Document:

Unassociated Document

    Exhibit
      10.108

    

    [TRANSLATION
      FROM HEBREW]

    

    

    EMPLOYMENT
      CONTRACT

    

    Which
      was made and signed in Petach-Tikva on August 26, 2007

     

    
      	 	 

      	 BETWEEN:	
              XFONE
                018 LTD.

            

      	
               

            	
              A
                Private Company No.513533430

            

    

    
      	
               

            	
              of
                1 Ha'Odem Street, Petach-Tikva

            

    

    
      	
               

            	
              (Hereinafter:
                "the Company")

            

    

    

    
      	
               

            	
              OF
                THE FIRST
                PART;

            

    

    

    
      	
              AND:

            	
              MR.
                RONI HALIVA

            

    

    
      	
               

            	
              Identity
                Card No.59664060

            

    

    
      	
               

            	
              55/1
                Hagvai Hasela Street, Ma'aleh
                Adumim

            

    

    
      	
               

            	
              (Hereinafter:
                "the Employee")

            

    

    

    
      	
               

            	
              OF
                THE SECOND PART;

            

    

    

    
      	
              WHEREAS:

            	
              The
                Company wishes to employ the Employee in the position of General
                Manager
                of the Company;

               

            
	
              AND
                WHEREAS:

            	
              The
                Employee wishes to be employed by the Company in the position of
                General
                Manager of the Company;

               

            
	
              AND
                WHEREAS:

            	
              The
                parties wish the terms of employment of the Employee by the Company
                to be
                governed by and based on written provisions, and all as specified
                hereunder in this agreement;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IT
      HAS THEREFORE BEEN DECLARED, STIPULATED AND AGREED BETWEEN THE PARTIES AS
      FOLLOWS:

    

    
      	
              1.

            	
              PREAMBLE

            

    

    

    
      	
               

            	
              1.1

            	
              The
                preamble to this agreement constitutes an integral part of
                it.

            

    

    

    
      	
               

            	
              1.2

            	
              The
                section title headings in this agreement are for convenience and
                reference
                only and nothing in them shall be used in the interpretation of the
                agreement.

            

    

     

    
      	
              2.

            	
              THE
                EMPLOYEES' POSITION

            

    

    

    
      	
               

            	
              2.1

            	
              The
                Employee will be employed by the Company in the position of General
                Manager of the Company ("the
                Position").

            

    

    

    
      	
               

            	
              2.2

            	
              In
                fulfilling his Position, the Employee will be subject to the Board
                of
                Directors of the Company (hereinafter: "the Board of
                Directors") and shall act in accordance with its
                instructions, and in accordance with the instructions of the Chief
                Executive Officer  of Xfone,
                Inc.  

            

    

    

    
      	
               

            	
              2.3

            	
              In
                the performance of his duties in the Position the Employee will work
                full
                time, and will devote all his working time and effort to his employment
                with the Company. The Employee will devote to his employment with
                the
                Company, all his knowledge and experience, and will act diligently
                and to
                the best of his ability for the advancement of the Company and for
                its
                success.

            

    

    

    
      	
               

            	
              2.4

            	
              As
                the Position requires a special degree of personal confidence and
                as the
                Company is unable to control the working hours and hours of rest
                of the
                Employee in the Position, the provisions of the Hours of Work and
                Rest
                Law, 5711-1951 shall not apply to the employment of the Employee
                by the
                Company.

            

    

    

    
      	
              3.

            	
              DECLARATIONS
                AND OBLIGATIONS OF THE
                EMPLOYEE:

            

    

    

    
      	
               

            	
              3.1

            	
              The
                Employee declares that to the best of his understanding he has the
                skills,
                know-how, experience and ability to fulfill his Position under this
                Agreement, and that there is no legal or any other impediment to
                his
                employment by the Company.

            

    

    

    Without
      derogating from the generality of the foregoing, the Employee declares and
      confirms that he has not been convicted of a criminal offense. For the purposes
      of this section, "Criminal Offense” - excludes a traffic offense as such is
      defined in the Traffic Ordinance (New Version) (hereinafter: "the Ordinance"),
      but includes an offense under Section 64 (Causing Death by Negligent Driving)
      of
      the Ordinance or under Section 64A (Leaving the Scene of an Accident after
      Injury) of the Ordinance, in respect of which the prescription period has not
      expired, as such is defined in Section 16 of the Criminal Records and
      Rehabilitation of Offenders Law, 5741-1981.

    

    
      	
               

            	
              3.2

            	
              The
                Employee undertakes to perform his duties diligently and faithfully
                and to
                comply with the instructions of the Board of Directors with regard
                to
                performance of the Position.

            

    

    

    
      	
               

            	
              3.3

            	
              The
                Employee undertakes to deliver to the Board of Directors any information
                in his possession that is likely to promote the interests of the
                Company
                or be beneficial to it, including in connection with marketing,
                distribution and sales, immediately upon such information coming
                into his
                possession.

            

      	 	 	 

    

    
      	
               

            	
              3.4

            	
              The
                Employee shall notify the Board of Directors immediately of any matter
                or
                subject in which he has a personal interest and which might give
                rise to a
                conflict of interests with his Position in the
                Company.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              3.5

            	
              The
                Employee will make a report to the Board of Directors of any mishap,
                problem or difficulty in connection with his activity and/or the
                Company's
                activity which he encounters during the fulfillment of his duties
                or in
                any other circumstances.

            

    

    

    
      	
               

            	
              3.6

            	
              The
                Employee undertakes not to accept any payment or benefit from any
                party
                including customers and suppliers of the Company directly or indirectly
                connected with his employment in the Company. The Employee undertakes
                to
                immediately notify the Board of Directors of any transaction or interest
                of the Company from which he or any person related to or associated
                with
                him, is likely to derive a benefit.

            

    

    

    
      	
               

            	
              3.7

            	
              The
                Employee will be faithful to the Company and avoid any act and/or
                omission
                that might prejudice the Company or its reputation or harm it in
                any
                way.

            

    

    

    
      	
               

            	
              3.8

            	
              The
                Employee hereby undertakes not to engage in any other business and/or
                occupation and/or other work either directly or indirectly, as a
                salaried
                Employee or as self employed, as an open or secret partner as an
                advisor
                or in any other way whether during working hours or at any other
                time or
                date, whether or not for payment or reward, unless the written and
                advance
                approval of the Board of Directors has been obtained
                thereto.

            

    

    

    
      	
              4.

            	
              THE
                CONSIDERATION:

            

    

    

    
      	
               

            	
              4.1

            	
              In
                consideration for fulfillment of the obligations, declarations and
                functions of the Employee under this Agreement in their entirety
                and in
                due time, the Employee's salary commencing from the date of commencement
                of his employment in the Company, will be NIS 36,000 gross per month
                on a
                full time employment basis (hereinafter: "the Basic
                Salary").

            

    

    

    
      	
               

            	
              4.2

            	
              The
                salary will be linked to the rate of increase of the Consumer Prices
                Index
                which is published by the Central Bureau of Statistics or any official
                index that replaces it (hereinafter: "the
                Index") commencing with the Index known on the
                date of signature of this Agreement. It is clarified that the salary
                will
                not be reduced as a result of a fall in the Index. An updating of
                the
                salary will occur once per quarter. Such updating shall replace cost
                of
                living increases and shall in any event be effective instead of
                them.

