.
      O. Box
      427

    Jackson,
      MS 39205-0427 
      
        	
                 

              	
                Attention:

              	
                Gina
                  M. Jacobs

              

      

      
        	
                 

              	
                Telephone:

              	
                
                  (601)
                    664-1108

                

              

      

      
        	
                 

              	
                Facsimile:

              	
                
                  (601)
                    664-1190

                

              

      

      
        	
                 

              	
                Email:

              	
                
                  wspooner@xfone.com

                

              

      

       

    

     

      IF
        TO
        ESCROW AGENT:

    

     

    [Trustmark
      National Bank

    248
      East Capitol Street

    Jackson,
      MS  39201

    Attention:
      W. Sanders (“Sandy”) Carter, V.P.]

     

    8.           JURISDICTION;
      SERVICE OF PROCESS

     

    Any
      action or proceeding seeking to enforce any provision of, or based on any right
      arising out of, this Agreement may be brought against any of the parties in
      the
      courts of Hinds County, Mississippi, State of Mississippi or, if it has or
      can
      acquire jurisdiction, in the United States District Court for the Southern
      District of Mississippi, and each of the parties consents to the jurisdiction
      of
      such courts (and of the appropriate appellate courts) in any such action or
      proceeding and waives any objection to venue laid therein. Process in any action
      or proceeding referred to in the preceding sentence may be served on any party
      anywhere in the world.

     

    9.           COUNTERPARTS

     

    This
      Agreement may be executed in one or more counterparts, each of which will be
      deemed to be an original and all of which, when taken together, will be deemed
      to constitute one and the same.

     

    10.           SECTION
      HEADINGS

     

    The
      headings of sections in this Agreement are provided for convenience only and
      will not affect its construction or interpretation.

     

    

    
      
        
          
          

        

        
          -77-

          
            

          

        

        
          
          

        

      

    

    

    11.           WAIVER

     

    The
      rights and remedies of the parties to this Agreement are cumulative and not
      alternative. Except as set forth in this Agreement or the Stock Purchase
      Agreement, neither the failure nor any delay by any party in exercising any
      right, power, or privilege under this Agreement or the documents referred to
      in
      this Agreement will operate as a waiver of such right, power, or privilege,
      and
      no single or partial exercise of any such right, power, or privilege will
      preclude any other or further exercise of such right, power, or privilege or
      the
      exercise of any other right, power, or privilege. To the maximum extent
      permitted by applicable law, (a) no claim or right arising
      out  of this Agreement or the documents referred to in this Agreement
      can be discharged by one party, in whole or in part, by a waiver or renunciation
      of the claim or right unless in writing signed by the other party; (b) no
      waiver that may be given by a party will be applicable except in the specific
      instance for which it is given; and (c) no notice to or demand on one party
      will be deemed to be a waiver of any obligation of such party or of the right
      of
      the party giving such notice or demand to take further action without notice
      or
      demand as provided in this Agreement or the documents referred to in this
      Agreement.

     

    12.           EXCLUSIVE
      AGREEMENT AND MODIFICATION

     

    This
      Agreement supersedes all prior agreements among the parties with respect to
      its
      subject matter and constitutes (along with the documents referred to in this
      Agreement) a complete and exclusive statement of the terms of the agreement
      between the parties with respect to its subject matter. This Agreement may
      not
      be amended except by a written agreement executed by the Purchaser, the
      Principals and the Escrow Agent.

     

    13.           GOVERNING
      LAW

     

    This
      Agreement shall be governed by the laws of the State of Mississippi, without
      regard to conflicts of law principles.

     

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

     

    
      	
              PURCHASER:

            	
              SELLERS’
                REPRESENTATIVE:

            

    

     

    
      	
              
                XFone,
                  Inc.

              

            	
               

            

    

     

    By:
Guy
      Nissenson, President and
      CEO                                                         

    
      	
               

            	
               

            

    

     

    ESCROW
      AGENT:

     

    

     

    By:                                                    

    
      	
              
                Title:

              

            	
               

            	 

    

     

    

    
      
        
          
          

        

        
          -78-

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      “A”

     

    
      	 	 	
              
                XFone
                  Common Stock

              

            	 	 
	
              
                NTS
                  Seller Name and Address

              

            	
              
                Cash

              

            	
              
                Value
                  of Shares

              

            	
              
                Number
                  of Shares

              

            	
              
                Pro-Rata
                  Share

              

            	
              
                Proportional
                  Share of Cash/XFone Common Stock

              

            
	 	 	 	 	 
	
              Ambrose,
                Dawn Lin

            	
              ________

            	
              ______

            	
              ______

            	
              _______%

            	
              _____%
                / _____%

            
	
              Andrews,
                Barbara A.

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Buxkemper,
                Kevin E.

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Cleveland,
                David W.

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Craft,
                Joyce

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Crosswhite,
                Richard A. & Sandra V.

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Dry
                Creek Cattle Company, Ltd.

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Elliott,
                Larry J. & Mary C.

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Farrar,
                Frank R. & Polly C.

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Fox,
                Nelson & Deborah C.

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Hoover,
                Jerry E. & Martha S.

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Jones,
                Jean C.

