FUNDS ESCROW AGREEMENT
This
Agreement (this “Agreement”) is dated as of the 27th day of September 2005 among
XFONE, INC., a Nevada corporation (the “Company”),
Laurus Master Fund, Ltd. (the "Purchaser"),
and
Loeb & Loeb LLP (the "Escrow
Agent"):
W I T N E S S E T H:
WHEREAS,
the Purchaser has advised the Escrow Agent that (a) the Company and the
Purchaser have entered into a Securities Purchase Agreement dated as of the
date
hereof (the "Securities
Purchase Agreement")
for
the sale by the Company to the Purchaser of a secured convertible term note
in
an aggregate principal amount of US$2,000,000 (the "Term
Note"),
(b)
the Company has issued to the Purchaser a common stock purchase warrant (the
“Term
Note Warrant”)
in
connection with the issuance of the Term Note, and (c) the Company and the
Purchaser have entered into a Registration Rights Agreement dated as of the
date
hereof covering the registration of the Company’s common stock underlying the
Term Note and the Term Note Warrant (the “Term
Note Registration Rights Agreement”);
WHEREAS,
the Company and the Purchaser wish the Purchaser to deliver to the Escrow Agent
copies of the Documents (as hereafter defined) and the Escrowed Payment (as
hereafter defined) to be held and released by Escrow Agent in accordance with
the terms and conditions of this Agreement; and
WHEREAS,
the Escrow Agent is willing to serve as escrow agent pursuant to the terms
and
conditions of this Agreement;
NOW
THEREFORE, the parties agree as follows:
ARTICLE
I
INTERPRETATION
1.1. Definitions.
Whenever used in this Agreement, the following terms shall have the meanings
set
forth below.
(a) "Agreement"
means this Agreement, as amended, modified and/or supplemented from time to
time
by written agreement among the parties hereto.
(b) "Closing
Payment" means the closing payment to be paid to Laurus Capital Management,
LLC,
the fund manager, as set forth on Schedule A hereto.
(c) “Disbursement
Letter” means that certain letter delivered to the Escrow Agent by each of the
Purchaser and the Company setting forth wire instructions and amounts to be
funded at the Closing.
(d) "Documents"
means copies of the Disbursement Letter, the Securities Purchase Agreement,
the
Term Note, the Term Note Warrant and the Term Note Registration Rights
Agreement.
(e) “Escrowed
Payment" means $2,000,000.
1.2. Entire
Agreement.
This
Agreement constitutes the entire agreement among the parties hereto with respect
to the matters contained herein and supersedes all prior agreements,
understandings, negotiations and discussions of the parties, whether oral or
written. There are no warranties, representations and other agreements made
by
the parties in connection with the subject matter hereof except as specifically
set forth in this Agreement.
1.3. Extended
Meanings.
In this
Agreement words importing the singular number include the plural and vice versa;
words importing the masculine gender include the feminine and neuter genders.
The word "person" includes an individual, body corporate, partnership, trustee
or trust or unincorporated association, executor, administrator or legal
representative.
1.4. Waivers
and Amendments.
This
Agreement may be amended, modified, superseded, cancelled, renewed or extended,
and the terms and conditions hereof may be waived, in each case only by a
written instrument signed by all parties hereto, or, in the case of a waiver,
by
the party waiving compliance. Except as expressly stated herein, no delay on
the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party
of
any right, power or privilege hereunder preclude any other or future exercise
of
any other right, power or privilege hereunder.
1.5. Headings.
The
division of this Agreement into articles, sections, subsections and paragraphs
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.
1.6. Law
Governing this Agreement; Consent to Jurisdiction.
THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. With
respect to any suit, action or proceeding relating to this Agreement or to
the
transactions contemplated hereby (“Proceedings”), each party hereto irrevocably
submits to the exclusive jurisdiction of the courts of the County of New York,
State of New York and the United States District court located in the county
of
New York in the State of New York. Each party hereto hereby irrevocably and
unconditionally (a) waives trial by jury in any Proceeding relating to this
Agreement and for any related counterclaim and (b) waives any objection which
it
may have at any time to the laying of venue of any Proceeding brought in any
such court, waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with respect to
such
Proceedings, that such court does not have jurisdiction over such party. As
between the Company and the Purchaser, the prevailing party shall be entitled
to
recover from the other party its reasonable attorneys’ fees and costs. In the
event that any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable, then the remainder of this
Agreement shall not be affected and shall remain in full force and
effect.
1.7. Construction.
Each
party acknowledges that its legal counsel participated in the preparation of
this Agreement and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Agreement to favor any party against the
other.
ARTICLE
II
APPOINTMENT
OF AND DELIVERIES TO THE ESCROW AGENT
2.1. Appointment.
The
Company and the Purchaser hereby irrevocably designate and appoint the Escrow
Agent as their escrow agent for the purposes set forth herein, and the Escrow
Agent by its execution and delivery of this Agreement hereby accepts such
appointment under the terms and conditions set forth herein.
2.2. Copies
of Documents to Escrow Agent.
On or
about the date hereof, the Purchaser shall deliver to the Escrow Agent copies
of
the Documents executed by the Company to the extent it is a party
thereto.
2.3. Delivery
of Escrowed Payment to Escrow Agent.
On or
about the date hereof, the Purchaser shall deliver to the Escrow Agent the
Escrowed Payment.
2.4.
Intention to Create Escrow Over the Escrowed Payment.
The
Purchaser and the Company intend that the Escrowed Payment shall be held in
escrow by the Escrow Agent and released from escrow by the Escrow Agent only
in
accordance with the terms and conditions of this Agreement.
1.
2.5Conditions
to Effectiveness. This Escrow Agreement shall become effective when signed
by
the Company, the Purchaser and the Escrow Agent.
ARTICLE
III
RELEASE
OF ESCROW
3.1. Release
of Escrow.
Subject
to the provisions of Section 4.2, the Escrow Agent shall release the Escrowed
Payment from escrow as follows:
(a) Promptly
following receipt by the Escrow Agent of (i) copies of the fully executed
Documents and this Agreement, (ii) the Escrowed Payment in immediately available
funds, (iii) a Disbursement Letter executed by the Company and the Purchaser
setting forth the payment direction instructions with respect to the Escrowed
Payment and (iv) Escrow Agent’s verbal instructions from Xxxxx Grin and/or
Xxxxxx Grin (each of whom is a director of the Purchaser) indicating that all
closing conditions relating to the Documents have been satisfied and directing
that the Escrowed Payment be disbursed by the Escrow Agent in accordance with
the Disbursement Letter, then the Escrowed Payment shall be deemed released
from
escrow and shall be promptly disbursed in accordance with the Disbursement
Letter. The Disbursement Letter shall include, without limitation, Escrow
Agent’s authorization to retain from the Escrowed Payment Escrow Agent’s fee for
acting as Escrow Agent hereunder and the Closing Payment for delivery to Laurus
Capital Management, LLC in accordance with the Disbursement Letter.
(b) Upon
receipt by the Escrow Agent of a final and non-appealable judgment, order,
decree or award of a court of competent jurisdiction (a "Court
Order")
relating to the Escrowed Payment, the Escrow Agent shall remit the Escrowed
Payment in accordance with the Court Order. Any Court Order shall be accompanied
by an opinion of counsel for the party presenting the Court Order to the Escrow
Agent (which opinion shall be satisfactory to the Escrow Agent) to the effect
that the court issuing the Court Order is a court of competent jurisdiction
and
that the Court Order is final and non-appealable.
3.2. Acknowledgement
of Company and Purchaser; Disputes.
The
Company and the Purchaser acknowledge that the only terms and conditions upon
which the Escrowed Payment are to be released from escrow are as set forth
in
Sections 3 and 4 of this Agreement. The Company and the Purchaser reaffirm
their
agreement to abide by the terms and conditions of this Agreement with respect
to
the release of the Escrowed Payment. Any dispute with respect to the release
of
the Escrowed Payment shall be resolved pursuant to Section 4.2 or by written
agreement between the Company and Purchaser.