            

    

    

    
      	
               

            	
              4.3

            	
              The
                Employee's salary will be paid once monthly no later than the seventh
                day
                of each month in respect of the preceding
                month.

            

    

    

    
      	
               

            	
              4.4

            	
              Except
                for the salary as stated above in this Section 4 and for the conditions
                and benefits specified hereunder in this Agreement the Employee will
                not
                be entitled to any additional salary and/or payment for carrying
                out all
                his obligations under this
                Agreement.

            

    

    

    
      	
               

            	
              4.5

            	
              The
                Company shall deduct, from the consideration that is paid to the
                Employee
                as specified in Section 4.1, Income Tax, National Insurance, Health
                Tax ,
                contributions made for directors and executives insurance, contributions
                made for an continuing education fund , value of use of a vehicle,
                and any
                other deduction that it is bound to make under any
                law.

            

    

    

    
      	
               

            	
              4.6

            	
              Once
                annually, after publication of the Company's annual financial statements,
                a discussion concerning salary shall take place between the Employee
                and
                the Company. It is hereby clarified that nothing in the foregoing
                shall be
                construed as obligating the Company to raise the Employee's salary
                as part
                of such a discussion.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              5.

            	
              ANNUAL
                BONUS:

            

    

    

    
      	
               

            	
              5.1

            	
              Once
                annually, and no later than November 30, the Employee shall submit
                a
                proposal for an annual budget to the Board of Directors and in it,
                his
                recommendation for the Company's targets for that year. The Board
                of
                Directors of the Company, after a discussion with the participation
                of the
                Employee, shall fix the Company's budget and its targets for the
                ensuing
                budget year (hereinafter: "the
                Targets").

            

    

    
      	
               

            	
              "Budget
                Year" - means a period of 12 months commencing
                on January 1, of each year.

            

    

    

    
      	
               

            	
              5.2

            	
              The
                Employee's entitlement to an annual bonus and the amount thereof
                is
                contingent on the Company meeting the Targets fixed for the relevant
                budget year (hereinafter: "the
                Bonus").

            

    

    

    
      	
               

            	
              5.3

            	
              The
                parties agree that the amount of the Bonus shall be as
                follows:

            

    

    

    
      	
               

            	
              5.3.1

            	
              If
                the Company does not meet 70% of the Targets - the Employee will
                not be
                entitled to any annual Bonus.

            

    

    

    
      	
               

            	
              5.3.2

            	
              If
                the Company meets at least 70% of the Targets and up to 100% of the
                Targets - the Employee will be entitled to a Bonus as follows: meeting
                100% of the Targets will give the Employee a Bonus amounting to 5
                salaries. Meeting Targets that amount to between 70% and 100% will
                give
                the Employee a proportionate linear Bonus. Thus for example: Meeting
                an
                amount of 70% of the Targets will give the Employee a Bonus amounting
                to
                3.5 salaries (70% of 5 salaries), meeting an amount of 80% of the
                Targets
                will give the Employee a Bonus amounting to 4 salaries (80% of 5
                salaries).

            

    

    

    
      	
               

            	
              5.3.3

            	
              If
                the Company meets at least 105% of the Targets - the Employee will
                be
                entitled to a Bonus amounting to 7
                salaries.

            

    

    

    
      	
               

            	
               5.3.4

            	
              If
                the Company meets at least 120% of the Targets - the Employee will
                be
                entitled to a Bonus amounting to 9
                salaries.

            

    

    

    
      	
               

            	
              5.3.5

            	
              If
                the Company meets at least 137.5% of the Targets - the Employee will
                be
                entitled to a Bonus amounting to
                11salaries.

            

    

    

    
      	
               

            	
              5.3.6

            	
              If
                the Company meets at least 150% of the Targets - the Employee will
                be
                entitled to a Bonus amounting to 13
                salaries.

            

    

    

    
      	
               

            	
              5.3.7

            	
              Salaries
                for the purposes of this Section 5.3 means: the Basic Salary as such
                is
                defined above in Section 4.1

            

    

    

    
      	
               

            	
              5.4

            	
              The
                Bonus (in so far as the Employee is entitled to one) will be paid
                to the
                Employee once annually together with payment of the salary in the
                month
                following the month in which the Company's annual audited financial
                statements for the relevant financial year were
                approved.

            

    

    

    
      	
               

            	
              5.5

            	
              In
                respect of the Bonus that is due to the Employee in accordance with
                the
                provisions of this Agreement, an advance payment shall be made to
                the
                Employee once every three months, in the first salary at the end
                of each
                quarter, and this in accordance with the Company's reviewed financial
                statements and subject to him, meeting the Targets assigned to him.
                Settlement of accounts shall take place at the end of the financial
                year
                and the necessary adjustments shall be made to the annual results
                in
                accordance with the audited financial statements of the
                Company.

            

    

    

    
      	
               

            	
              5.5.1

            	
              If
                it should transpire that the quarterly advance payment made to the
                Employee during the budget year, including the provisions set aside
                in
                respect of the basic Bonus for the pension plan and the continuing
                education fund, is lower than the amount of the Bonus and the provisions
                made for it, that is due to the Employee - the deficiency shall be
                paid on
                a date commencing 30 days after publication of the Company's annual
                audited financial statements in respect of such tax
                year.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              5.5.2

            	
              If
                it should transpire that the quarterly advance payment made to the
                Employee, including the provisions set aside in respect of it for
                the
                pension plan and the advance study fund, exceed the annual Bonus
                and the
                provisions made for it, the overpayment to the Employee will be set
                off
                against the quarterly advance payments that may be become due to
                the
                Employee in the future, if and in so far as any become due to the
                Employee, and/or against such provisions that have to be set aside
                in
                respect of the Employee for the following quarters and/or for any
                amount
                that becomes due to the Employee from the Company during the term
                of his
                employment in the Company and/or upon the termination thereof, including
                salary.

            

    

    

    
      	
               

            	
              5.6

            	
              It
                is hereby clarified that upon termination of the Employee's employment
                a
                final settlement of accounts shall take place and all such adjustments
                as
                are necessary shall be made as at the date of termination of the
                Employee's employment with the
                Company.

            

    

    

    
      	
               

            	
              5.7

            	
              As
                the Employee commenced employment with the Company in the course
                of a
                calendar year, the parties agree that for the months of September,
                October
                and November 2007, and only in respect of these months, the Employee
                will
                be paid a "budget preparation bonus" of NIS 6,000 gross per
                month.  During this period the Employee must submit his annual
                budget proposal for the Company to the Board of Directors, for the
                ensuing
                year, and including in it his recommendation for the Company's Targets
                including for December 2007 and for 2008. In respect of December
                2007 the
                Employee will be paid a partial annual Bonus depending on the fractional
                proportion of his employment with the Company in 2007 and in accordance
                with the foregoing provisions of Section
                5.3.

