Document:

[Exhibit 10.2 Letter Agreement With China Cardinal]

          [Letterhead of Minghua Group International Holdings Limited]

April 13, 2004

Ms. Li-Ping Han
China Cardinal Limited
Flat/Rm 708
7th Floor
Dannies House
20 Luard Road
Wanchai, Hong Kong

Re:  Amendment to January 13, 2004 Contract

Dear Mr. Yang:

      Reference is made to that certain contract, dated January 13, 2004 (the
"January 13 Contract") between Minghua Group International Holdings Limited
("Minghua") and China Cardinal Limited ("China Cardinal").

      Pursuant to the January 13 Contract, China Cardinal agreed to purchase
16,483,514 shares of Minghua's Common Stock for an aggregate price of
$2,307,692. China Cardinal funded US$662,652 of the purchase price on January
18, 2004 and received 4,733,229 shares of Minghua's Common Stock. China Cardinal
was then required to fund the remaining US$1,640,040 and receive 11,750,185
shares of Minghua Common Stock on March 31, 2004 (the "March Payment"). To date,
China Cardinal has not yet made the March Payment.

      Without waiving any potential claims that either party may have against
the other for breach of the January 13 Contract, the parties now desire to amend
the January 13 Contract to provide for an extension of the time within which
China Cardinal is required to make the March Payment. Accordingly, Minghua and
Qiang Long, intending to be bound, hereby agree as follows:

      1. Amendment to March Payment Date. The January 13 Contract is hereby
amended to extend the due date for the March Payment from March 31, 2004 to May
31, 2004.

      2. Contracts Remain in Full Force and Effect. Except as modified by this
letter agreement, the January 13 Contract remain valid and binding upon the
parties, unchanged and in full force and effect. This letter agreement shall be
treated by the parties as a supplement and an amendment to the January 13
Contract and shall be governed by the provisions thereof, including any
provisions regarding governing law and arbitration.

<PAGE>

      4. Miscellaneous. The parties hereto, without the need for any additional
consideration, agree to execute such other and further instruments, documents
and agreements and to perform such other acts as may be reasonably required to
effectuate the purposes of this letter agreement. This letter agreement along
with the January 13 Contract constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements, arrangements and understandings relating to the subject matter
hereof, including without limitation, any Chinese language versions of this
agreement or the January 13 Contract that may have been entered into by the
parties prior to the date hereof. Notwithstanding any provision of the January
13 Contract to the contrary, neither this letter agreement nor the January 13
Contracts may be amended, modified or supplemented except by a written
instrument signed by all of the parties hereto. This letter agreement may be
executed in any number of counterparts, each of which shall be deemed an
original and enforceable against the parties actually executing such
counterpart, and all of which, when taken together, shall constitute one
instrument. Facsimile execution and delivery of this letter agreement is legal,
valid and binding execution and delivery for all purposes.

                            [signature page follows]

                                       2
<PAGE>

      Please indicate your assent to the foregoing by executing this letter in
the space provided below.

                                    Sincerely,

                           MINGHUA GROUP INTERNATIONAL
                                HOLDINGS LIMITED

                              By: /s/ Albert Wong
                                 ----------------------------------------
                              Albert Wong, Chief Executive Officer

ACCEPTED AND AGREED
TO AS OF THE DATE OF THIS
LETTER:

CHINA CARDINAL LIMITED

         /s/ Li Ping Han
-------------------------------------
Li-Ping Han

                                       3EXHIBIT 10.16

                      SHARES AND WARRANT PURCHASE AGREEMENT

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

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

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

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

      Section 1. Issuance of Shares and Warrants ("Securities").  Subject to the
terms and conditions of this Agreement,  each Purchaser  agrees,  simultaneously
with the execution and delivery of this Agreement,  to purchase from the Company
the amount of Shares set forth  opposite  to its name in Exhibit 1 at a purchase
price of U.S. $3.00 per share. Simultaneously with the execution and delivery of
this  Agreement  (i) each  Purchaser is paying the  Purchase  Price set forth on
Exhibit 1 opposite to the name of such Purchaser by wire transfer of immediately
available funds to the Company in accordance with the wire transfer instructions
set forth on Exhibit 2 hereto and is executing and  delivering to the Company an
Irrevocable  Proxy in the form attached hereto as Exhibit 3; (ii) the Company is
delivering to each Purchaser a stock  certificate  evidencing  such  Purchaser's
ownership of the number of shares set forth in Exhibit 1 opposite to the name of
such  Purchaser.   Simultaneously  with  the  execution  and  delivery  of  this
Agreement,  the Company is issuing to each  Purchaser  Warrants to purchase  the
amount of Shares of the  Company  set forth on Exhibit 1 opposite to the name of
such  Purchaser,  such Warrants to be in the forms attached hereto as Exhibits 4
and 5 (except  that the  Warrants  issued to  Platinum  Partners  LLC shall also
restrict Platinum Partners LLC from exercising the Warrants, if immediately upon
exercise of the  Warrants  Platinum  Partners  LLC shall own 4.9% or more of the
then  outstanding  Ordinary  Shares  of the  Company).  Simultaneously  with the
execution  and  delivery of this  Agreement,  the Company and each  Purchaser is
executing and delivering a  Registration  Rights  Agreement  (the  "Registration
Rights Agreement") substantially in the form of Exhibit 6 hereto. As used herein
the term  "Transaction  Documents"  means this  Agreement,  the Warrants and the
Registration Rights Agreement, and completion of all of the actions described in
this Section 1 is considered the "Closing Date".

