AGREEMENT
Prepared and signed on August 26, 2004, between XFONE COMMUNICATION LTD., PCN
513533430 (hereinafter: "the Company"), XFONE, INC. (hereinafter: "XFONE INC."),
and XXXX XXXXXXXX, I.D. No. 54735386 (hereinafter: "the Investor").
1. The Investor will secure the replacement of the bank guarantee, which was
provided by the Company pursuant to regulation 22 of the International
Operators Regulations with another bank guarantee (hereinafter: "the Other
Bank Guarantee"). The Other Bank Guarantee will conform to all the
provisions and terms of the International Operators Regulations and the
Company's license, and shall be to the complete satisfaction of the
Ministry of Communication.
The costs involved in the issuance of the Other Bank Guarantee (commission
and stamp duty) will be paid by the Company.
2. In addition, the Investor will extend a loan to the Company for the Shekel
equivalent of the sum of $400,000 (hereinafter: "the Shareholder Loan of
the Investor").
3. In return for the replacement of the bank guarantee and the grant of the
Shareholder Loan of the Investor, as hereinbefore and hereinafter stated,
the Company and XFONE INC. will ensure that 26% of the Company's shares
will be transferred and registered in the name of a person and/or company
as determined by the Investor.
The Investor undertakes that all of the said shares will be held directly
by an Israeli citizen and resident or by a company which is controlled by
an Israeli citizen and resident.
4. In return for the replacement of the bank guarantee and the grant of the
Shareholder Loan of the Investor, as hereinbefore and hereinafter stated,
the Company and XFONE INC. will ensure that the Investor is appointed as a
director of the Company.
5. In case of need, and at the request of the Company's Board of Directors,
XFONE INC. shall make a further investment in the Company, by way of a
shareholder loan, amounting to the Shekel equivalent of the sum of
$600,000 (hereinafter: "the Shareholder Loan of XFONE INC.").
6. The Shareholder Loan of the Investor and the Shareholder Loan of XFONE
INC. will be provided for a period to be agreed between the parties,
together with interest and linkage differentials pursuant to the
provisions of the Income Tax Ordinance and any relevant law.
7. The Shareholder Loan of the Investor and the Shareholder Loan of XFONE
INC. will be returned by the Company in accordance with the relative
proportion of the loans in practice (and not in accordance with the
relative shareholdings in the Company).
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8. In the event that, after the Shareholder Loan funds of the Investor and
the Shareholder Loan funds of XFONE INC. (as detailed in clauses 2 and 5
above) have been utilized, the Company's Board of Directors decides to
engage in additional capital raising, both XFONE INC. and the Investor
shall be entitled to participate in such capital raising by way of
additional investment in the Company, according to their relative holdings
in the Company.
9. The holdings in the Company of any one party who has not exercised his
said entitlement and has not invested in the Company according to his
relative share of the Company's shareholding will be diluted in the event
that such investment is performed by the other party and/or by a third
party. The said dilution shall be in proportion to the Company's value at
the time the investment is made. In the event of any differences of
opinion, the Company's value shall be determined by Zinger & Even or any
other entity agreeable to the parties. If at the time of making the
investment, the Company shall be a public company, the value of the
Company for purposes of the dilution will be ascertained in accordance
with the Company's market value (an average of 30 trading days before the
investment is made).
10. If the Other Bank Guarantee is cancelled, for any reason, during the first
year, the Investor shall make available to the Company further credit by
way of a bank guarantee in the sum of NIS 1,500,000. The costs involved in
the issue of the bank guarantee (commission and stamp duty) will be paid
by the Company.
11. If the Other Bank Guarantee is reduced, for any reason, during the first
year, the Investor shall make available to the Company further credit by
way of bank guarantee at the rate of 15% of the reduction. The costs
involved in the issue of the bank guarantee (commission and stamp duty)
will be paid by the Company.
12. XFONE INC. shall be entitled to receive from the Company management fees
equivalent to 5% of the operating profit of the Company, in return for the
management services provided by XFONE INC. to the Company.
13. It is hereby declared and agreed between the parties that the Company is
not obligated to purchase communication services of any type from XFONE
INC.
14. The parties agree that the appointment of the household members of Messrs.
Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx, and Xxxx Xxxxxxxx, to positions in the
Company shall be subject, inter alia, to the consent of all the parties.
15. The parties agree that the appointment of the Company's
accountant-comptroller shall be by consent.
16. XFONE INC. and the Investor hereby agree to the Company's business plan
dated April-May 2004. It is declared and agreed that the Company shall do
everything in its power in order to implement the said business plan,
subject to changes as approved from time to time by the Company's Board of
Directors.