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              McLeod,
                Don & Ethel

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              David
                Fate Moore Trust

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Telephone
                Electronics Corporation

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Shawn
                Troy Wallace Trust

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              Worthington,
                Brad & Tracy

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	
              [Non-Participating
                Shareholders]

            	
              ________

            	
              ______

            	
              ______

            	
              _______

            	
              _____%
                / _____%

            
	 	 	 	 	 	 
	
                TOTAL

            	 	 	 	 	 

    

    

    CLOSING
      DATE VALUE

     

    Xfone
      Common Stock - $_______ per share

     

    

    

    

    

    

    

    
      
        
          
          

        

        
          -79-

          
            

          

        

        
          
          

        

      

    

    

    APPENDIX
      A

     

    PENDING
      CLAIM NOTICE

     

    To:                      _______________________,
      or its successor (“Escrow Agent”)

    _______________________
      (“Sellers’ Representative”)

     

    
      	
              From:

            	
              XFone,
                Inc. (“Purchaser”)

            

    

     

    
      	
              Date:

            	
              _____________________

            

    

     

    Please
      be
      advised that, pursuant to Section 1(h) of the Escrow Agreement dated
      ____________, 2006 by and among the undersigned, the Escrow Agent, and the
      Sellers’ Representative, each of you are hereby notified that, Purchaser
      believes that the Purchaser has or may suffer Adverse Consequences pursuant
      to
      the provisions of Article VII of the Stock Purchase Agreement dated as of
      _______________________ (“Stock Purchase Agreement”) by virtue of

     

    

     

    

     

    

     

    Purchaser
      estimates that the Adverse Consequences is $_____________ (“Estimated Adverse
      Consequences”).

     

    Signed
      this _____ day of _________________, 20____.

     

    XFone,
      Inc.

     

    By:                                                                         

    Title:                                                                         

    

    
      
        
          
          

        

        
          -80-

          
            

          

        

        
          
          

        

      

    

    

    APPENDIX
      B

     

    PURCHASER
      DEPOSITION NOTICE REQUEST

     

    
      	
              To:

            	
              ______________________,
                or its successor (“Escrow Agent”)

            

    

    ______________________
      (“Sellers’ Representative”)

     

    
      	
              From:

            	
              XFone,
                Inc. (“Purchaser”)

            

    

     

    
      	
              Date:

            	
              _______________________

            

    

     

    
      	
              Re:

            	
              Escrow
                Agreement Dated ____________, 200__ Among the Above-referenced Parties
                (“Escrow Agreement”)

            

    

     

    Please
      be
      advised that pursuant to Section 2(a) of the Escrow Agreement you are hereby
      notified that Adverse Consequences (as defined in the Stock Purchase Agreement
      dated ________________, 2007) has been determined and you are hereby instructed
      to deliver to XFone, Inc. each NTS Seller’s Pro-Rata Share thereof from the
      Escrow Funds.

     

    Check
      One:

     

    
      
        	
                ____

              	
                This
                  is the Adverse Consequences as determined for Pending Claims Notice
                  dated.

              

      

       

    

    
      	
              ____

            	
              This
                notice also constitutes a Pending Claims Notice and the Adverse
                Consequences arises out of the
                following:

            

    

     

    Sincerely,

     

    XFone,
      Inc.

     

    By:                                                                         

    Title:                                                                         

    

    

    

    

    
      
        
          
          

        

        
          -81-

          
            

          

        

        
          
          

        

      

    

    

    Exhibit
      C

    

    SECOND
      AMENDMENT TO LEASE AGREEMENT

     

    This
      is the Second Amendment to that
      certain Lease Agreement between NTS Communications, Inc., a Texas corporation
      with its offices at 5207 W. Loop 289, Lubbock, Texas 79414 (“Tenant”), and
      Shareholder Value, Ltd., a Texas limited partnership with its offices at 5307
      W.
      Loop 289, Lubbock, Texas 79414(“Landlord”) dated October 3, 1997, as amended by
      the First Amendment to the Lease Agreement dated November 5, 1999, (the “Lease
      Agreement”).

    

    Recitals

     

    Whereas,
      the parties have obtained a
      series of appraisals in order to determine the market rental value of the
      Premises.

    

    Whereas,
      based upon the appraisals, the
      parties have agreed to make changes to the Lease Agreement’s square footage of
      the Office Building and Base Rent.

    

    Now,
      therefore, in consideration for
      the mutual promises and covenants contained herein, and for other good and
      valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged and confessed by both the Landlord and Tenant, the parties agree
      to
      amend the terms of the Lease Agreement as follows:

    

    Amendment

     

    

    
      	
              Premises.

            	
              The
                square footage of the Office Building shall be 45,072 square
                feet.

            

    

    

    
      	
              Base
                Rent:

            	
              Five
                Hundred Eighteen Thousand Three Hundred Twenty Eight and No/100 Dollars
                ($518,328.00) per annum, payable in monthly installments of Forty
                Three
                Thousand One Hundred Ninety Four and No/100 Dollars ($43,194.00)
                each.

            

    

    

    It
      is the
      specified intent of the parties to modify the Lease Agreement as specifically
      stated in this Second Amendment.  All provisions of the Lease
      Agreement not specifically modified by this Second Amendment shall remain in
      full force and effect.