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

<PAGE>

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

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

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

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

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

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

                                       2
<PAGE>

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

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

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

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

                  (ii) have been, or will be, duly and validly authorized and on
the date of issuance, and upon exercise of the Warrants, the Warrant Shares will
be duly and validly  issued,  fully paid and  nonassessable  (and if  registered
pursuant  to the 1933 Act,  and resold  pursuant  to an  effective  registration
statement  will be free trading and  unrestricted,  provided that each Purchaser
complies with the prospectus delivery requirements of the 1933 Act and any state
securities laws); and

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

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

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

            (i)  Reporting  Company.  The  Company  is a  publicly-held  company
subject  to  reporting  obligations  pursuant  to  Sections  15(d) and 13 of the
Securities  Exchange Act of 1934,  as amended (the "1934 Act").  Pursuant to the
provisions of the 1934 Act, the Company has timely filed all reports ("Reports")
and other materials  required to be filed there under with the Commission during
the preceding twelve months.

                                       3
<PAGE>

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

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

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

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

            (n) No  Integrated  Offering.  Neither the  Company,  nor any of its
affiliates,  nor any  person  acting on its or their  behalf,  has  directly  or
indirectly  made any offers or sales of any security or solicited  any offers to
buy  any  security  under  circumstances  that  would  cause  the  offer  of the
Securities  pursuant to this Agreement to be integrated  with prior offerings by
the Company for purposes of the 1933 Act or any applicable  stockholder approval
provisions,  including,  without limitation,  under the rules and regulations of
the  Bulletin  Board.  Nor  will  the  Company  or  any  of  its  affiliates  or
subsidiaries  take any  action  or  steps  that  would  cause  the  offer of the
Securities to be integrated with other  offerings.  The Company will not conduct
any  offering  other  than the  transactions  contemplated  hereby  that will be
integrated with the offer or issuance of the Securities.

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

                                       4
<PAGE>

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

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

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

            (s) Capitalization.  The authorized and outstanding capital stock of
the Company as of the date of this  Agreement and the Closing Date are set forth
on  Schedule  2(s).  Except  as set  forth  in the  Reports  and  Other  Written
Information  and Schedule  2(d),  there are no options,  warrants,  or rights to
subscribe to, securities, rights or obligations convertible into or exchangeable
for or giving any right to  subscribe  for any  shares of  capital  stock of the
Company.  All of the outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and nonassessable. (t)
Dilution.  The Company's executive officers and directors have studied and fully
understand  the nature of the  Securities  being sold hereby and recognize  that
they have a potential  dilutive  effect on the interests of other holders of the
Company's  securities.  The board of directors of the Company has concluded,  in
its good faith business  judgment that such issuance is in the best interests of
the Company. (u) Correctness of Representations. The Company represents that the
foregoing  representations  and  warranties  are true and correct as of the date
hereof in all material respects, will be true and correct as of the Closing Date
in all  material  respects,  and,  unless the  Company  otherwise  notifies  the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date.  The foregoing  representations  and warranties
shall survive the Closing Date for a period of three years.

      Section 3. Representations by the Purchasers

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

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

                                       5
<PAGE>

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

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

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

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

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

      Section  5.  Reissuance  of  Securities.  The  Company  agrees to  reissue
certificates  representing  the  Shares  and  the  Warrant  Shares  without  the
restrictive  legends  set forth in  Sections  3(d) above at such time as (a) the
holder thereof is permitted to and disposes of the  Securities  pursuant to Rule
144(d)  and/or  Rule 144(k)  under the 1933 Act in the opinion of legal  counsel
reasonably  satisfactory  to the  Company,  or (b)  upon  resale  subject  to an
effective  registration  statement  after the Shares and the Warrant  Shares are
registered  under the 1933  Act.  The  Company  agrees  to  cooperate  with each
Subscriber  in  connection  with all  resales  pursuant  to Rule 144(d) and Rule
144(k) and provide legal  opinions at the Company's  expense  necessary to allow
such resales provided the Company and its counsel receive  reasonably  requested
written  representations  from  each  Subscriber  and  selling  broker,  if any.
Provided each Purchaser  provides  required  certifications  and  representation
letters,  if any, if the Company  fails to remove any legend as required by this
Section  5 (a  "Legend  Removal  Failure"),  then  beginning  on the  fourteenth
business day following the date that each Purchaser has requested the removal of
the legend and  delivered  all items  reasonably  required  by the Company to be
delivered by each Purchaser,  that the Company  continues to fail to remove such
legend,  the Company shall pay to each  Purchaser or assignee  holding Shares or
Warrant Shares,  subject to a Legend Removal Failure,  as liquidated damages and
not a penalty an amount each Purchaser or assignee holding Securities subject to
a Legend Removal Failure may, at its option, require the Company to purchase all
or any  portion of the Shares and  Warrant  Shares  subject to a Legend  Removal
Failure held by each Purchaser or assignee at a price per share equal to 130% of
the purchase  price of such Shares and Warrant  Shares  within a period of up to
twelve months.