ARTICLE
IV
CONCERNING
THE ESCROW AGENT
4.1. Duties
and Responsibilities of the Escrow Agent.
The
Escrow Agent's duties and responsibilities shall be subject to the following
terms and conditions:
(a) The
Purchaser and the Company acknowledge and agree that the Escrow Agent (i) shall
not be required to inquire into whether the Purchaser, the Company or any other
party is entitled to receipt of any Document or all or any portion of the
Escrowed Payment; (ii) shall not be called upon to construe or review any
Document or any other document, instrument or agreement entered into in
connection therewith; (iii) shall be obligated only for the performance of
such
duties as are specifically assumed by the Escrow Agent pursuant to this
Agreement; (iv) may rely on and shall be protected in acting or refraining
from
acting upon any written notice, instruction, instrument, statement, request
or
document furnished to it hereunder and believed by the Escrow Agent in good
faith to be genuine and to have been signed or presented by the proper person
or
party, without being required to determine the authenticity or correctness
of
any fact stated therein or the propriety or validity or the service thereof;
(v)
may assume that any person purporting to give notice or make any statement
or
execute any document in connection with the provisions hereof has been duly
authorized to do so; (vi) shall not be responsible for the identity, authority
or rights of any person, firm or company executing or delivering or purporting
to execute or deliver this Agreement or any Document or any funds deposited
hereunder or any endorsement thereon or assignment thereof; (vii) shall not
be
under any duty to give the property held by Escrow Agent hereunder any greater
degree of care than Escrow Agent gives its own similar property; and (viii)
may
consult counsel satisfactory to Escrow Agent (including, without limitation,
Loeb & Loeb, LLP or such other counsel of Escrow Agent’s choosing), the
opinion of such counsel to be full and complete authorization and protection
in
respect of any action taken, suffered or omitted by Escrow Agent hereunder
in
good faith and in accordance with the opinion of such counsel.
(b) The
Purchaser and the Company acknowledge that the Escrow Agent is acting solely
as
a stakeholder at their request and that the Escrow Agent shall not be liable
for
any action taken by Escrow Agent in good faith and believed by Escrow Agent
to
be authorized or within the rights or powers conferred upon Escrow Agent by
this
Agreement. The Purchaser and the Company hereby, jointly and severally,
indemnify and hold harmless the Escrow Agent and any of Escrow Agent's partners,
employees, agents and representatives from and against any and all actions
taken
or omitted to be taken by Escrow Agent or any of them hereunder and any and
all
claims, losses, liabilities, costs, damages and expenses suffered and/or
incurred by the Escrow Agent arising in any manner whatsoever out of the
transactions contemplated by this Agreement and/or any transaction related
in
any way hereto, including the fees of outside counsel and other costs and
expenses of defending itself against any claims, losses, liabilities, costs,
damages and expenses arising in any manner whatsoever out the transactions
contemplated by this Agreement and/or any transaction related in any way hereto,
except for such claims, losses, liabilities, costs, damages and expenses
incurred by reason of the Escrow Agent’s gross negligence or willful misconduct.
The Escrow Agent shall owe a duty only to the Purchaser and the Company under
this Agreement and to no other person.
(c) The
Purchaser and the Company shall jointly and severally reimburse the Escrow
Agent
for its reasonable out-of-pocket expenses (including counsel fees (which counsel
may be Loeb & Loeb LLP or such other counsel of the Escrow Agent’s choosing)
incurred in connection with the performance of its duties and responsibilities
hereunder, which shall not (subject to Section 4.1(b)) exceed $2,000.