            

    

    

    
      	
               

            	
              5.8

            	
              In
                the event of the labor relationship between the Employee and the
                Company
                terminating, and this for any reason except in the circumstances
                detailed
                below in Section 19.5, the Employee will be entitled to a proportionate
                payment of the Bonus in respect of the period up to the giving/receipt
                of
                prior notice, and this subject to his signature of a no claims letter
                and
                to him meeting his obligation as to no competition with the Company.
                The
                Employee will also be entitled to proportionate payment of the Bonus
                in
                respect of the prior notice period, and this irrespective of whether
                or
                not payment is made in lieu.

            

    

    

    
      	
               

            	
              5.9

            	
              It
                is hereby expressly clarified and agreed that the calculation as
                to
                entitlement to Bonus will be made by the Company's
                Accountant.

            

    

    

    
      	
               

            	
              5.10

            	
              It
                is hereby clarified, that the Bonus up to an amount equivalent to
                9.66
                salaries per annum, in so far as it is due to the Employee, will
                be deemed
                to be part of the Employee's salary for the purpose of calculating
                severance pay and for the purpose of making provisions for contributions
                to directors and executives insurance and the continuing education
                fund
                (hereinafter: "the Basic
                Bonus").

            

    

    

    
      	
               

            	
              It
                is hereby clarified that nothing in the contents of this section
                shall
                derogate from the provisions of Section 5.2 of this
                Agreement.

            

    

    

    
      	
               

            	
              5.11

            	
              It
                is expressly agreed between the parties that the Bonus that is to
                be paid
                to the Employee over and above the Basic Bonus constitutes an increment
                and is not part of salary of the Employee's employment in any respect,
                including for the purpose of calculating the amount of social benefits
                and
                including severance pay that is due to the Employee, in so far as
                any
                becomes due to him in the future.

            

    

    

    
      	
               

            	
              This
                Section shall be submitted to the Minister of Industry and Trade
                for
                approval in accordance with Section 28 of the Severance Pay
                Law.

            

    

    

    
      	
               

            	
              5.12

            	
              The
                parties agree that if the parties do not apply for approval of the
                Minister of Industry and Trade or approval of Minister of Industry
                and
                Trade is not received, or if it is determined that such approval
                is not
                valid for any reason, then in the event that it is determined by
                a
                competent party that the Bonus must be taken into account over and
                above
                the Basic Bonus which has been paid to the Employee, as a component
                for
                the purposes of severance pay and only if the Company has paid severance
                pay in respect of such amount of the Bonus as exceeds the Basic Bonus,
                the
                following provisions shall apply:

            

    

    

    
      	
               

            	
              5.12.1

            	
              The
                amount of the Bonuses paid to the Employee under this Agreement in
                excess
                of the Basic Bonus shall be reduced by the rate of
                8.33%.

            

    

    

    
      	
               

            	
              5.12.2

            	
              The
                Employee will be obliged to make a refund to the Company immediately
                upon
                its demand, of such severance pay as was included in the Bonuses
                that were
                paid to him in excess of the Basic Bonus, amounting to 8.33% of the
                total
                of all the payments made to him, with the addition of linkage
                differentials and interest commencing from the date of each of the
                individual payments paid to him, and until the date of actual refund
                to
                the Company.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              6.

            	
              PENSION
                PLAN:

            

    

    

    
      	
               

            	
              6.1

            	
              Commencing
                from the date of commencement of his employment with the Company,
                the
                Company undertakes to allocate and set aside, for directors and executives
                insurance, of the Employee's choice, or to a recognized pension fund
                of
                his choice (hereinafter: "the Pension Plan"), 5% of the
                qualifying salary for the allocations in respect of retirement on
                pension,
                8.333% on account of severance pay and up to 2.5% in respect of loss
                of
                working capacity.

            

    

    

    
      	
               

            	
              The
                Company shall deduct a further 5% of the qualifying salary for
                allocations, for pension, and shall remit such amount to the Pension
                Plan.
                It is explicitly agreed that the allocations and the deductions for
                the
                Pension Plan from the Basic Salary will be made on a month to month
                basis
                whereas the allocations and deductions in respect of the Basic Bonus
                (the
                whole or part of it - depending on the Employee's entitlement under
                this
                Agreement), as such is defined in Section 5.11, will be made on the
                date
                of payment of the advance payments on account of the
                Bonus.

            

    

    

    
      	
               

            	
              6.2

            	
              "The
                Qualifying Salary for Allocations" - means the
                Basic Salary with the addition of the Basic
                Bonus.

            

    

    

    
      	
               

            	
              6.3

            	
              It
                is expressly agreed between the parties that in so far as the Employee
                wishes to continue the pension plan that is in existence for him
                prior to
                the date of signature of this Agreement (hereinafter: "the
                Existing Pension Plan"), the company's allocations and the
                deductions from the Employee's salary shall be made in accordance
                with the
                amount of allocations and deductions under the Existing Pension Plan.
                It
                is hereby clarified that the Existing Pension Plan is a mixture of
                capital
                and benefit related directors and executives insurance plans (with
                Migdal)
                the allocations in respect of which are as specified in Section 6.1,
                and
                the old Makefet Pension Fund in respect of which the allocations
                are: 7.5%
                employer's payments for compensation, 8.333% employer's payments
                on
                account of severance pay and up to 2.5%, the employer's payments
                in
                respect of loss of working capacity. The Company will also deduct
                an
                additional 7% from that part of the Employer's salary that is allocated
                to
                the pension fund for a pension and shall remit such amount to the
                Makefet
                Pension Fund.

            

    

    

    
      	
               

            	
              6.4

            	
              The
                Company's payments to the Pension Plan for severance pay will be
                on
                account of severance pay that is likely to be due to the Employee
                or his
                survivors, as the case may be. In a case in which the Employee has
                resigned from his employment with the Company or the Employee has
                been
                dismissed from his employment with the Company and his right to payment
                of
                severance pay arises under the Severance Pay Law, the Company shall
                make
                up the difference, if and in so far as there is a difference, between
                the
                amount of the severance pay that is due to the Employee by law, and
                the
                amounts that have accumulated to his credit in the Pension Plan,
                on
                account of severance pay.

            

    

    

    
      	
               

            	
              6.5

            	
              Upon
                termination of the employment of the Employee with the Company for
                any
                reason, except if he was dismissed from the Company in the circumstances
                prescribed in Section 19.5 of this agreement, all such moneys as
                have
                accumulated to his credit in the Pension Plan, including on account
                of
                severance pay, shall be released to the
                Employee.

            

    

    

    
      	
               

            	
              6.6

            	
              In
                the event of the labor relationship between the Employee and the
                Company
                terminating in the circumstances specified in Section 19.5 of this
                agreement the Employee will not be entitled, as aforementioned, to
                prior
                notice, or payment in lieu thereof or to payment of severance
                pay.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              7.

            	
              CONTINUING
                EDUCATION FUND:

            

    

    

    
      	
               

            	
              7.1

            	
              With
                effect from commencement of the Employee's employment with the Company
                the
                Company will, each month, set aside and contribute to a continuing
                education fund, a sum amounting to 7.5% of the qualifying salary
                for
                allocations. The Company shall deduct from the qualifying salary
                for
                allocations a monthly sum equivalent to 2.5% of the salary and shall
                remit
                such sum to the continuing education
                fund.