                                       6
<PAGE>

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

      Section 7 Purchasers' Rights of Participation in Additional  Financings It
is  understood  and  agreed to by the  Purchasers  that  their  rights of future
participation  is limited to 20% (twenty  percent) of any financing  done by the
Company in the next 12 months from the Closing  Date of this  Agreement.  If the
Company does a financing, including but not limited to the sale of common stock,
preferred  stock,  convertible  debt or  otherwise,  with the  effect of issuing
shares below US$3.00 per share in the 12 month period following the Closing Date
of this  Agreement,  the  Purchasers  shall  have their  purchase  price in this
Agreement adjusted to that same lower price.

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

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

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

                                       7
<PAGE>

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

            (d) Reporting Requirements. From the Closing Date and until at least
two (2) years after the actual effective date of the Registration Statement, the
Company  will (i) cause its Common  Stock to  continue  to be  registered  under
Section  12(b) of the 1934 Act,  (ii) comply in all respects  with its reporting
and  filing   obligations  under  the  1934  Act,  and  (iii)  comply  with  all
requirements  related  to any  registration  statement  filed  pursuant  to this
Agreement.  The Company will use its best efforts not to take any action or file
any  document  (whether or not  permitted by the 1933 Act or the 1934 Act or the
rules there under) to terminate or suspend such  registration or to terminate or
suspend its reporting and filing  obligations under said acts until the later of
two (2) years after the actual  effective  date of the  Registration  Statement.
Until the  earlier of the resale of the  Shares and the  Warrant  Shares by each
Purchaser or at least two (2) years after the Warrants have been exercised,  the
Company  will use its best  efforts to continue  the listing or quotation of the
Common  Stock on the main market  where the  Company's  shares  trade,  and will
comply  in  all  respects  with  the  Company's  reporting,   filing  and  other
obligations under the bylaws or rules of the Principal Market.

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

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

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

                                       8
<PAGE>

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

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

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

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

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

            (m) NON-PUBLIC  INFORMATION.  THE COMPANY  COVENANTS AND AGREES THAT
NEITHER IT NOR ANY OTHER PERSON  ACTING ON ITS BEHALF WILL PROVIDE ANY PURCHASER
OR ITS  AGENTS  OR  COUNSEL  WITH  ANY  INFORMATION  THAT THE  COMPANY  BELIEVES
CONSTITUTES MATERIAL NON-PUBLIC INFORMATION, UNLESS PRIOR THERETO SUCH PURCHASER
SHALL HAVE EXECUTED A WRITTEN AGREEMENT REGARDING THE CONFIDENTIALITY AND USE OF
SUCH INFORMATION. THE COMPANY UNDERSTANDS AND CONFIRMS THAT EACH PURCHASER SHALL
BE  RELYING  ON THE  FOREGOING  REPRESENTATIONS  IN  EFFECTING  TRANSACTIONS  IN
SECURITIES OF THE COMPANY.

                                       9
<PAGE>

            (N) SECURITIES  LAWS  DISCLOSURE;  PUBLICITY.  THE COMPANY SHALL, BY
8:30 A.M.  EASTERN TIME ON THE TRADING DAY FOLLOWING  THE CLOSING DATE,  ISSUE A
PRESS RELEASE OR FILE A CURRENT REPORT ON FORM 6-K, OR COMPARABLE DISCLOSURE, IN
EACH CASE REASONABLY  ACCEPTABLE TO EACH PURCHASER DISCLOSING THE MATERIAL TERMS
OF THE TRANSACTIONS  CONTEMPLATED  HEREBY.  THE COMPANY AND EACH PURCHASER SHALL
CONSULT  WITH EACH  OTHER IN  ISSUING  ANY PRESS  RELEASES  WITH  RESPECT TO THE
TRANSACTIONS  CONTEMPLATED  HEREBY,  AND NEITHER  THE COMPANY NOR ANY  PURCHASER
SHALL ISSUE ANY SUCH PRESS RELEASE OR OTHERWISE  MAKE ANY SUCH PUBLIC  STATEMENT
WITHOUT THE PRIOR  CONSENT OF THE COMPANY,  WITH RESPECT TO ANY PRESS RELEASE OF
ANY PURCHASER,  OR WITHOUT THE PRIOR CONSENT OF EACH PURCHASER,  WITH RESPECT TO
ANY PRESS  RELEASE OF THE  COMPANY,  WHICH  CONSENT  SHALL NOT  UNREASONABLY  BE
WITHHELD,  EXCEPT IF SUCH  DISCLOSURE  IS  REQUIRED  BY LAW,  IN WHICH  CASE THE
DISCLOSING  PARTY SHALL  PROMPTLY  PROVIDE THE OTHER PARTY WITH PRIOR  NOTICE OF
SUCH PUBLIC  STATEMENT OR  COMMUNICATION.  NOTWITHSTANDING  THE  FOREGOING,  THE
COMPANY SHALL NOT PUBLICLY  DISCLOSE THE NAME OF ANY  PURCHASER,  OR INCLUDE THE
NAME OF ANY PURCHASER IN ANY FILING WITH THE COMMISSION OR ANY REGULATORY AGENCY
OR TRADING MARKET,  WITHOUT THE PRIOR WRITTEN CONSENT OF SUCH PURCHASER,  EXCEPT
(I) AS REQUIRED BY FEDERAL  SECURITIES LAW IN CONNECTION  WITH THE  REGISTRATION
STATEMENT  CONTEMPLATED  BY THE  REGISTRATION  RIGHTS  AGREEMENT AND (II) TO THE
EXTENT SUCH  DISCLOSURE  IS REQUIRED BY LAW OR TRADING  MARKET  REGULATIONS,  IN
WHICH CASE THE COMPANY  SHALL PROVIDE THE  PURCHASERS  WITH PRIOR NOTICE OF SUCH
DISCLOSURE PERMITTED UNDER SUBCLAUSE (I) OR (II).