(d) The
Escrow Agent may at any time resign as Escrow Agent hereunder by giving five
(5)
business days prior written notice of resignation to the Purchaser and the
Company. Prior to the effective date of resignation as specified in such notice,
the Purchaser and Company will issue to the Escrow Agent a Joint Instruction
authorizing delivery of the Documents and the Escrowed Payment to a substitute
Escrow Agent selected by the Purchaser and the Company. If no successor Escrow
Agent is named by the Purchaser and the Company, the Escrow Agent may apply
to a
court of competent jurisdiction in the State of New York for appointment of
a
successor Escrow Agent, and deposit the Documents and the Escrowed Payment
with
the clerk of any such court and/or otherwise commence an interpleader or similar
action for a determination of where to deposit the same.
(e) The
Escrow Agent does not have and will not have any interest in the Documents
and
the Escrowed Payment, but is serving only as escrow agent, having only
possession thereof.
(f) The
Escrow Agent shall not be liable for any action taken or omitted by it in good
faith and reasonably believed by it to be authorized hereby or within the rights
or powers conferred upon it hereunder, nor for action taken or omitted by it
in
good faith, and in accordance with advice of counsel (which counsel may be
Loeb
& Loeb, LLP or such other counsel of the Escrow Agent’s choosing), and shall
not be liable for any mistake of fact or error of judgment or for any acts
or
omissions of any kind except to the extent any such liability arose from its
own
willful misconduct or gross negligence.
(g) This
Agreement sets forth exclusively the duties of the Escrow Agent with respect
to
any and all matters pertinent thereto and no implied duties or obligations
shall
be read into this Agreement.
(h) The
Escrow Agent shall be permitted to act as counsel for the Purchaser, in any
dispute as to the disposition of the Documents and the Escrowed Payment, in
any
other dispute between the Purchaser and the Company, whether or not the Escrow
Agent is then holding the Documents and/or the Escrowed Payment and continues
to
act as the Escrow Agent hereunder.
(i) The
provisions of this Section 4.1 shall survive the resignation of the Escrow
Agent
or the termination of this Agreement.
4.2. Dispute
Resolution; Judgments.
Resolution of disputes arising under this Agreement shall be subject to the
following terms and conditions:
(a) If
any
dispute shall arise with respect to the delivery, ownership, right of possession
or disposition of the Documents and/or the Escrowed Payment, or if the Escrow
Agent shall in good faith be uncertain as to its duties or rights hereunder,
the
Escrow Agent shall be authorized, without liability to anyone, to (i) refrain
from taking any action other than to continue to hold the Documents and the
Escrowed Payment pending receipt of a Joint Instruction from the Purchaser
and
the Company, (ii) commence an interpleader or similar action, suit or proceeding
for the resolution of any such dispute; and/or (iii) deposit the Documents
and
the Escrowed Payment with any court of competent jurisdiction in the State
of
New York, in which event the Escrow Agent shall give written notice thereof
to
the Purchaser and the Company and shall thereupon be relieved and discharged
from all further obligations pursuant to this Agreement. The Escrow Agent may,
but shall be under no duty to, institute or defend any legal proceedings which
relate to the Documents and the Escrowed Payment. The Escrow Agent shall have
the right to retain counsel if it becomes involved in any disagreement, dispute
or litigation on account of this Agreement or otherwise determines that it
is
necessary to consult counsel which such counsel may be Loeb & Loeb
LLP
or
such
other counsel of the Escrow Agent’s choosing.
(b) The
Escrow Agent is hereby expressly authorized to comply with and obey any Court
Order. In case the Escrow Agent obeys or complies with a Court Order, the Escrow
Agent shall not be liable to the Purchaser and the Company or to any other
person, firm, company or entity by reason of such compliance.
ARTICLE
V
GENERAL
MATTERS
5.1. Termination.
This
escrow shall terminate upon disbursement of the Escrowed Payment in accordance
with the terms of this Agreement or earlier upon the agreement in writing of
the
Purchaser and the Company or resignation of the Escrow Agent in accordance
with
the terms hereof.