    

    Executed
      this                                           day
      of                                           ,
      2007.

    

    

    NTS
      COMMUNICATIONS,
      INC.                                                                                                SHAREHOLDER
      VALUE, LTD.

    By:
      NTS Properties, L.C.,

    General
      Partner

    

    

    By:                                                                By:                                                      

    Barbara
      Andrews,
      President                                                                                                Brad
      Worthington, President

    

    

    
      
        
          
          

        

        
          -82-

          
            

          

        

        
          
          

        

      

    

    

    Exhibit
      D

    

    Noncompetition,
      Nondisclosure and Nonsolicitation Agreement

     

    This
      Noncompetition, Nondisclosure and Nonsolicitation Agreement (this “Agreement”)
      is made as of the ___ day of _____________, 200___, by and among Xfone, Inc.,
      a
      Nevada corporation (“Purchaser”), on the one hand, and each of Telephone
      Electronics Corporation, Inc., a Mississippi corporation (“TEC”), Joseph D.
      Fail, Chris Chelette, Robert Healea, Joey Garner, and Walter Frank, severally
      and not jointly, each of such individuals being an officer or director of TEC
      or
      an affiliate of TEC, including NTS (as defined herein), on the other hand (the
      “TEC Affiliates” and together with TEC the “TEC Parties”).

     

    RECITALS

     

    
      	
               

            	
              A.

            	
              TEC
                owns 799,214 shares of the common stock which constitutes 63.5 percent
                (63.5%) of all the issued and outstanding Equity Interests of NTS
                Communications, Inc. (together with its subsidiaries “NTS”), and is the
                single largest shareholder of NTS.

            

    

     

    
      	
               

            	
              B.

            	
              Concurrently
                with the execution and delivery of this Agreement, Purchaser is purchasing
                from TEC all of the Equity Interests owned by TEC in NTS pursuant
                to the
                terms and conditions of a stock purchase agreement made as of the
                ____day
                of August, 2007 (the “Stock Purchase
                Agreement”).

            

    

     

    
      	
               

            	
              C.

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

            

    

     

    
      	
               

            	
              D.

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

            

    

     

    AGREEMENT

     

    The
      parties, intending to be legally bound, agree as follows:

     

    1.            DEFINITIONS

     

    “Confidential
      Information,” is defined in Section 2.

     

    Capitalized
      terms not expressly defined in this Agreement shall have the meanings ascribed
      to them in the Stock Purchase Agreement.

     

    2.           ACKNOWLEDGMENTS
      BY THE TEC PARTIES

     

    Each
      of
      the TEC Parties acknowledge that he (or it) has occupied a position of trust
      and
      confidence with TEC or NTS prior to the date hereof and has had access to and
      has become familiar
      with the following, any and all of which constitute confidential information
      of
      NTS (collectively the “Confidential Information”): Except as provided in the
      final sentence of this paragraph, (a) any and all trade secrets concerning
      the
      business and affairs of NTS, including product specifications, data,
      compositions, processes, past, current and planned research and development,
      current and planned construction, products and distribution methods and
      processes, customer lists, current and anticipated customer requirements, price
      lists, market studies, business plans, computer software and programs (including
      object code and source code), database technologies, systems, structures
      architectures processes, improvements, devices, know-how, discoveries, concepts,
      methods and information of NTS’s business and any other information, however
      documented, of NTS that is a trade secret within the meaning of applicable
      law
      as of the date hereof; (b) any and all information concerning the business
      and
      affairs of NTS (which includes historical financial statements, financial
      projections and budgets, historical and projected sales, capital spending
      budgets and plans, personnel training and techniques and confidential
      information related to NTS’ customers, however documented; and (c) any and all
      notes, analysis, compilations, studies, summaries and other material prepared
      by
      or for NTS containing or based, in whole or in part, upon any information
      included in the foregoing which has been treated as confidential by NTS or
      the
      creator thereof, as the case may be.  Notwithstanding the foregoing,
      the Confidential Information shall not include: (i) information that has been
      provided to TEC or any TEC Party solely in connection with such person or
      entity’s (or such person’s status as an officer or agent of another business
      entity) commercial dealings with NTS, outside of the TEC Party’s relationship of
      authority or trust with NTS, if any, (ii) information readily ascertainable
      or
      compilable from the books and records of any other business or governmental
      entity, other than those provided to a TEC Party in confidence by NTS, (iii)
      information that relates to the business dealings between TEC and its affiliates
      and the TEC Parties, on the one hand, and NTS on the other, other than any
      information received in such TEC Party’s service as an officer or director of
      NTS, (iv) information which is also the confidential information of TEC or
      any
      of the TEC Parties, or their respective Affiliates.