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17. The parties agree that the Company shall distribute a dividend to the
shareholders only after the Shareholder Loan of the Investor and the
Shareholder Loan of XFONE INC. have been returned in full. It is similarly
agreed that the Company will distribute the dividend only if the Company's
cash flow enables this, and that in any event no dividend will be
distributed if the total cash available to the Company is less than 10% of
the Company's turnover, or less than $500,000, whichever is higher. It is
further agreed that a dividend which is distributed by the Company,
subject to the aforementioned, shall constitute a minimum of 40% of the
Company's net profit.
18. If any of the parties should request to sell its shares in the Company, it
must first contact the other party and offer it the right to purchase its
shares. The offeree will answer the offeror within 30 days. If the offeree
chooses to refuse to accept the sale offer, the offeror shall be entitled
to sell its shares to a third party, provided that this is done within 60
days and on the same terms proposed to the offeree.
19. The parties undertake to comply with all the provisions and terms of the
Company's license and/or the International Operators Regulations and/or
any other relevant law which shall apply to the Company and/or to them
and/or to companies owned by them or under their control.
20. The parties undertake not to perform, either directly or indirectly, any
act or omission (including the sale of shares to a third party), which may
result in the Company's non compliance with the provisions and terms of
the Company's license and/or the International Operators Regulations
and/or any other relevant law.
Provisions Regarding the Performance and Cancellation of the Agreement
21. Within 10 days of the date of signing this Agreement, the Investor shall
notify the Company and XFONE INC. whether this Agreement is approved by
Bank Leumi Ltd., which is the Investor's bank. If this Agreement is not
approved by the said Bank, the Agreement shall be null and void. In such
case, neither the Company nor XFONE INC. shall have any actions and/or
claims against the Investor.
22. If this Agreement is approved by the said Bank, the Investor shall deposit
the full amount of the Shareholder Loan of the Investor in an escrow
account of a trustee whose identity shall be agreed upon between the
parties (hereinafter: "the Trustee"), within 12 days of signing this
Agreement.
23. If this Agreement is approved by the said Bank, the Company's Board of
Directors shall be requested to approve this Agreement, within 7 days of
the deposit of the Shareholder Loan funds of the Investor as stipulated in
clause 22 above. If this Agreement is not approved by the Company's Board
of Directors, the Agreement shall be null and void. In such case, the
Shareholder Loan funds of the Investor shall be returned by the Trustee to
the Investor in full, and the Investor shall have no actions or claims
against the Company and/or XFONE INC. and/or any of its agents and/or
proxies.
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24. If this Agreement is approved by the Company's Board of Directors, the
Company shall contact the Ministry of Communications, within 7 days of the
said approval of this Agreement by the Company's Board of Directors, and
shall request to receive the authorization of the Minister of
Communication pursuant to clause 18 of the Company's license. If the
aforesaid authorization of the Minister of Communication is not received
for any reason whatsoever, this Agreement shall be null and void. In such
case, the Shareholder Loan funds of the Investor shall be returned in full
by the Trustee to the Investor, and the Investor shall have no actions or
claims against the Company and/or XFONE INC. and/or any of its agents
and/or proxies.
25. If the said authorization of the Minister of Communication is obtained,
the parties shall act in the following manner:
The Investor shall attend to the replacement of the bank guarantee, as
stated above in this Agreement, within 10 days of the receipt of such
approval by the Minister of Communication.
Within 7 days of the date on which the bank guarantee is replaced, as
stated above in this Agreement, the Company and XFONE INC. shall attend to
the transfer and registration of the shares, as hereinbefore stated in
this Agreement.
Within 7 days of the date on which the bank guarantee is replaced, as
stated above in this Agreement, the Company and XFONE INC. shall attend to
the appointment of the Investor as a director of the Company, as
hereinbefore stated in this Agreement.
Within 7 days of the date on which the shares are transferred and
registered, and the Investor is appointed as a director of the Company,
the Trustee shall transfer to the Company the full amount of the
Shareholder Loan funds of the Investor.
As testimony the sides affix their signatures
XFONE COMMUNICATION LTD.
/s/ Xxxxxx Xxxx
-------------------
By: Xxxxxx Xxxx
Managing Director
/s/ Xxxx Xxxxxxx
-------------------
By: Xxxx Xxxxxxx
Legal Advisor
XFONE, INC.
/s/ Xxx Xxxxxxxxx
-------------------
By: Xxx Xxxxxxxxx
President and Chief Executive Officer
XXXX XXXXXXXX
/s/ Xxxx Xxxxxxxx
-------------------
By: Xxxx Xxxxxxxx
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