5.2. Notices.
All
notices, requests, demands and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given one
(1) day after being sent by telecopy (with copy delivered by overnight courier,
regular or certified mail):
|
If
to the Company, to:
|
XFONE,
INC.
|
|
c/o
Xfone 018 Ltd.
|
|
|
0
Xxxxxx Xxxxxx, 0xx
Xxxxx
|
|
|
|
Kiryat
Matalon
|
|
|
Petach
Tikva, Israel
|
|
Facsimile:
011.972.39238838
|
|
|
|
Attention:
Xxxx Xxxxxxx, Adv.
|
|
With
a copy to:
|
|
|
Xxxxxxx
Xxxxxxxxx
|
|
|
Advocate
and Attorney-at-Law
|
|
|
Xxxxxxxxx
& Co.
|
|
|
Xxxxx
Center, Room 315
|
|
|
Ra'anana
00000
|
|
|
Xxxxxx
|
|
|
Facsimile:
011.972.508966694
|
(b)
If to
the Purchaser, to:
LAURUS
MASTER FUND, LTD.
M&C
Corporate Services Limited, X.X. Xxx 000 XX, Xxxxxx
House,
South Church Street, Xxxxxx Town, Grand Cayman,
Cayman
Islands, Fax: 000-000-0000
(c) If
to the
Escrow Agent, to:
Loeb
& Loeb LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax:
(000) 000-0000
Attention:
Xxxxx X. Xxxxxxxx, Esq.
or
to
such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.
5.3. Interest.
The
Escrowed Payment shall not be held in an interest bearing account nor will
interest be payable in connection therewith.
5.4. Assignment;
Binding Agreement.
Neither
this Agreement nor any right or obligation hereunder shall be assignable by
any
party without the prior written consent of the other parties hereto. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective legal representatives, successors and assigns.
5.5. Invalidity.
In the
event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal, or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the parties hereto shall
be
enforceable to the fullest extent permitted by law.
5.6. Counterparts/Execution.
Subject
to Section 2.5, this Agreement may be executed in any number of counterparts
and
by different signatories hereto on separate counterparts, each of which, when
so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same agreement. This Agreement may be executed by
facsimile transmission.
2. IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
and year first above written.
COMPANY:
XFONE,
INC.
By:_________________________________
Name:
Xxx
Xxxxxxxxx
Title:
President & CEO
PURCHASER:
LAURUS
MASTER FUND, LTD.
By:_________________________________
Name:
Title:
ESCROW
AGENT:
LOEB
& LOEB LLP
By:_________________________________
Name:
Title:
SCHEDULE
A TO FUNDS ESCROW AGREEMENT
|
PURCHASER
|
PRINCIPAL
NOTE AMOUNT
|
|
LAURUS
MASTER FUND, LTD.,
M&C
Corporate Services Limited, X.X. Xxx 000 XX,
Xxxxxx
House,
South Church Street, Xxxxxx Town,
Grand Cayman,
Cayman
Islands, Fax: 000-000-0000
|
Term
Note in an aggregate principal amount of $2,000,000.
|
|
TOTAL
|
$2,000,000
|
|
FUND
MANAGER
|
CLOSING
PAYMENT
|
|
LAURUS
CAPITAL MANAGEMENT, L.L.C.
000
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Fax:
000-000-0000
|
Closing
payment payable in connection with investment by Laurus Master Fund,
Ltd.
for which Laurus Capital Management, L.L.C. is the
Manager.
|
|
TOTAL
|
$72,000
|
WARRANTS
|
WARRANT
RECIPIENT
|
WARRANTS
IN CONNECTION WITH OFFERING
|
|
LAURUS
MASTER FUND, LTD.
M&C
Corporate Services Limited, X.X. Xxx 000 XX, Xxxxxx
House,
South Church Street, Xxxxxx Town, Grand Cayman,
Cayman
Islands, Fax: 000-000-0000
|
Term
Note Warrant execisable into 157,500 shares of common stock of the
Company
issuable in connection with the Term Note.
|
|
TOTAL
|
Warrants
exercisable into 157.500 shares of common stock of the
Company
|
Xfone,
Inc.