     

    

    
      
        
          
          

        

        
          -83-

          
            

          

        

        
          
          

        

      

    

    

     

    Each
      of
      the TEC Parties acknowledge that (a) the business of NTS relating to the use
      and
      operation of all its assets prior to Closing (the “Business”) is interstate in
      scope but relates primarily to that part of the State of Texas west of a line
      drawn from the Grayson County Courthouse to the Jefferson County Court House
      (the “Primary Market”); (b) its products and services related to such Business
      are marketed in several regions of the United States, including the Primary
      Market; (c) NTS’ s Business prior to Closing competes with other businesses that
      are or could be located in any part of the United States; (d) Purchaser has
      required that each of the TEC Parties make the covenants set forth in Sections
      3
      and 4 of this Agreement as a condition to the closing of the Stock Purchase
      Agreement; (e) the provisions of Sections 3 and 4 of this Agreement are
      reasonable and necessary to protect and preserve NTS and its Business and the
      Purchaser’s interests in and right to the use and operation of the Business from
      and after Closing; and (f) Purchaser would be irreparably damaged if any of
      the
      TEC Parties were to breach the covenants set forth in Sections 3 and 4 of this
      Agreement.

     

    3.           CONFIDENTIAL
      INFORMATION

     

    Each
      of
      the TEC Parties acknowledge and agree that the protection of the Confidential
      Information is necessary to protect and preserve the value of the Business.
      Therefore, each of the TEC Parties hereby agree not to disclose to any
      unauthorized Persons or use for his or its own account
      or for the benefit of any third party any Confidential Information, whether
      or
      not such information is embodied in writing or other physical form or is
      retained in the memory any of the TEC Parties, without Purchaser’s written
      consent, unless and to the extent that the Confidential Information is or
      becomes generally known to by the public other than as a result of the TEC
      Party’s fault, the provisions hereof are waived by Purchaser or the disclosure
      in question is required by applicable law or process of
      law.  Notwithstanding the foregoing, however, no provision of this
      agreement shall be deemed to limit the ability of any TEC Party to provide
      truthful testimony or to offer truthful information to any agent of the United
      States Government or any member of the United States
      Congress.

     

    

    
      
        
          
          

        

        
          -84-

          
            

          

        

        
          
          

        

      

    

    

     

    4.           NONCOMPETITION
      AND NONSOLICITATION

     

    As
      an
      inducement for Purchaser to enter into the Stock Purchase Agreement and as
      additional consideration for the consideration to be paid to TEC under the
      Stock
      Purchase Agreement, each of the TEC Parties agree that:

     

    (a)           For
      a period of two (2) years after the Closing:

     

    (i)           TEC
      will not, directly or indirectly, engage or invest in, own, manage, operate,
      finance, control or participate in the ownership, management, operation,
      financing or control of, be employed by, associated with or in any manner
      connected with, or render services or advice or other aid to, or guarantee
      any
      obligation of, any Person, engaged in or planning to become engaged in providing
      to any Primary Market Customer, local or long distance telecommunications
      services or any other products or services which compete with the products
      and
      services provided by NTS prior to the Closing (“Competitive Products”),
      including without limitation, local, long distance, broadband, dial up data
      services, wireless, DSL, Voice-over-Internet Protocol (VoIP).  TEC
      agrees that this covenant is reasonable with respect to its duration,
      geographical area and scope.  For the purposes hereof, a “Primary
      Market Customer” shall be any individual resident in, or any business entity
      whose principal executive offices are located in, the Primary Market
      Area.

     

    (ii)           The
      TEC Parties, severally and not jointly, will not directly or indirectly, engage
      or invest in, own, manage, operate, finance, control or participate in the
      ownership, management, operation, financing or control of, be employed by,
      associated with or in any manner connected with, or render services or advice
      or
      other aid to, or guarantee any obligation of, any Person, other than a Current
      Competitor, engaged in or planning to become engaged in providing to any Primary
      Market Customer, local or long distance telecommunications services or any
      other
      products or services which compete with the Competitive Products, including
      without limitation, local, long distance, broadband, dial up data services,
      wireless, DSL, Voice-over-Internet Protocol (VoIP).  The TEC Parties
      agree that this covenant is reasonable with respect to its duration,
      geographical area and scope.  For the purposes hereof, the “Current
      Competitors” shall mean those business entities of which a TEC Party is the
      record or beneficial owner of less than all of such entity’s debt or equity
      securities as of the date hereof, and which is currently offering or proposing
      to offer Competitive Products in the Primary Market, including but not limited
      to Randy White Telecommunications, Inc.

     

    

    
      
        
          
          

        

        
          -85-

          
            

          

        

        
          
          

        

      

    

    

    (iii)           Each
      of the TEC Parties agree not to, directly or indirectly, (A) induce or attempt
      to induce any employee of NTS or any NTS employee who becomes an employee of
      Purchaser in connection with the purchase of the Business to leave the employ
      of
      NTS or Purchaser; (B) in any way interfere with the relationship between
      Purchaser and any such employee of NTS or Purchaser; (C) employ or otherwise
      engage as an employee, independent contractor or otherwise any such employee
      of
      NTS or Purchaser at a time when such employee is an employee of NTS anywhere
      or
      Purchaser within the Primary Market; (D) induce or attempt to induce any
      supplier, licensee or other Person, other than customers, to cease doing
      business with NTS or in any way interfere with the relationship between any
      such
      supplier, licensee or other business entity and NTS, or (E) except that no
      provision hereof shall limit the ability of the Current Competitors to compete
      with NTS (other than through individual efforts of a TEC Party), induce or
      attempt to induce any customer of NTS to cease doing business with NTS or in
      any
      way interfere with the relationship between any such customer and
      NTS.