            

    

    

    
      	
               

            	
              7.2

            	
              It
                is explicitly agreed that the allocations and deductions for the
                continuing education fund from the basic salary, will be made on
                a month
                to month basis and the allocations and deductions in respect of the
                Basic
                Bonus (all or part of it - depending on the Employee's entitlement
                under
                this Agreement), as such is defined in Section 5.11, shall be made
                on the
                date on which the advance payments are made on account of the
                bonus.

            

    

    

    
      	
               

            	
              7.3

            	
              At
                the request of the Employee the Company will make contribution payments
                to
                the continuing education fund up to the ceiling that is recognized
                by the
                Income Tax Authorities as updated from time to time, and subject
                to the
                provisions of this section, the balance of the allocations shall
                be added
                to the Employee's salary (hereinafter: "above the ceiling
                allocations").

            

    

    

    
      	
               

            	
              7.4

            	
              Upon
                termination of the Employee's employment with the Company for any
                reason
                the Company shall release to the Employee's credit all such amounts
                as
                have accrued to his credit in the continuing education
                fund.

            

    

    

    
      	
               

            	
              7.5

            	
              It
                is hereby explicitly clarified that the above the ceiling allocations
                are
                being paid to the Employee, at his request, as a salary increment,
                instead
                of a surplus allocation to the continuing education fund. It is expressly
                agreed that the above ceiling allocations shall not be deemed to
                be part
                of the salary of the Employee in any respect, including, and without
                derogating from the generality of the foregoing, for the purpose
                of
                calculating the amount of social benefits, determination of the qualifying
                salary for the purpose of calculating severance pay, determination
                of the
                qualifying salary for the purpose of calculating holiday pay
                etc.

            

    

    

    
      	
               

            	
              This
                section shall be submitted for the approval of the Minister of Industry
                and Trade in accordance with Section 28 of the Severance Pay
                Law.

            

    

    

    
      	
               

            	
              7.6

            	
              The
                parties agree that if the parties do not apply for approval of the
                Minister of Industry and Trade or approval of Minister of Industry
                and
                Trade is not received, or if it is determined that such approval
                is not
                valid for any reason, then in the event that it is determined that
                the
                above ceiling allocations constitute part of the Employee's salary
                for the
                purpose of calculating severance pay, and this notwithstanding what
                is
                stated above in Section 7.5,  the following provisions shall
                apply:

            

    

    

    
      	
               

            	
              7.6.1

            	
              The
                amount of the above the ceiling allocations paid to the Employee
                under
                this Agreement shall be reduced by the rate of
                8.33%.

            

    

    

    
      	
               

            	
              7.6.2

            	
              The
                Employee will be obliged to refund to the Company immediately upon
                its
                demand, such severance pay as was included in the above ceiling
                allocations, by 8.33% of the total of all the payments made to him,
                with
                the addition of linkage differentials and interest commencing from
                the
                date of each of the individual payments paid to him, and until the
                date of
                actual refund to the Company.

            

    

    

    
      	
               

            	
              7.7

            	
              In
                the event of the termination of the Employee-employer relationship
                between
                the Employee and the Company in such circumstances as are prescribed
                in
                Section 19.5 of this Agreement, such sums shall be remitted to the
                Employee as have accrued to his credit in the continuing education
                fund on
                account of the Employee's contributions only, and the moneys that
                have
                accrued in respect of the Company's contributions to the fund shall
                be
                refunded to the Company.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              8.

            	
              ANNUAL
                LEAVE:

            

    

    

    
      	
               

            	
              8.1

            	
              The
                Employee will be entitled to annual leave of 24 working days for
                each
                complete year of employment.

            

    

    

    
      	
               

            	
              8.2

            	
              The
                date on which the Employee goes on leave shall be fixed by the Company,
                in
                coordination, to the extent that this is possible, with the
                Employee.

            

    

    

    
      	
               

            	
              8.3

            	
              The
                Employee will be entitled to accumulate 48 leave days in accordance
                with
                the provisions of the Annual Leave Law,
                5711-1951.

            

    

    

    
      	
               

            	
              8.4

            	
              The
                annual leave days that have been accumulated in accordance with the
                provisions of this Agreement, to the Employee's credit, may be redeemed
                at
                the end of the term of employment of the Employee in the Company,
                and in
                accordance with the provisions of an Annual Leave Law,
                5711-1951.

            

    

    

    
      	
              9.

            	
              SICK
                DAYS:

            

    

    

    
      	
               

            	
              9.1

            	
              The
                Employee will be entitled to be absent from work because of sickness
                on
                full payment of salary commencing from the first day of his absence
                and
                for a period of 30 days in any year of employment, provided that
                he has
                not received payment in respect of such sick leave days from the
                National
                Insurance Institute and/or the directors and executives
                insurance.

            

    

    

    
      	
               

            	
              9.2

            	
              The
                Employee will be entitled to accumulate sick days up to a maximum
                of 90
                days.

            

      	 	 	 

    

    
      	
               

            	
              9.3

            	
              Sick
                days not utilized by the Employee are not redeemable. Accordingly
                upon
                termination of the Employee-employer relationship between the parties
                no
                compensation or payment shall be made to the Employee for un-utilized
                sick
                days.

            

    

    

    
      	
              10.

            	
              CONVALESCENT
                PAY:

            

    

    

    
      	
               

            	
              The
                Employee will be entitled to payment of convalescent pay in respect
                of 12
                days convalescence in accordance with the provisions of the general
                extension order operative in the national economy which extends provisions
                of the collective agreement signed between the Liaison Office of
                the
                Economic Organizations and the General Labor
                Federation.

            

    

    

    
      	
              11.

            	
              VEHICLE:

            

    

    

    
      	
               

            	
              11.1

            	
              The
                Company will place at the Employee's disposal a suitable vehicle
                for the
                purposes of his employment (Licensing Class 5) and shall bear all
                such
                expenses as are involved in use of the vehicle (Licensing, Insurance,
                Fuel, Repairs etc.).

            

    

    

    
      	
               

            	
              11.2

            	
              The
                Employee shall ensure that the vehicle is properly maintained and
                shall
                use the vehicle carefully, reasonably and all in accordance with
                the
                Company's instructions and
                procedures.

            

    

    
      	
               

            	
              The
                Employee undertakes to carry out day to day examinations of oil and
                water
                in the vehicle and to ensure that it is kept
                clean.

            

    

    

    
      	
               

            	
              11.3

            	
              Income
                Tax in respect of the use value of the vehicle shall apply equally
                to the
                Employee and the Company to the effect that the Income Tax in respect
                of
                use value of the vehicle shall be paid by the Employee, and shall
                be
                deducted from his salary and the Company shall gross up one half of such
                amount.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              11.4

            	
              The
                Employee declares that it has been explained to him that he is personally
                liable for the payment of all traffic or parking fines or other penalties
                that are imposed on the vehicle.

            

      	 	 	 

    

    
      	
               

            	
              If
                the Employee does not pay the aforementioned fines, the Company may
                pay
                the amounts thereof and the Employee hereby gives the Company an
                irrevocable instruction to deduct the amount of the fine/fines from
                any
                sum that is due in the future to the Employee from the
                Company.

            

    

    

    
      	
              12.