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

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

      Section 11 Term and Termination. The Company agrees to give the Purchasers
2 business  days to pay the Purchase  Price as described  herein to the Company,
from the date of  signing  this  Agreement.  At the end of such  time,  only the
Company can choose to  terminate  this  Agreement  by doing so in writing to the
Purchasers.

      Section  12.  Notices.  Any  notice  required  by the  provisions  of this
Agreement  will be  writing  and  will be  deemed  effectively  given:  (a) upon
personal  delivery  to the  party to be  notified;  (b) when  sent by  confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next  business  day; (c) seven (7) days after having been sent by registered
or certified mail, return receipt requested,  postage prepaid;  or (d) three (3)
days after deposit with a nationally  recognized  overnight courier,  specifying
next day delivery,  with written verification of receipt.  Notices shall be sent
to the  addresses  first set forth  above or to such  other  address  as a party
furnishes to other parties in writing.

                                       10
<PAGE>

      Section 13. Law Governing. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York with respect to contracts
executed and performed in the State of New York.

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

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

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

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

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

                                       11
<PAGE>

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

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

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

----------------------------     ----------------------------------------------
Xfone, Inc.            Date      Platinum Partners Value Arbitrage Fund LP  Date

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

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

----------------------------------
Countrywide Partners LLC     Date

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

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

---------------------------------
WEC Partners LLC      Date

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

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

                                       12
<PAGE>

                                                                       Exhibit 1

<TABLE>
<CAPTION>

Name and Address          Name of             Share   Number of  Purchase    Number of   Number of
of Purchaser              Shares Purchased    Price   Shares      Price      Warrant A   Warrant B
------------              ----------------    -----   ------      -----      ---------   ---------
<S>                       <C>                 <C>     <C>         <C>         <C>         <C>
Platinum Partners          Xfone              $3.00   100,000     $300,000    100,000     100,000
Value Arbitrage Fund LP

Countrywide Partners LLC   Xfone              $3.00    50,000     $150,000     50,000      50,000

WEC Partners LLC           Xfone              $3.00    16,667      $50,000     16,667      16,667
</TABLE>

                                       13
<PAGE>

                                                                       Exhibit 2

                           Wire Transfer Instructions

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

                                       14
<PAGE>

                                                                       Exhibit 3

                                IRREVOCABLE PROXY

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

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

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

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

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

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

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

<PAGE>

                                                                       Exhibit 4

                                    WARRANT A

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

                        WARRANT TO PURCHASE COMMON STOCK
                                 OF XFONE, INC.

NO. _

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

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

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

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

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

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

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

<PAGE>

2.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

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

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

3.    EXERCISE OF WARRANT

      3.1.  Subject to compliance  with the terms and conditions of this Warrant
and applicable  securities  laws, this Warrant may be exercised,  in whole or in
part with respect to the  applicable  number of Warrant  Shares,  at an exercise
price (the "Exercise Price") of U.S. $5.5 per Warrant Share.

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

                        X = Y (A-B)

                           -------

                              A

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

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

                                       2
<PAGE>

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

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

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

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

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

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

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

            (b)  payment,  (i) in cash (by  check)  or by wire  transfer,  of an
amount  equal to the  product  obtained by  multiplying  the number of shares of
Warrant  Shares  being  purchased  upon  such  exercise  by the then  applicable
Exercise  Price,  (and the Warrant Shares shall be issued as soon as practicable
after  five (5) days  commencing  the  payment  day),  except  that if Holder is
subject to HSR Act Restrictions (as defined in Section 3.4 below),  the Exercise
Amount  shall  be paid to the  Company  within  five  (5)  business  days of the
termination of all HSR Act Restrictions  (and the Warrant Shares shall be issued
as soon as practicable after five (5) days commencing the payment day).

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

                                       3
<PAGE>

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

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

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

      3.7 Expiration of Warrant.  This Warrant shall expire, with respect to the
applicable  number of Warrant  Shares only, on the earlier to occur of : (a) the
date that is five (5) years  following the date of this Warrant;  (b) the merger
or  consolidation  of  the  Company  with  or  into,  or  the  sale  of  all  or
substantially  all of the assets or shares of the Company to,  another person or
entity,  following  which the  Company is not the  surviving  entity;  provided,
however, that the Holder receives at least 30 days' prior written notice of such
follow on offering  and shall be entitled to make its  exercise of this  Warrant
conditional upon the closing of such  transaction;  (c) The Company can call the
Warrants before the end of the 5 years, if the underlying  shares are registered
and the  closing  price  of the  Share in the  market  is $12 or  higher  for 20
consecutive  trading  days,  subject to there  being an  effective  registration
statement and 10 days written notice to the Holder.

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

                                       4
<PAGE>

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

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

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

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

                                       5
<PAGE>

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

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

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

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

                                       6
<PAGE>

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

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

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

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

                                       7
<PAGE>

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

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

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

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

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

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

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

If to Holder:

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

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

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

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

                                       8
<PAGE>

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

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

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

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

17.   NOTICES OF RECORD DATE. In case:

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

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

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

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

                                       9
<PAGE>

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

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

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

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

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       10
<PAGE>

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

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

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

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

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

                                       11
<PAGE>

                                    EXHIBIT 1

                                    AGREEMENT

                                       12
<PAGE>

                                    EXHIBIT 2

                               NOTICE OF EXERCISE

                    (To be executed upon exercise of Warrant)

XFONE, INC.                                                     WARRANT NO. __

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

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

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

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

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

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

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

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

                                       13
<PAGE>

                                                                       Exhibit 5

                                    WARRANT B

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

                        WARRANT TO PURCHASE COMMON STOCK
                                 OF XFONE, INC.