     

    (iv)           Each
      of the TEC Parties agree that they (or it) will not, directly or indirectly,
      solicit the business of any Person who they know to be a customer of NTS,
      whether or not the TEC Party had personal contact with such Person prior to
      Closing; provided that such limitation shall not limit the ability of the
      Current Competitors to compete with NTS other than through the personal efforts
      of a TEC Party.

     

    (b)           In
      the event of a breach by any of the TEC Parties of any covenant set forth in
      Subsection 4(a) of this Agreement, the term of such covenant will be extended
      by
      the period of the duration of such breach; and

     

    (c)           Neither
      TEC nor any of the TEC Parties will, at any time during or after the two year
      period, intentionally disparage Purchaser, NTS, or the business conducted by
      Purchaser or any person known by TEC or such TEC Party, respectively, to be
      a
      director or officer of NTS or Purchaser.

     

    5.           REMEDIES

     

    If
      any of
      the TEC Parties breaches the covenants set forth in Sections 3 or 4 of this
      Agreement, Purchaser will be entitled to the following remedies:

     

    (a)           Damages
      from TEC and the TEC Party who breached such covenants;

     

    (b)           In
      addition to its right to damages and any other rights it may have, to obtain
      injunctive or other equitable relief to restrain any breach or threatened breach
      or otherwise to specifically enforce the provisions of Sections 3 and 4 of
      this
      Agreement, it being agreed that money damages alone would be inadequate to
      compensate Purchaser and would be an inadequate remedy for such
      breach.

     

    (c)           Notwithstanding
      any provision hereof to the contrary, the obligations of TEC and the TEC Parties
      hereunder are several and not joint; provided that the foregoing shall not
      limit
      TEC’s liability, if any, for the conduct of its directors, officers, employees
      and agents acting in such capacity.

     

    

    
      
        
          
          

        

        
          -86-

          
            

          

        

        
          
          

        

      

    

    

    (d)           The
      rights and remedies of the parties to this Agreement are cumulative and not
      alternative.

     

    6.           SUCCESSORS
      AND ASSIGNS

     

    This
      Agreement will be binding upon Purchaser and each TEC Party and will inure
      to
      the benefit of Purchaser and its successors.

     

    7.           WAIVER

     

    Neither
      the failure nor any delay by any party in exercising any right, power or
      privilege under this Agreement will operate as a waiver of such right, power
      or
      privilege, and no single or partial exercise of any such right, power or
      privilege will preclude any other or further exercise of such right, power
      or
      privilege or the exercise of any other right, power or privilege. To the maximum
      extent permitted by applicable law, (a) no claim or right arising out of this
      Agreement can be discharged, in whole or in part, by a waiver or renunciation
      of
      the claim or right except in writing; (b) no waiver that may be given by a
      party
      will be applicable except in the specific instance for which it is given; and
      (c) no notice to or demand on one party will be deemed to be a waiver of any
      obligation of such party, or of the right of the party giving such notice or
      demand to require the other party, to take further action without notice or
      demand as provided in this Agreement.

     

    8.           GOVERNING
      LAW

     

    This
      Agreement will be governed by the laws of the State of Mississippi.

     

    9.           JURISDICTION;
      SERVICE OF PROCESS

     

    Any
      action or proceeding seeking to enforce any provision of, or based upon any
      right arising out of, this Agreement may be brought against any of the parties
      in the courts of the State of Mississippi, County of Rankin, and each of the
      parties consents to the jurisdiction of such courts (and of the appropriate
      appellate courts) in any such action or proceeding and waives any objection
      to
      venue laid therein. Process in any action or proceeding referred to in the
      preceding sentence may be served on any party anywhere in the
      world.

     

    10.           SEVERABILITY

     

    Whenever
      possible, each provision and term of this Agreement will be interpreted in
      a
      manner to be effective and valid, but if any provision or term of this Agreement
      is held to be prohibited or invalid, then such provision or term will be
      ineffective only to the extent of such prohibition or invalidity, without
      invalidating or affecting in any manner whatsoever the remainder of such
      provision or term or the remaining provisions or terms of this Agreement. If
      any
      of the covenants set forth in Section 4 of this Agreement are held to be
      unreasonable, arbitrary or against public policy, such covenants will be
      considered divisible with respect to scope, time and geographic area, and in
      such lesser scope, time and geographic area, will be effective, binding and
      enforceable against the TEC Parties to the greatest extent
      permissible.

     

    

    
      
        
          
          

        

        
          -87-

          
            

          

        

        
          
          

        

      

    

    

    11.           COUNTERPARTS

     

    This
      Agreement may be executed in one or more counterparts, each of which will be
      deemed to be an original copy of this Agreement and all of which, when taken
      together, will be deemed to constitute one and the same agreement.

     

    12.           SECTION
      HEADINGS, CONSTRUCTION

     

    The
      headings of sections in this Agreement are provided for convenience only and
      will not affect its construction or interpretation. All references to “Section”
or “Sections” refer to the corresponding Section or Sections of this Agreement
      unless otherwise specified. All words used in this Agreement will be construed
      to be of such gender or number as the circumstances require. Unless otherwise
      expressly provided, the word “Including” does not limit the preceding words or
      terms.