            	
              OPTIONS:

            

    

    

    
      	
               

            	
              The
                Employee will be entitled to an allotment of options of Xfone Inc.
                and
                this subject to and in accordance with Appendix A to this
                Agreement.

            

    

    

    
      	
              13.

            	
              SALE
                BONUS:

            

    

    

    
      	
               

            	
              13.1

            	
              Upon
                the occurrence of an entitling event, as such is defined below in
                Section
                13.2, the Employee will be entitled to payment of a special sale
                bonus
                (hereinafter: "the Special Sale
                Bonus").

            

    

    

    
      	
               

            	
              13.2

            	
              One
                of the following shall be deemed an entitling
                event:

            

    

    

    
      	
               

            	
              13.2.1

            	
              Sale
                of all shares of the Company and sale of all activity of the Company,
                provided that the consideration for sale of such shares/activity
                as
                aforesaid has been calculated on the basis on the value of the Company
                which is not lower than 8 million US Dollars valued as at the date
                of
                signature of the aforesaid shares/activity sale
                agreement.

            

    

    

    
      	
               

            	
              13.2.2

            	
              Sale
                of some of the Company's shares and/or sale of part of the Company's
                activity by the Company and/or its shareholders (except Margo Sport
                Ltd.
                which holds 5% of the Company's shares) provided that the proceeds
                of sale
                of such shares/activity have been calculated on the basis of a value
                of
                the Company which is not lower than 10 million US Dollars valued
                as at the
                date of signature of such sale of
                shares/activity.

            

    

    

    
      	
               

            	
              13.3

            	
              The
                Special Sale Bonus shall be paid at the following
                rates:

            

    

    

    
      	
               

            	
              13.3.1

            	
              If
                the agreement governing the entitling event was signed during the
                first
                year of employment of the Employee with the Company - the Special
                Sale
                Bonus will amount to a gross sum that is equivalent to 0.75% of the
                consideration actually paid in respect of the entitling
                event.

            

    

    

    
      	
               

            	
              13.3.2

            	
              If
                the agreement governing the entitling event was signed during the
                second
                year of employment of the Employee with the Company - the Special
                Sale
                Bonus will amount to a gross sum that is equivalent to 1.75% of the
                consideration actually paid in respect of the entitling
                event.

            

    

    

    
      	
               

            	
              13.3.2

            	
              If
                the agreement governing the entitling event was signed during the
                third
                and subsequent years of employment of the Employee with the Company
                - the
                Special Sale Bonus will amount to a gross sum that is equivalent
                to 3.5%
                of the consideration actually paid in respect of the entitling
                event.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              13.4

            	
              The
                sale bonus will be paid at the end of 30 days after the making of
                all such
                payments as are due to the Company and/or to its shareholders in
                respect
                of the entitling event.

            

    

    

    
      	
               

            	
              13.5

            	
              For
                the removal of doubt it is hereby clarified that the Employee will
                be
                entitled to the Special Sale Bonus as stated in Section 13 herein,
                but
                only if the agreement governing the entitling event was signed during
                the
                term of the Employee's employment with the Company (including during
                the
                prior notice period).

            

    

    

    
      	
              14.

            	
              MISCELANEOUS
                AND ANCILLARY BENEFITS:

            

    

    

    
      	
               

            	
              14.1

            	
              The
                Company will insure the Employee under officeholders insurance under
                the
                Company's existing policy at the date of signature of this agreement
                the
                terms and conditions of which will be the same as those that apply
                to the
                Directors of the Company.

            

    

    

    
      	
               

            	
              14.2

            	
              The
                Company will put a cellular telephone at the Employee's disposal
                and shall
                bear all the costs of its use. The use value of the telephone shall
                be the
                Employee's liability and shall be deducted from his
                salary.

            

    

    

    
      	
               

            	
              14.3

            	
              The
                Employee will be entitled to a subscription to a daily newspaper
                of his
                choice.

            

    

    

    
      	
               

            	
              14.4

            	
              The
                Employee will be entitled to a monthly subscription for travel on
                a toll
                road (Highway 6).

            

    

    

    
      	
              15.

            	
              PAYMENT
                DURING RESERVE DUTY:

            

    

    

    
      	
               

            	
              The
                Employee undertakes to notify the Board of Directors forthwith, of
                any
                summons that he has received for active service in the reserves.
                The
                handling of an attempt to obtain a deferment of reserve duty shall
                be done
                in coordination with the Board of Directors. At the end of the period
                of
                reserve duty the Employee will furnish the Company with all such
                certificates as are necessary for the purpose of recovery of a reserve
                duty compensation payment from the National Insurance Institute.
                Subject
                to the foregoing, the Company shall pay the Employee a full salary
                for the
                days on which he was absent from work due to reserve service as
                aforesaid.

            

    

    

    
      	
              16.

            	
              NON-DISCLOSURE:

            

    

    

    
      	
               

            	
              16.1

            	
              The
                Employee shall maintain confidentiality and shall not disclose to
                any
                other person any information or professional, financial, commercial
                or
                other information which either directly or indirectly pertains to
                the
                Company, the Company's shareholders, to a corporate body which is
                controlled by any of the Company's shareholders, to a corporate body
                which
                the Company controls, including but without derogating from the generality
                of the foregoing, the Company's practices and/or working methods
                and/or
                activity, and/or in a corporate body as
                described.

            

    

    

    
      	
               

            	
              16.2

            	
              Notwithstanding
                the foregoing it is agreed that the aforementioned obligation shall
                not
                apply with regard to delivery of information to third parties, if
                this is
                necessary for the performance of the Employee's function in the Company
                and his work therein and to such extent as is
                necessary.

            

    

    

    
      	
               

            	
              16.3

            	
              The
                obligations of the Employee as stated in this Section 16 shall remain
                in
                force and also shall be binding on the Employee without time limit
                after
                the employer-Employee relationship between him and the Company has
                terminated.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              17.

            	
              NON-COMPETITION:

            

    

    

    
      	
               

            	
              17.1

            	
              For
                a period of 12 months from the date of termination of employer-Employee
                relationships for any reason, the Employee will not engage in any
                occupation which might, either directly or indirectly, place him
                in a
                competitive relationship with the company in its sector of activity
                or in
                a conflict of interests with it and this whether salaried or as
                self-employed or as a partner or a shareholder or as an adviser or
                in any
                other way, unless he has obtained the Company’s consent thereto, in
                writing and in advance.

            

    

    

    
      	
               

            	
              17.2

            	
              For
                the removal any doubt it is hereby declared that without derogating
                from
                the Employee's obligation as stated in Section 16 and in Section
                17.1
                above, the Employee will be under no restriction in the use of know-how
                and experience that he possessed prior to the commencement of his
                employment in the Company.

            

    

    

    
      	
              18.

            	
              Without
                derogating from the generality of what is stated above in Section
                17 it is
                expressly agreed between the parties that for a period of 12 months
                from
                the date of termination of the employer-Employee relationship for
                any
                reason the Employee will not be entitled to exploit, in the sectors
                in
                which the Company is engaged, his connections with customers or suppliers
                of the Company or commercial or business contacts of the Company
                which
                were created or utilized in the context of his employment in the
                Company
                and he will not be entitled to employ, either directly or indirectly,
                any
                Employee of the Company.