NO. _

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

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

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

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

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

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

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

2.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

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

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

3.    EXERCISE OF WARRANT

      3.1.  Subject to compliance  with the terms and conditions of this Warrant
and applicable  securities  laws, this Warrant may be exercised,  in whole or in
part with respect to the  applicable  number of Warrant  Shares,  at an exercise
price (the "Exercise Price") of U.S. $3.5 per Warrant Share.

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

                        X = Y (A-B)

                            -------

                               A

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

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

                                       2
<PAGE>

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

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

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

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

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

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

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

            (b)  payment,  (i) in cash (by  check)  or by wire  transfer,  of an
amount  equal to the  product  obtained by  multiplying  the number of shares of
Warrant  Shares  being  purchased  upon  such  exercise  by the then  applicable
Exercise  Price,  (and the Warrant Shares shall be issued as soon as practicable
after  five (5) days  commencing  the  payment  day),  except  that if Holder is
subject to HSR Act Restrictions (as defined in Section 3.4 below),  the Exercise
Amount  shall  be paid to the  Company  within  five  (5)  business  days of the
termination of all HSR Act Restrictions  (and the Warrant Shares shall be issued
as soon as practicable after five (5) days commencing the payment day).

                  (ii) Provided,  however,  that under no circumstances  may the
Holder  exercise,  and in no event shall the Company be  obligated  to honor any
exercise of, this Warrant to the extent the result of such exercise and issuance
of Warrant  Shares  pursuant  thereto  would result (after giving effect to such
issuance)  in the  Holder  owning 10% or more of the then  outstanding  Ordinary
Shares of the Company.  To the extent any such exercise is not honored  pursuant
to the foregoing  proviso,  the shares  withheld from such exercise shall remain
available for issuance upon subsequent exercise of this Warrant, subject to such
proviso.

                                       3
<PAGE>

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

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

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

      3.7 Expiration of Warrant.  This Warrant shall expire, with respect to the
applicable  number of Warrant  Shares  only,  on the earlier to occur of: (a) 10
days  after the  Company is  approved  for  listing  on NASDAQ  Small Cap or the
American Stock Exchange or 10 days following  effectiveness  of the registration
statement  to be  filed  by the  company  pursuant  to the  Registration  Rights
Agreement  between the Holder and the Company of even date hereof;  (b) the date
that is 375  days  following  the  date  of this  Warrant;  (c)  the  merger  or
consolidation  of the Company with or into, or the sale of all or  substantially
all of the  assets  or shares  of the  Company  to,  another  person or  entity,
following which the Company is not the surviving entity; provided, however, that
the Holder  receives  at least 30 days' prior  written  notice of such follow on
offering and shall be entitled to make its exercise of this Warrant  conditional
upon the closing of such  transaction;  (d) The  Company  can call the  Warrants
before the end of the180 days,  if the closing  price of the Share in the market
is $12 or higher for 20  consecutive  trading  days,  subject to there  being an
effective registration statement and 10 days written notice to the Holder.

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

                                       4
<PAGE>

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

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

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

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

                                       5
<PAGE>

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

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

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

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

                                       6
<PAGE>

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

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

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

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

                                       7
<PAGE>

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

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

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

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

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

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

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

If to Holder:

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

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

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

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

                                       8
<PAGE>

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

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

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

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

17.   NOTICES OF RECORD DATE. In case:

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

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

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

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

                                       9
<PAGE>

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

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

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

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

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       10
<PAGE>

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

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

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

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

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

                                       11
<PAGE>

                                    EXHIBIT 1

                                    AGREEMENT

                                       12
<PAGE>

                                    EXHIBIT 2

                               NOTICE OF EXERCISE

                    (To be executed upon exercise of Warrant)

XFONE, INC.                                                  WARRANT B NO. __

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

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

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

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

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

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

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

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

                                       13
<PAGE>

                                                                       EXHIBIT 6

                          REGISTRATION RIGHTS AGREEMENT

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

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

      The Company and the Purchasers hereby agree as follows:

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

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

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

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

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

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

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

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

            "Proceeding"  means  an  action,   claim,  suit,   investigation  or
      proceeding  (including,  without  limitation,  an investigation or partial
      proceeding, such as a deposition), whether commenced or threatened.

<PAGE>

            "Prospectus"  means  the  prospectus  included  in the  Registration
      Statement (including,  without limitation,  a prospectus that includes any
      information  previously  omitted  from a  prospectus  filed  as part of an
      effective  registration  statement in reliance upon Rule 430A  promulgated
      under the Securities  Act), as amended or  supplemented  by any prospectus
      supplement,  with  respect to the terms of the  offering of any portion of
      the Registrable Securities covered by the Registration Statement,  and all
      other   amendments   and   supplements   to  the   Prospectus,   including
      post-effective  amendments,  and all material incorporated by reference or
      deemed to be incorporated by reference in such Prospectus.