     

    13.           NOTICES

     

    All
      notices, consents, waivers and other communications under this Agreement must
      be
      in writing and will be deemed to have been duly given when (a) delivered by
      hand
      (with written confirmation of receipt); (b) sent by facsimile (with written
      confirmation of receipt), provided that a copy is also promptly mailed by
      registered mail, return receipt requested; or (c) when received by the
      addressee, if sent by a nationally recognized overnight delivery service
      (receipt requested), in each case to the appropriate addresses and facsimile
      numbers set forth below (or to such other addresses and facsimile numbers as
      a
      party may designate by notice to the other parties):

     

    Joseph
      D.
      Fail

    

    

    Telephone
      No:                                                                

    Facsimile
      No:                                                                

    Email:                                                                

     

    
      	
              with
                a copy to:

            	 	 	 

    

    Attention:                                                                

    Facsimile
      No:                                                                

     

    Chris
      Chelette

    

    

    Telephone
      No:                                                      

    Facsimile
      No:                                                                

    Email:                                                                

    

    
      
        
          
          

        

        
          -88-

          
            

          

        

        
          
          

        

      

    

    

    with
      a
      copy
      to:                                           

    Attention:                                                                

    Facsimile
      No:                                                                

     

    Robert
      Healea

    

    

    Telephone
      No:                                                      

    Facsimile
      No:                                                                

    Email:                                                                

     

    
      	
              with
                a copy to:

            	 	 	 

    

    Attention:                                                                

    Facsimile
      No:                                                                

     

    Joey
      Garner

    

    

    Telephone
      No:                                                      

    Facsimile
      No:                                                                

    Email:                                                                

     

    
      	
              with
                a copy to:

            	 	 	 

    

    Attention:                                                                

    Facsimile
      No:                                                                

     

    Walter
      Frank

    

    

    Telephone
      No:                                                      

    Facsimile
      No:                                                                

    Email:                                                                

     

    

    
      	
              with
                a copy to:

            	 	 	 

    

    Attention:                                                                

    Facsimile
      No:                                                                

     

    
      	
              TEC:       
                

            	
              Telephone
                Electronics Corporation

            

    

    Attention:                                                                

    

    

    Telephone
      No:                                                      

    Facsimile
      No:                                                                

     

    

    
      
        
          
          

        

        
          -89-

          
            

          

        

        
          
          

        

      

    

    

    with
      a
      copy
      to:                                           

     

    Attention:                                                                

    Facsimile
      No:                                                                

     

    Purchaser:                              Xfone,
      Inc.

    Britannia
      House

    960
      High
      Road

    London,
      N129RY

    United
      Kingdom

    Attention:                                Guy
      Nissenson

    Telephone:                                +44
      208-446-9494

    Facsimile:                                +44
      208-446-7010

    Email:                                guy@Xfone.com

    

    and

    

    Xfone
      USA, Inc.

    2506
      Lakeland Drive, Suite 100

    Flowood,
      MS  39232

    Attention:                                Wade
      Spooner

    Telephone:                                (601)
      664-1108

    Facsimile:                                (601)
      664-1190

    Email:                      wspooner@expetel.com

    

    with
      a
      mandatory

    copy
      to:

    

    Watkins
      Ludlam Winter & Stennis, P.A.

    633
      North
      State Street (39202)

    P.
      O. Box
      427

    Jackson,
      MS 39205-0427

    Attention:                                Gina
      M. Jacobs

    Telephone:                                601-949-4705

    Facsimile:                                601-949-4804

    Email:                                gjacobs@watkinsludlam.com

    

    
      
        
          
          

        

        
          -90-

          
            

          

        

        
          
          

        

      

    

    

    
      	
               

            	
              14.

            	
              ENTIRE
                AGREEMENT

            

      	 	 	 

    

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

     

    [Signature
      Pages Follow]

     

    

    
      
        
          
          

        

        
          -91-

          
            

          

        

        
          
          

        

      

    

    

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

     

    

    
      	
              TEC
                PARTIES:

               

              TELEPHONE
                ELECTRONICS CORPORATION, INC.

               

               

              By:                                                                  

                     _________________________,
                President

            	
              PURCHASER:

               

              XFONE,
                INC.

               

               

               

              Guy
                Nissenson, President

            
	 	 
	
               

               

              Joseph
                D. Fail, Individually

               

              Chris
                Chelette, Individually

               

              Robert
                Healea, Individually

               

              Joey
                Garner, Individually

               

              Walter
                Frank, Individually

            

    

    

    

    

    
      
        
          
          

        

        
          -92-

          
            

          

        

        
          
          

        

      

    

     

     PURCHASER
      SCHEDULES

     

    
      
        

      

    

    

    Schedule
      4.3 - Required Consents

    

    
      	
              ·  

            	
              Approval
                of any related “Application for Listing of Securities” by the TASE.
                [Applicable in the event that Purchaser’s shares of common stock are to be
                issued (or to be issuable upon conversion) in connection with the
                Contemplated Transactions].