            

    

    

    
      	
              19.

            	
              DURATION
                OF THE EMPLOYMENT AND TERMINATION OF THE
                AGREEMENT:

            

    

    

    
      	
               

            	
              19.1

            	
              The
                contract under this agreement commences with effect from August 26,
                2007.

            

    

    

    
      	
               

            	
              19.2

            	
              The
                parties may terminate the contract of employment at any time on prior
                notice as follows:

            

    

    

    
      	
               

            	
              19.2.1.

            	
              In
                the first year of employment: 120
                days.

            

    

    

    
      	
               

            	
              19.2.2

            	
              Commencing
                from the second year of employment and thereafter: 180
                days.

            

    

    

    
      	
               

            	
              19.3

            	
              Where
                the Company has given prior notice of termination of the employment,
                the
                Company may waive all or part of the actual employment of the Employee
                during the prior notice period, and may also terminate the employment
                forthwith provided that it pays the Employee in lieu of the prior
                notice
                at the salary level and all such social benefits and ancillary benefits
                to
                which the Employee is entitled in accordance with the provisions
                of this
                agreement, and which would have been due to the Employee in practice
                during the prior notice period. It is hereby clarified that the Employee
                will be entitled to payment of bonus for the prior notice period
                whether
                or not it is actually worked, and that the prior notice period,
                irrespective of whether or not worked, will be taken into account
                as a
                period of employment in all respect for the purposes of the Employee's
                entitlement to the options of specified in Appendix A to this
                Agreement.

            

    

    

    
      	
               

            	
              19.4

            	
              If
                the Employee commits a breach of his obligation to give the Company
                prior
                notice of resignation the Employee will be bound to pay the Company
                agreed
                compensation amounting to the total salary that he would have been
                entitled to receive had he worked and this without derogating from
                such
                relief as the Company is entitled to in the circumstances of the
                case.

            

    

    

    
      	
               

            	
              19.5

            	
              The
                parties expressly agree that notwithstanding what is stated above
                in
                Section 19.2, in circumstances in which by law full or partial payment
                of
                severance pay may be denied to the Employee, the Company may terminate
                this agreement forthwith without being under an obligation to pay
                the
                Employee in lieu of prior notice and severance
                pay.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              19.6

            	
              The
                Employee undertakes that upon either of the parties giving notice
                as to
                termination of the employment for any reason, he will transfer his
                position in an orderly manner to his replacement or to any other
                person
                that the Company shall direct him to do so, including preparation
                of a
                detailed report of the matters that he was handling and their up
                to date
                position, and will deliver to the Company all such documents, information,
                equipment and material that has reached him and/or he has prepared
                in
                connection with his employment and no duplicate or photocopy of such
                documents shall remain in his possession in any form
                whatsoever.

            

    

    

    
      	
               

            	
              19.7

            	
              The
                Employee undertakes to be at the Company's disposal, reasonably,
                during a
                period of 6 months after termination of his employment in the Company
                in
                order to provide explanations and clarifications regarding his employment
                and regarding all that has been done and/or said between him and
                customers
                and/or suppliers of the Company and if required to do so by the Company's
                Board, he will come to meetings with customers and/or bodies and/or
                persons with whom he dealt and in respect of whom questions, doubts
                or
                problems have arisen. Such meetings will take place after prior
                coordination with the Employee.

            

    

    

    
      	
               

            	
              19.8

            	
              Notwithstanding
                what is stated above in this Agreement, it is hereby expressly agreed
                and
                declared that if for any reason, approval is not received from the
                defense
                establishment of the State of Israel for employment of the Employee
                of the
                Company in the position (hereinafter: "Defense Establishment
                Security Clearance") or if for any reason and at any time the
                Defense Establishment Security Clearance is revoked, this Agreement
                and
                the employer-employee relationship between the Employee and the Company
                (in so far as it has commenced) shall terminate automatically and
                this
                immediately upon the pronouncement of a decision as to non-granting
                of or
                revocation of Defense Establishment Security
                Clearance.

            

    

    

    
      	
              20.

            	
              MISCELLANEOUS:

            

    

    

    
      	
               

            	
              20.1

            	
              The
                Employee hereby gives the Company an irrevocable instruction to deduct,
                any debt which the Employee owes to the Company on the date of such
                deduction, from his salary or from any other amount which becomes
                due to
                the Employee in the future from the Company, including in respect
                of
                amounts that he will be entitled to receive as a result of and because
                of
                termination of his employment with the Company, including  and
                without derogating from the generality of the foregoing, moneys that
                have
                accumulated to his credit in the directors and executives insurance
                policy
                (including compensation) and in the continuing education fund
                .

            

    

    

    
      	
               

            	
              20.2

            	
              The
                contractual terms as stated in this Agreement, are personal. The
                Employee
                hereby gives his consent to the submission of a copy of this Agreement
                to
                the US Securities and Exchange Commission (SEC) and to the Israeli
                Securities Authority, by Xfone Inc. and he hereby confirms that he
                is
                aware that as a result of such reports this Agreement (including
                Appendix
                A to it) will be available for public
                scrutiny.

            

    

    

    
      	
               

            	
              20.3

            	
              The
                Employee hereby declares and agrees explicitly that this Agreement
                prevails over any agreement, arrangement or other commitment between
                him
                and the Company and/or parent company and/or associated company.
                Any
                agreement or other commitment made prior to signature of this Agreement,
                which has not been expressed explicitly in this Agreement neither
                adds to
                the rights and obligations prescribed in this Agreement or arising
                from
                them, nor detracts from or varies
                them.

            

    

    

    
      	
               

            	
              20.4

            	
              A
                variation and/or cancellation of any one of the provisions of this
                Agreement shall only be made in a written document which shall be
                signed
                by the two parties.

            

    

    

    
      	
               

            	
              20.5

            	
              This
                employment contract shall also be deemed to be notice, as such is
                defined
                in the Notice to employee (Terms of Employment) Law,
                5762-2002.

            

    

    

    
      	
               

            	
              20.6

            	
              Any
                notification that is sent by either of the parties to the other by
                registered mail shall be deemed to have been received by the other
                party
                after 72 hours from the time of its dispatch as
                aforesaid.

            

    

    

    
      	
               

            	
              20.7

            	
              The
                addresses of the parties for the purpose of this Agreement are as
                specified in the preamble to this
                Agreement.

            

    

     

    
      	
               

            	
              AND
                IN WITNESS WHEREOF THE PARTIES HAVE
                SIGNED:

            

    

    

    
      	 	 	 	 	 
	
              /s/Abraham
                Keinan

            	 	 	
              /s/
                Roni Haliva

            	 
	
               

            	 	 	
               

            	 
	
              Xfone
                018 Ltd.     

            	 	 	
              Roni
                Haliva

            	 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              APPENDIX
                A TO EMPLOYMENT CONTRACT

            

    

    
      	
               

            	
               DATED
                AUGUST 26, 2007

            

    

    

    
      	
              1.

            	
              In
                this appendix the following terns shall have the meanings stated
                alongside
                them:

            

    

    

    
      	
               

            	
              1.1

            	
              "The
                Company" - Xfone, Inc.