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

            "Registration  Statement" means the registration statements required
      to be filed hereunder, including (in each case) the Prospectus, amendments
      and  supplements to the  registration  statement or Prospectus,  including
      pre- and post-effective amendments, all exhibits thereto, and all material
      incorporated by reference or deemed to be incorporated by reference in the
      registration statement.

            "Rule 415" means Rule 415 promulgated by the Commission  pursuant to
      the Securities  Act, as such Rule may be amended from time to time, or any
      similar rule or  regulation  hereafter  adopted by the  Commission  having
      substantially the same effect as such Rule.

            "Rule 424" means Rule 424 promulgated by the Commission  pursuant to
      the Securities  Act, as such Rule may be amended from time to time, or any
      similar rule or  regulation  hereafter  adopted by the  Commission  having
      substantially the same effect as such Rule.

            "Securities Act" means the Securities Act of 1933, as amended.

      2.    Registration.

            (a) On or prior to the Filing Date,  the Company  shall  prepare and
      file with the Commission the Registration Statement covering the resale of
      all  of the  Registrable  Securities  for  an  offering  to be  made  on a
      continuous basis pursuant to Rule 415. The Registration Statement required
      hereunder  shall be on Form S-3 or its equivalent for a public offering of
      shares  and the  Company  shall use its  reasonable  efforts to cause such
      shares to be  registered  for the  offering.  The  Registration  Statement
      required  hereunder  shall  reflecting the principles of what is contained
      (except  if   otherwise   directed  by  the   Holders)  in  the  "Plan  of
      Distribution"  attached  hereto  as  Annex  A,  subject  to the  laws  and
      regulations  governing any plan of distribution,  and what is customary by
      the Company according to the Purchase  Agreement.  The Company shall cause
      the  Registration  Statement to become  effective and remain  effective as
      provided herein. The Company shall use its commercially reasonable efforts
      to cause the  Registration  Statement to be declared  effective  under the
      Securities  Act as promptly as possible after the filing  thereof,  but in
      any  event  not  later  than the  Effectiveness  Date,  and  shall use its
      commercially   reasonable  efforts  to  keep  the  Registration  Statement
      continuously  effective  under the  Securities Act until the date when all
      Registrable Securities covered by the Registration Statement (a) have been
      sold  pursuant to the  Registration  Statement  or an  exemption  from the
      registration requirements of the Securities Act or (b) may be sold without
      volume  restrictions  pursuant to Rule 144(k) as determined by the counsel
      to the  Company  pursuant  to a written  opinion  letter  to such  effect,
      addressed and acceptable to the Company's  transfer agent and the affected
      Holders (the "Effectiveness Period").

                                       2
<PAGE>

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

      3.    Registration Procedures

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

            (a) Not less  than  five  Trading  Days  prior to the  filing of the
      Registration  Statement  or any related  Prospectus  or any  amendment  or
      supplement  thereto,  and subject to the Purchase Agreement (i) furnish to
      the Holders copies of all such documents  proposed to be filed  (including
      documents  incorporated or deemed  incorporated by reference to the extent
      requested  by such Person and not  available on the EDGAR  system),  which
      documents  will be subject to the review of such  Holders,  and (ii) cause
      its officers  and  directors,  counsel and  independent  certified  public
      accountants  to respond to such  inquiries as shall be  necessary,  in the
      reasonable   opinion  of  respective   counsel  to  conduct  a  reasonable
      investigation  within the meaning of the Securities Act. The Company shall
      not  file  the  Registration  Statement  or  any  such  Prospectus  or any
      amendments  or  supplements  thereto to which the Holders of a majority of
      the Registrable Securities shall reasonably object in good faith.

                                       3
<PAGE>

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

            (c)  Notify  the  Holders of  Registrable  Securities  to be sold as
      promptly as reasonably  possible  (and,  in the case of (i)(A) below,  not
      less than two Trading Days prior to such filing) and (if  requested by any
      such Person)  confirm such notice in writing  promptly  following  the day
      (i)(A) when a Prospectus or any  Prospectus  supplement or  post-effective
      amendment to the Registration  Statement is proposed to be filed; (B) when
      the  Commission  notifies the Company  whether there will be a "review" of
      the Registration Statement and whenever the Commission comments in writing
      on the Registration Statement (the Company shall upon request provide true
      and complete copies thereof and all written  responses  thereto to each of
      the Holders);  and (C) with respect to the  Registration  Statement or any
      post-effective  amendment, when the same has become effective; (ii) of any
      request  by the  Commission  or any other  Federal  or state  governmental
      authority during the period of effectiveness of the Registration Statement
      for amendments or supplements to the Registration  Statement or Prospectus
      or for additional information;  (iii) of the issuance by the Commission or
      any  other  federal  or state  governmental  authority  of any stop  order
      suspending the effectiveness of the Registration Statement covering any or
      all of the Registrable Securities or the initiation of any Proceedings for
      that purpose;  (iv) of the receipt by the Company of any notification with
      respect  to  the  suspension  of  the   qualification  or  exemption  from
      qualification  of  any of  the  Registrable  Securities  for  sale  in any
      jurisdiction,  or the initiation or threatening of any Proceeding for such
      purpose;  and (v) of the  occurrence  of any event or passage of time that
      makes the  financial  statements  included in the  Registration  Statement
      ineligible for inclusion therein or any statement made in the Registration
      Statement  or  Prospectus  or any  document  incorporated  or deemed to be
      incorporated  therein by reference  untrue in any material respect or that
      requires any revisions to the Registration Statement,  Prospectus or other
      documents  so  that,  in the  case of the  Registration  Statement  or the
      Prospectus,  as the case may be, it will not contain any untrue  statement
      of a  material  fact or omit to state any  material  fact  required  to be
      stated  therein or necessary to make the statements  therein,  in light of
      the circumstances under which they were made, not misleading.