September
27, 2005
Xxxxx
X.
Xxxxxxxx
Xxxx
& Xxxx LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Direct
Dial: (000) 000-0000
Fax:
(000) 000-0000
|
RE:
|
XFONE,
INC.
-
Escrow Release
|
Gross
Escrow Deposit: $2,000,000
Dear
Xx.
Xxxxxxxx:
These
instructions are given to you pursuant to a Funds Escrow Agreement among
XFONE,
INC.
(the “Company”), Laurus Master Fund, Ltd. and Loeb & Loeb LLP as Escrow
Agent. Subject to the terms set forth below, you are instructed to disburse
$2,000,000 of the investor’s funds received by you to and on the Company’s
behalf as follows:
| 1. | $1,590,476.67 - Xfone, Inc., pursuant to the following wire instructions: |
|
Bank:
|
AmSouth
Bank
0000
0xx Xxx X
Xxxxxxxxxx,
XX 00000
|
|
ABA
#:
|
000000000
|
|
Account
#:
|
0050488686
|
|
Account
Name:
|
Xfone,
Inc.
|
|
Reference:
|
| 2. |
$110,000.00-
Oberon
Securities,
LLC, pursuant to the following wire
instructions:
|
|
Bank:
|
Bank
of New York
000
Xxxxxxx Xxx
XX,
XX 00000
|
|
ABA#:
|
000000000
|
|
Swift
#:
|
XXXXXX0X
|
|
Account
#:
|
630-0000000
|
|
Account
Name:
|
Oberon
Securities
|
| 3. |
$200,023.33-
AmSouth
Bank,
pursuant to the following wire
instructions:
|
|
Bank:
|
AmSouth
Bank
0000
0xx Xxx X
Xxxxxxxxxx,
XX 00000
|
|
ABA#:
|
000000000
|
|
Account
#:
|
007000005385
|
|
Account
Name:
|
eXpeTel
Communications, Inc.
|
|
Reference:
|
Xfone
USA/ eXpeTel Communications Credit
Facility
|
| 4. |
$72,000.00
-
Laurus Capital Management, L.L.C. (management fees), pursuant to
the
following wire instructions:
|
|
Bank:
|
Xxxxx
Xxxx Xxxx
Xxx
Xxxx, XX 00000
|
|
ABA#:
|
000000000
|
|
For
Credit to:
|
Laurus
Capital Management, LL.C.
|
|
Account
Number:
|
2774045278
|
| 5. |
$25,500.00
-
Laurus Capital Management, L.L.C. (for payment in full of all due
diligence and documentation fees owed by the Company), pursuant
to the
following wire instructions:
|
|
Bank:
|
Xxxxx
Xxxx Xxxx
Xxx
Xxxx, XX 00000
|
|
ABA#:
|
000000000
|
|
For
Credit to:
|
Laurus
Capital Management, LL.C.
|
|
Account
Number:
|
2774045278
|
| 6. |
$2,000.00
-
Loeb & Loeb LLP (for escrow agent fee and expenses), pursuant to the
following wire instructions:
|
|
Bank:
|
Citibank,
N.A.
|
|
ABA
No:
|
000000000
|
|
Acct.
No.:
|
02674308
|
|
Reference:
|
Laurus
Escrow Arrangement
|
Very
truly yours,
XFONE,
INC.
By:_________________________________
Accepted
and Agreed:
Laurus
Master Fund, Ltd.
By:_______________________
Schedule
1
Xfone,
Inc.
000
Xxxx
Xxxx
Xxxxxx,
Xxxxxx Xxxxxxx X00 0XX
Oberon
Securities, LLC
00
Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx
Xxxx,
XX 00000
Laurus
Capital Management LLC
000
0xx
Xxx.
00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Loeb
& Loeb
000
Xxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
AmSouth
Bank
0000
0xx
Xxx X
Xxxxxxxxxx,
XX 00000