            

    

    

    
      	
               

            	
              1.2

            	
              "The
                Employee" - Roni Haliva

            

    

    

    
      	
               

            	
              1.3

            	
              "The
                Employer" - Xfone 018
                Ltd.

            

    

    

    
      	
               

            	
              1.4

            	
              "The
                Employment Contract" - an employment contract
                dated August 26, 2007 made between the Employer and the Employee,
                and of
                which this Appendix constitutes an integral
                part.

            

    

    

    
      	
               

            	
              1.5

            	
              "The
                Determining Date"- the date of ratification of the plan by the
                Company's shareholders.

            

    

    

    
      	
               

            	
              1.6

            	
              "The
                Plan"- a stock option/bonus plan that will be adopted and
                approved by the Company in 2007

            

    

    

    
      	
              2.

            	
               

            

      	 	 

    

    
      	
               

            	
              2.1

            	
              Within
                30 days of the Determining Date the Company will grant, for nil
                consideration, 300,000 options as part of and subject to the Plan
                to
                purchase 300,000 of the Company's common stock (hereinafter respectively:
                "the Options", "the Option
                Shares").

            

      	 	 	 

      	 	2.2	For
              as long as an employer-employee relationship exists between the Employee
              and the Employer and subject to the provisions of the Plan (including
              as
              to nullification or termination of options), the Employee will be entitled
              to exercise the Options for the Option Shares, as
              follows:

    

     

    
      	
               

            	
              2.2.1

            	
              The
                Employee will be entitled to exercise up to 75,000 Options after
                twelve
                (12) months have elapsed from the date of commencement of his employment
                with the Employer, but not before the qualifying date (hereinafter:
                "the First Exercise
                Date").

            

    

    

    
      	
               

            	
              2.2.2

            	
              The
                Employee will be entitled to exercise up to 18,750 additional options
                at
                the end of every three (3) months, and this commencing after three
                (3)
                months have elapsed from the first exercise
                date.

            

    

    
      	
              3.

            	
               

            

    

    
      	
               

            	
              3.1

            	
              At
                the end of each calendar year commencing from 2008 and ending in
                2011,
                subject to what is stated below in Section 7, and to the Employee
                meeting
                100% of the targets set in Section 5 of the employment contract in
                respect
                of such year, the Company will grant the Employee for nil consideration,
                25,000 options as part of and subject to the Plan (hereinafter:
                "the Additional Options") to purchase 25,000 of the
                Company's common stocks (hereinafter: "the Additional Option
                Shares") and this up to a maximum aggregate
                number of 100,000 Additional Options for the whole of the said
                period.

            

    

    

    
      	
               

            	
              3.2

            	
              The
                Employee will be entitled to exercise the Additional Options for
                the
                Additional Option Shares commencing from thirty (30) days after the
                date
                of publication of the Company’s annual financial statements, in any year
                during the said period.

            

    

    

    
      	
              4.

            	
              Each
                additional individual option shall be exercisable for one ordinary
                share
                of the Company in consideration of an exercise price that is equivalent
                to
                $US 3.5

            

    

    

    
      	
              5.

            	
              Subject
                to the provisions of the Plan as regards termination or nullification
                of
                options, and subject to what is stated above in Sections 2-3, the
                Options
                and the Additional Options which have vested, shall be available
                for
                exercise up to one hundred and twenty (120) days after termination
                of
                employer-employee relationships between the Employer and the Employee.
                Notwithstanding the foregoing, where the Employee has been dismissed
                by
                the Employer in the circumstances prescribed in Section 19.5 of the
                Employment Contract, the Employee's right to exercise the Options
                and the
                Additional Options that have not yet been exercised, shall terminate
                forthwith, and this even if the time for their vesting has fallen
                due.

            

    

    

    
      	
              6.

            	
              It
                is hereby clarified that in the absence of registration in accordance
                with
                the Securities Act of 1933 (hereinafter: "the American Securities
                Law") the Option Shares and the Additional
                Option Shares shall be issued as "Restricted Shares". The Company
                hereby
                confirms that it intends to register under the American Securities
                Law,
                all such commpn stocks of the Company as arise from exercise of options
                that are to be granted as part of the Plan (including the Option
                Shares
                and the Additional Option Shares).

            

    

    

    
      	
              7.

            	
              The
                right of the Employee to the grant of the Options and the Additional
                Options is conditional on actual employment with the Employer on
                the date
                of the granting of them. Nothing in the contents of the Employment
                Contract and/or in this Appendix shall be construed as constituting
                a
                commitment of the Employer and/or the Employee to any minimum period
                of
                employment. Nothing in the contents of the Employment Contract and/or
                in
                this Appendix shall be construed as creating an employer-employee
                relationship between the Company and the
                Employee.

            

    

    

    
      	
              8.

            	
              The
                Options/the Additional Options are being granted to the Employee
                personally and they are not transferable to any third
                party.

            

    

    

    
      	
              9.

            	
              Any
                tax that applies, if any, to the Employee in respect of allotment
                of the
                Options/ the Additional Options or their exercise, shall be paid
                by the
                Employee.

            

    

    

    
      	
              10.

            	
              This
                Appendix is subject to the provisions of the Plan and in any case
                of
                conflict between its provisions and the provisions of the Plan, the
                provisions of the Plan shall prevail. Notwithstanding what is stated
                in
                the Employment Contract, the laws that apply to this Appendix (including
                in relation to its performance and interpretation) shall be the laws
                that
                apply to the Plan.

            

    

    

    
      	
              11.

            	
              By
                his signature of this Appendix the Employee undertakes to take any
                action
                that is required of him in accordance with the Plan, and including
                the
                signature of any agreement and/or document, the signature of which
                is
                necessary in accordance with the Plan.

               

            

    

    
      	 	 	 	 	 
	
              /s/Abraham
                Keinan

            	 	 	
              /s/
                Roni
                Haliva

            	 
	
               

            	 	 	
               

            	 
	
              Xfone
                018 Ltd.   

            	 	 	
              Roni
                Haliva

            	 

    

    
      	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
              /s/Abraham
                Keinan

            	 	 	
               

            	 
	
               

            	 	 	
               

            	 
	
              Xfone,
                Inc.ex10-1.htm

    Exhibit
      10.1

     

    
      AMENDMENT
        NO. 5 AND REAFFIRMATION AGREEMENT

       

      AMENDMENT
        NO. 5 AND REAFFIRMATION AGREEMENT (this “Amendment”) dated as of August
        21, 2007 to CREDIT AGREEMENT (as amended, modified or supplemented prior
        to the
        date hereof, the “Credit Agreement”) dated as of November 9, 2005, among
        MARVEL ENTERTAINMENT, INC., a Delaware corporation, and HSBC BANK USA, NATIONAL
        ASSOCIATION, as Lender.  All capitalized terms used but not defined
        herein shall have the same meanings herein as in the Credit
        Agreement.  The parties hereto hereby agree as follows:

       

      
        ARTICLE
          I:  AMENDMENTS

      

       

      Section
        1.1.  Defined
        Terms.  Section 1.1 of the Credit Agreement is hereby amended by
        adding a new definition as follows:

       

      “Market
        Capitalization” means
        the Market Price multiplied by the number of shares of Marvel Stock currently
        outstanding.  For purposes of this definition, the number of shares of
        Marvel Stock currently outstanding shall not include any shares held (a)
        as
        Collateral, (b) by any subsidiary of the Borrower or (c) by the Borrower
        as
        treasury stock or otherwise.