                                       4
<PAGE>

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

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

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

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

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

                                       5
<PAGE>

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

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

            (k) The Company may require  each  selling  Holder to furnish to the
      Company a certified  statement  as to the number of shares of Common Stock
      beneficially owned by such Holder and, if required by the Commission,  the
      Person thereof that has voting and dispositive control over the Shares.

                                       6
<PAGE>

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

      5.    Indemnification

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

                                       7
<PAGE>

            (b) Indemnification by Holders. Each Holder shall, severally and not
      jointly, indemnify and hold harmless the Company, its directors, officers,
      agents and  employees,  each Person who controls  the Company  (within the
      meaning of Section 15 of the Securities Act and Section 20 of the Exchange
      Act), and the directors, officers, agents or employees of such controlling
      Persons,  to the fullest  extent  permitted by  applicable  law,  from and
      against all Losses,  as  incurred,  to the extent  arising out of or based
      upon:  (x) such Holder's  failure to comply with the  prospectus  delivery
      requirements  of the  Securities  Act or (y) any untrue or alleged  untrue
      statement of a material fact contained in any Registration Statement,  any
      Prospectus,  or any form of prospectus,  or in any amendment or supplement
      thereto or in any preliminary prospectus, or arising out of or relating to
      any omission or alleged  omission of a material fact required to be stated
      therein or necessary to make the statements  therein not misleading to the
      extent, but only to the extent,  that such untrue statement or omission is
      contained in any information so furnished in writing by such Holder to the
      Company  specifically for inclusion in the Registration  Statement or such
      Prospectus  or to the extent that (1) such untrue  statements or omissions
      are based  solely upon  information  regarding  such Holder  furnished  in
      writing to the Company by such Holder expressly for use therein, or to the
      extent  that such  information  relates  to such  Holder or such  Holder's
      proposed method of distribution of Registrable Securities and was reviewed
      and expressly  approved in writing by such Holder expressly for use in the
      Registration  Statement (it being  understood that the Holder has approved
      Annex A  hereto  for  this  purpose),  such  Prospectus  or  such  form of
      prospectus or in any amendment or supplement thereto or (2) in the case of
      an occurrence of an event of the type  specified in Section  3(c)(ii)-(v),
      the use by such Holder of an outdated or  defective  Prospectus  after the
      Company  has  notified  such  Holder in  writing  that the  Prospectus  is
      outdated  or  defective  and prior to the  receipt  by such  Holder of the
      Advice  contemplated  in Section  6(d). In no event shall the liability of
      any selling  Holder  hereunder be greater in amount than the dollar amount
      of the  net  proceeds  received  by  such  Holder  upon  the  sale  of the
      Registrable Securities giving rise to such indemnification obligation.

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

                                       8
<PAGE>

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

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

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

                                       9
<PAGE>

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

      6.    Miscellaneous

            (a)  Remedies.  In the  event of a  breach  by the  Company  or by a
      Holder, of any of their  obligations under this Agreement,  each Holder or
      the Company, as the case may be, in addition to being entitled to exercise
      all rights granted by law and under this Agreement,  including recovery of
      damages, will be entitled to specific performance of its rights under this
      Agreement.  The Company and each Holder agree that monetary  damages would
      not provide  adequate  compensation for any losses incurred by reason of a
      breach by it of any of the provisions of this Agreement and hereby further
      agrees  that,  in the event of any  action  for  specific  performance  in
      respect of such  breach,  it shall waive the defense  that a remedy at law
      would be adequate.

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

            (c) Discontinued Disposition.  Each Holder agrees by its acquisition
      of such  Registrable  Securities  that,  upon receipt of a notice from the
      Company of the  occurrence  of any event of the kind  described in Section
      3(c),  such  Holder  will  forthwith   discontinue   disposition  of  such
      Registrable   Securities  under  the  Registration  Statement  until  such
      Holder's  receipt  of the  copies of the  supplemented  Prospectus  and/or
      amended  Registration  Statement  or until it is advised  in writing  (the
      "Advice") by the Company that the use of the applicable  Prospectus may be
      resumed,  and, in either case,  has received  copies of any  additional or
      supplemental filings that are incorporated or deemed to be incorporated by
      reference in such  Prospectus or Registration  Statement.  The Company may
      provide  appropriate  stop  orders  to  enforce  the  provisions  of  this
      paragraph.

                                       10
<PAGE>

            (d)   Piggy-Back   Registrations.   If  at  any  time   during   the
      Effectiveness  Period  there is not an  effective  Registration  Statement
      covering all of the Registrable Securities and the Company shall determine
      to prepare and file with the Commission a registration  statement relating
      to an  offering  for its own  account or the  account of others  under the
      Securities Act of any of its equity securities,  other than on Form S-4 or
      Form S-8 (each as  promulgated  under the  Securities  Act) or their  then
      equivalents   relating  to  equity  securities  to  be  issued  solely  in
      connection  with any  acquisition  of any  entity  or  business  or equity
      securities  issuable in connection with the stock option or other employee
      benefit plans, then the Company shall send to each Holder a written notice
      of such  determination  and, if within fifteen days after the date of such
      notice,  any such Holder  shall so request in writing,  the Company  shall
      include in such registration statement all or any part of such Registrable
      Securities  such Holder  requests to be  registered,  subject to customary
      underwriter cutbacks applicable to all holders of registration rights.