            

    

    

    
      	
              ·  

            	
              Approval
                of any related “Additional Listing Application” by
                AMEX.

            

    

    
      	
               

            	
              [Applicable
                in the event that Purchaser’s shares of common stock are to be issued (or
                to be issuable upon conversion) in connection with the Contemplated
                Transactions].

            

    

    

    
      	
              ·  

            	
              Approval
                of the Contemplated Transactions by the Purchaser's
                shareholders.

            

    

    
      	
               

            	
              [Applicable
                in the event that the number of Purchaser’s shares of common stock to be
                issued (or to be issuable upon conversion) in connection with the
                Contemplated Transactions exceeds 20% of the Purchaser’s outstanding
                shares of common stock].

            

    

    

    

    

    
      
        
          
          

        

        
          -93-

          
            

          

        

        
          
          

        

      

    

    

    Schedule
      4.4 - Non-Contravention

    

     None.

    

    

    
      
        
          
          

        

        
          -94-

          
            

          

        

        
          
          

        

      

    

    

    Schedule
      4.8 - Broker's Fees

    

    Oberon
      Securities, LLC

    

    

    
      
        
          
          

        

        
          -95-ex10107.htm

    Exhibit
      10.107

     

    XFONE

    

    June
      15,
      2007

    

    Ms.
      Barbara Andrews

    President
      & CEO

    NTS
      Holdings, Inc.

    5307
      W.
      Loop 289

    Lubbock,
      TX 79414

    

    

    Letter
      of Joint Venture

    

    Dear
      Barbara:

    

    Xfone,
      Inc. (“Xfone”) is pleased to submit this letter regarding a joint venture
      between NTS Holdings, Inc. and its affiliates and assigns (“Holdings”) and
      Xfone, Inc. and its affiliates and assigns (“Xfone”) (together the “Joint
      Venture”), with regards to Xfone acquiring 100% ownership of NTS Communications,
      Inc. and / or its affiliates and assigns (“NTS”) (the
“Transaction”).  In addition, this letter summarizes the key
      employment terms between Xfone on the one hand and Barbara Andrews, Brad
      Worthington and Jerry Hoover (together “Senior Management”) on the
      other.  This Joint Venture shall terminate upon consummation of the
      Transaction.  NTS Communications and Xfone USA shall be merged or
      combined into a single entity (“US Operations”).

    

    
      	
              1.  

            	
              Terms.

            

    

     

    
      	
              (a)  

            	
              Holdings
                Participation in Free Cash Flow of US Operations.  As
                consideration for its participation in the Joint Venture, Holdings
                will
                receive 5% of the excess aggregate free cash flow (defined as cash
                flow
                from US Operations less capital expenditures of the US Operations
                less
                purchase price for any subsequent acquisitions in the U.S. combined
                with
                the US Operations) generated by the US Operations in perpetuity beginning
                at such time as Xfone has received a return on its invested capital
                equivalent to the purchase price for NTS plus a preferred annual
                return of
                8% a year.  Amounts due to NTS Holdings shall be paid annually
                within 30 calendar days of the completion of prior year audited financial
                statements.

            

    

     

    
      	
              (b)  

            	
              Employment.  Simultaneously
                with the execution of the Stock Purchase Agreement between Xfone
                and NTS,
                Xfone will enter into five year employment agreements (executed in
                conjunction with the Stock Purchase Agreement and effective on the
                date of
                the consummation of the Transaction) with each member of the Senior
                Management on such terms and conditions as would be negotiated and
                agreed
                by both parties, including mutually agreeable provisions regarding
                term,
                base and incentive compensation, confidentiality, assignment to the
                US
                Operations of intellectual property rights in past and future work
                product
                and restrictions on competition.  Xfone would also offer at will
                employment to many of NTS’ employees and would expect Senior Management to
                use its best efforts to assist Xfone to employ these
                employees.  Some of the specific terms that have already been
                agreed to with regards to such Employment
                include:

            

    

     

    
      	
              i.  

            	
              The
                compensation for Senior Management under the employment agreement
                will be
                consistent with current remuneration.  Brad Worthington and
                Jerry Hoover however will receive a one-time 3% increase in their
                base
                salaries starting at the close of the
                Transaction;

            

    

     

    
      	
              ii.  

            	
              At
                the close of the Transaction, each of the members of Senior Management
                will receive a one-time cash bonus equivalent to one year’s base salary
                with the exception of Barbara Andrews who will receive a $500,000
                cash
                bonus;

            

    

     

    
      	
              iii.  

            	
              Senior
                Management shall receive the following stock option plan (stock options
                shall be defined as the right to purchase Xfone, Inc. common
                stock):

            

    

     

    
      	
              1.  

            	
              Barbara
                Andrews shall receive (i) 250,000 5-year options with a strike price
                of
                10% above the average closing price for the prior ten trading days
                immediately prior to signing of the definitive Stock Purchase Agreement
                and (ii) upon serving 2 years under her employment contract, shall
                receive
                an additional 267,000 5-year options with a strike price of $5.00
                per
                share.

            

    

     

    
      	
              2.  