       

      Section
        1.2.  Amendment
        to Section 5.2(c).  Section 5.2(c) of the Credit Agreement is
        hereby amended and restated in its entirety to read as follows:

       

      “(c)           Net
        Income of the Borrower and its subsidiaries (other than the Excluded
        Subsidiaries) shall not be less than $1.00 in any fiscal quarter.”

      

      Section
        1.3.  Amendment
        to Section 6.1.  Section 6.1 is hereby amended by adding a new
        clause (n) as follows:

       

      “(n)           Market
        Capitalization shall be less than $1,300,000,000 for (i) any five consecutive
        trading days if Marvel Stock is publicly traded or (ii) for any day if Marvel
        Stock is not publicly traded;”

       

      
        
          ARTICLE
            II:  REAFFIRMATION;
            REPRESENTATIONS AND WARRANTIES

        

      

       

      Section
        2.1.  General.  Each
        Obligor hereby ratifies, confirms and reaffirms in all respects all of its
        Obligations to the Lender as evidenced by the Credit Documents and all of
        its
        Obligations to the Lender arising under any other instrument or agreement
        creating, evidencing, or securing any of its obligations to the
        Lender.

       

      Section
        2.2.  Reaffirmation
        of the Security Agreement and the Guaranty.  Without limiting any
        obligations of any Obligor under the Security Agreements or any other Credit
        Documents, each Obligor hereby reaffirms its grant of a security interest
        in the
        Collateral under the Security Agreements to secure all Obligations (as defined
        in the Security Agreements after giving effect to the amendments
        herein).  Without limiting any obligations of any Guarantor under the
        Guaranty or any other Credit Documents, each Guarantor hereby reaffirms its
        guaranty of the Obligations.

       

      Section
        2.3.  Representations
        and Warranties.  Each Obligor hereby represents and warrants to
        the Lender that, after giving effect to this Amendment, (a) the representations
        and warranties set forth in the Credit Documents are true and correct in
        all
        material respects on and as of the date hereof, except to the extent such
        representations and warranties expressly relate to an earlier date, (b) no
        Default or Event of Default has occurred and is continuing, (c) this Amendment
        has been duly authorized,

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      executed
        and delivered by the Obligors and constitute a legal, valid and binding
        obligation of the Obligors, enforceable against the Obligors in accordance
        with
        its terms and (d) no litigation has been commenced against any Obligor or
        any of
        its subsidiaries seeking to restrain or enjoin (whether temporarily,
        preliminarily or permanently) the performance of any action by any Obligor
        required or contemplated by this Amendment, the Credit Agreement or the Credit
        Documents, in each case as amended hereby.

      
        ARTICLE
          III:  MISCELLANEOUS

      

       

      Section
        3.1.  No
        Waiver.  Except as otherwise provided herein, this Amendment shall
        not (a) constitute a modification, acceptance or waiver with respect to any
        other term, provision or condition of the Credit Agreement or any other
        instrument or agreement referred to therein or (b) except as contemplated
        hereunder, prejudice any right or remedy that the Lender may now have or
        may
        have in the future under or in connection with the Credit Agreement or any
        other
        instrument or agreement referred to therein and all obligations of the Obligors
        and rights of the Lender thereunder shall remain in full force and
        effect.

       

      Section
        3.2.  Amendment.  This
        Amendment, Amendment No. 4 to the Credit Agreement dated as of May 7, 2007
        by
        and between the Borrower and the Lender, Amendment No. 3 to the Credit Agreement
        dated as of June 30, 2006 by and between the Borrower and the Lender, Amendment
        No. 2 to the Credit Agreement dated as of June 28, 2006 by and between the
        Borrower and the Lender, and Amendment No. 1 to the Credit Agreement dated
        as of
        January 18, 2006 by and between the Borrower and the Lender are Credit
        Documents.

       

      Section
        3.3.  Successors
        and Assigns.  The provisions of this Amendment shall be binding
        upon and inure to the benefit of the parties hereto and their respective
        successors and assigns, except that no Obligor may assign or otherwise transfer
        any of its rights or Obligations hereunder without the prior written consent
        of
        Lender (and any attempted assignment or transfer by any Obligor without such
        consent shall be null and void).

       

      Section
        3.4.  Governing
        Law.  This Amendment shall be governed by and construed in
        accordance with the laws of the State of New York.

       

      Section
        3.5.  Headings.  Article
        and section headings are for convenience of reference only, are not part
        of this
        Amendment and shall not affect the construction of, or be taken into
        consideration in interpreting, this Amendment.

       

      Section
        3.6.   Counterparts.  This
        Amendment may be executed in counterparts (and by different parties hereto
        on
        different counterparts), each of which shall constitute an original, but
        all of
        which when taken together shall constitute a single
        contract.  Delivery of an executed counterpart of a signature page of
        this Amendment or of any other Credit Document by telecopy shall be effective
        as
        delivery of a manually executed counterpart of this Amendment or of such
        other
        Credit Document.

       

      Section
        3.7.  Severability.  The
        fact that any term or provision of this Amendment is held invalid, illegal
        or
        unenforceable as to any person in any situation in any jurisdiction shall
        not
        affect the validity, enforceability or legality of the remaining terms or
        provisions hereof or the validity, enforceability or legality of such offending
        term or provision in any other situation, or jurisdiction or as applied to
        any
        person.

       

      [Signature
        page follows]

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the parties hereto have caused this Amendment to be
        duly executed by their respective authorized officers as of the day and year
        first above written.

       

      BORROWER:

      

      MARVEL
        ENTERTAINMENT, INC.

      

      By
        /s/Kenneth P.
        West                         
       
                                                                

      Name:
        Kenneth P. West

      Title:
        Executive Vice President
        and

        Chief
        Financial
        Officer

      

      Notice
        Address for The Borrower:

      

      417
        Fifth
        Avenue

      New
        York,
        NY  10016

      Attn:  Kenneth
        P. West, Executive Vice President and 
Chief Financial Officer

      Telephone:  212-576-8538

      Facsimile:  212-576-4064

      

      ADDITIONAL
        OBLIGOR(S):

      

      MARVEL
        CHARACTERS, INC.

      

      By
/s/
        Alan
        Fine                                 
                                                                  

      Name:
        Alan Fine

      Title:
        Chief Marketing Officer
        and

                    
         Executive Vice President

      

      

      LENDER:

      

      HSBC
        BANK USA, NATIONAL ASSOCIATION

      

      By
/s/
        Barbara
        Constantinidis                          
         

      Name:  Barbara
        Constantinidis

      Title:    Vice
        President

      

      Notice
        Address:

      

      452
        Fifth
        Avenue

      New
        York,
        New York 10018

      

      Attn:  Mary
        A. Pan, Senior Vice President

      Telephone:  212-525-5370

      Facsimile:   212-525-6233

      

      Attn:  Barbara
        Constantinidis

      Telephone:  212-525-4887

      Facsimile:   212-525-7620

       

       

      3

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