            (e)  Amendments  and  Waivers.  The  provisions  of this  Agreement,
      including the provisions of this sentence, may not be amended, modified or
      supplemented,  and waivers or consents to departures  from the  provisions
      hereof may not be given, unless the same shall be in writing and signed by
      the  Company  and  each  Holder  of  the  then   outstanding   Registrable
      Securities.

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

            (g)  Successors  and  Assigns.  This  Agreement  shall  inure to the
      benefit of and be binding upon the  successors  and  permitted  assigns of
      each of the parties and shall  inure to the benefit of each  Holder.  Each
      Holder may assign their  respective  rights hereunder in the manner and to
      the Persons as permitted under the Purchase Agreement.

            (h) Execution and  Counterparts.  This  Agreement may be executed in
      any number of counterparts, each of which when so executed shall be deemed
      to be an original and, all of which taken  together  shall  constitute one
      and the same  Agreement.  In the event that any  signature is delivered by
      facsimile  transmission,  such  signature  shall  create  a valid  binding
      obligation of the party  executing  (or on whose behalf such  signature is
      executed)  the same with the same  force and  effect as if such  facsimile
      signature were the original thereof.

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

                                       11
<PAGE>

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

            (k) Severability. If any term, provision, covenant or restriction of
      this Agreement is held by a court of competent jurisdiction to be invalid,
      illegal,  void or unenforceable,  the remainder of the terms,  provisions,
      covenants and restrictions set forth herein shall remain in full force and
      effect and shall in no way be affected,  impaired or invalidated,  and the
      parties hereto shall use their commercially reasonable efforts to find and
      employ an alternative  means to achieve the same or substantially the same
      result  as  that  contemplated  by  such  term,  provision,   covenant  or
      restriction.  It is hereby  stipulated and declared to be the intention of
      the parties that they would have executed the remaining terms, provisions,
      covenants  and  restrictions  without  including  any of such  that may be
      hereafter declared invalid, illegal, void or unenforceable.

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

                                       12
<PAGE>

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

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

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                     [PURCHASERS' SIGNATURE PAGES TO FOLLOW]

                                       13
<PAGE>

          [PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]

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

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

----------------------------      ----------------------------------------------
Xfone, Inc.            Date       Platinum Partners Value Arbitrage Fund LP Date

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

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

---------------------------------
Countrywide Partners LLC    Date

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

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

--------------------------------
WEC Partners LLC      Date

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

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

                                       14
<PAGE>

                                     ANNEX A

                              Plan of Distribution

      The Selling Stockholders and any of their pledgees,  assignees, donees and
successors-in-interest  may, from time to time,  sell any or all of their shares
of Common Stock on any stock exchange,  market or trading  facility on which the
shares  are traded or in private  transactions.  These  sales may be at fixed or
negotiated  prices.  The  Selling  Stockholders  may  use any one or more of the
following  methods  when  selling  shares  subject to the terms of the  Purchase
Agreement and the Registration Rights Agreement:

      o     ordinary  brokerage  transactions  and  transactions  in  which  the
            broker-dealer solicits purchasers;

      o     block  trades in which the  broker-dealer  will  attempt to sell the
            shares as agent but may  position  and resell a portion of the block
            as principal to facilitate the transaction;

      o     purchases  by  a  broker-dealer  as  principal  and  resale  by  the
            broker-dealer for its account;

      o     an  exchange  distribution  in  accordance  with  the  rules  of the
            applicable exchange;

      o     privately negotiated transactions;

      o     broker-dealers  may agree with the  Selling  Stockholders  to sell a
            specified number of such shares at a stipulated price per share;

      o     a combination of any such methods of sale; and

      o     any other method permitted pursuant to applicable law.

      The Selling  Stockholders  may also sell  shares  under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

      Broker-dealers  engaged by the Selling  Stockholders may arrange for other
brokers-dealers to participate in sales.  Broker-dealers may receive commissions
or discounts from the Selling  Stockholders  (or, if any  broker-dealer  acts as
agent  for the  purchaser  of  shares,  from the  purchaser)  in  amounts  to be
negotiated.  The  Selling  Stockholders  do not  expect  these  commissions  and
discounts to exceed what is customary in the types of transactions involved.

      The Selling  Stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties  may offer and sell the  shares of common  stock from time to time under
this  prospectus,  or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act of 1933 amending the list of
Selling  Stockholders to include the pledgee,  transferee or other successors in
interest as Selling Stockholders under this prospectus.

                                       15
<PAGE>

      The  Selling  Stockholders  and any  broker-dealers  or  agents  that  are
involved  in selling  the shares may be deemed to be  "underwriters"  within the
meaning of the Securities Act in connection with such sales. In such event,  any
commissions  received  by such  broker-dealers  or agents  and any profit on the
resale  of the  shares  purchased  by  them  may be  deemed  to be  underwriting
commissions or discounts under the Securities Act.

      Each  Selling  Stockholder  has informed the Company that it does not have
any  agreement  or  understanding,  directly or  indirectly,  with any person to
distribute the Common Stock.

                                       16
<PAGE>

                                 SCHEDULE 2 (d)

                          Outstanding Rights to Equity

<PAGE>

                                  SCHEDULE 2(s)

                                 Capitalization

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