            	
              Brad
                Worthington shall receive (i) 400,000 5-year options with a strike
                price
                of 10% above the average closing price for the prior ten trading
                days
                immediately prior to signing of the definitive Stock Purchase Agreement
                and (ii) upon serving 2 years under his employment contract, shall
                receive
                an additional 267,000 5-year options with a strike price of $5.00
                per
                share.

            

    

     

    
      	
              3.  

            	
              Jerry
                Hoover shall receive (i) 400,000 5-year options with a strike price
                of 10%
                above the average closing price for the prior ten trading days immediately
                prior to signing of the definitive Stock Purchase Agreement and (ii)
                upon
                serving 2 years under his employment contract, shall receive an additional
                267,000 5-year options with a strike price of $5.00 per
                share.

            

    

     

    
      	
              (c)  

            	
              Xfone
                and Holdings will (i) cooperate with each other in good faith in
                the
                preparation, negotiation and execution of the Stock Purchase Agreement,
                related agreements and other necessary documentation, in making any
                required governmental filings and in obtaining all material consents
                from
                third parties; and (ii) use their best efforts to execute as soon
                as
                possible a Purchase Agreement and related agreements with respect
                to the
                Transaction and to obtain all material third-party
                consents.

            

    

     

    2.   Expenses.  Holdings,
      on one hand and Xfone, on the other hand, shall bear their respective expenses,
      costs and fees (including attorneys and accountants) in connection with the
      Joint Venture contemplated hereby.

    

    3.   Public
      Announcements.  Neither Holdings nor Xfone will make any
      announcement of the proposed Joint Venture or Transaction contemplated by this
      joint venture letter prior to the execution of the Purchase
      Agreement.  The foregoing shall not restrict in any respect Holdings
      or Xfone ability to communicate information concerning this Joint Venture letter
      and the transactions contemplated hereby to their respective affiliates’,
      officers, directors, employees and professional advisers, and, to the extent
      relevant, to third parties whose consent is required in connection with the
      transaction contemplated by this Joint Venture letter.

    

    4.   Exclusive
      Negotiating Rights.  In order to induce Holdings and Xfone to
      commit the resources, forego other potential opportunities, and incur the legal,
      accounting and incidental expenses necessary properly to evaluate the Joint
      Venture, and to negotiate the terms of, and consummate, the Transaction
      contemplated hereby, Holdings and Xfone for a period of 2 years after the date
      hereof, their respective affiliates and their respective officers, directors,
      employees and agents shall not initiate, solicit, encourage, directly or
      indirectly, or accept any offer or proposal, regarding the possible acquisition
      of NTS by any party other than the Joint Venture, including, without limitation,
      by way of a purchase of shares, purchase of assets or merger, of all or any
      substantial part of NTS’s equity securities or assets, and shall not (other than
      in the ordinary course of business as heretofore conducted) provide any
      confidential information regarding NTS’s assets or business to any person other
      than the Joint Venture and its representatives.  Notwithstanding the
      foregoing, should the Joint Venture created hereby fail to consummate the
      transactions contemplated, Senior Management shall in the exercise of their
      present duties with NTS, be free to sell, offer to sell, negotiate and or
      propose the sale of NTS to an unaffiliated party.

    

    5.   Other
      NTS Employees.  NTS key employees will also be eligible to
      participate in Xfone’s employee stock option plan and will be credited for
      seniority based on total time employed with NTS.

    

    6.   Miscellaneous.  This
      letter shall be governed by the substantive laws of the State of New York
      without regard to conflict of law principles.  This letter constitutes
      the entire understanding and agreement between the parties hereto and their
      affiliates with respect to its subject matter and supersedes all prior or
      contemporaneous agreements, representations, warranties and understandings
      of
      such parties (whether oral or written).  No
      promise, inducement, representation or agreement, other than as expressly set
      forth herein, has been made to or by the parties hereto.  This letter
      may be amended only by written agreement, signed by the parties to be bound
      by
      the amendment. Evidence shall be inadmissible to show agreement by and between
      such parties to any term or condition contrary to or in addition to the terms
      and conditions contained in this letter.  This letter shall be
      construed according to its fair meaning and not strictly for or against either
      party.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Please
      confirm your agreement with the foregoing by signing and returning a copy of
      this Letter to the undersigned.

    

    

    

    Very
      truly yours,

    

    Xfone,
      Inc.

    

    

    By:
      _/s/ Guy
      Nissenson                                                      

    Guy
      Nissenson

    President
&
CEO

    

    ACCEPTED
      AND AGREED TO AS

    OF
      THE
      DATE OF THIS LETTER

    

    NTS
      Holdings, Inc.

    

    

    By:           /s/
      Barbara
      Andrews                                           

    Barbara
      Andrews

    President
      & CEO,

    

    Senior
      Management

    

    By:           /s/
      Barbara
      Andrews                                           

    Barbara
      Andrews

    Individually
      as a member of Senior Management

    

    By:           /s/
      Brad
      Worthington                                                      

    Brad
      Worthington

    Individually
      as a member of Senior Management

    

    By:           /s/
      Jerry
      Hoover                                           

    Jerry
      Hoover

    Individually
      as a member of Senior Management

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00128-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00128-of-00352.parquet"}]]