ESCROW AGREEMENT
This Escrow Agreement, dated as of ____________, 2004 (the "Closing
Date"), among XFone, Inc., a Nevada corporation, and XFone USA, Inc., a
Mississippi corporation (collectively "Buyer"), Xxxx Xxxxxxx, an individual
resident of Mississippi ("Xxxxxxx"), and Xxx Xxxxxxx, an individual resident of
Mississippi ("Xxxxxxx" and collectively with Xxxxxxx, "Principals" or each as
"Principal"), and ___________, a [national banking association] [bank organized
under the laws of ___________], as escrow agent ("Escrow Agent").
This is the Escrow Agreement referred to in the Agreement and Plan of
Merger Agreement dated ____________, 2004 (the "Merger Agreement") among Buyer,
WS Telecom, Inc. (the "Company") and the Principals. Capitalized terms used in
this agreement without definition shall have the respective meanings given to
them in the Merger Agreement.
In order to provide Buyer security for certain rights of indemnification
that the Buyer possesses under the Merger Agreement in the event of a breach of
the representations, warranties or agreements by the Company or the Principals
thereunder, or otherwise pursuant to the terms of the Merger Agreement, the
Principals and the Buyer have agreed that the number of shares of XFone, Inc.
Common Stock (the "XFone Common Stock") and the number of XFone, Inc. Stock
Warrants ("XFone Stock Warrants") as set forth in Exhibit "A", which constitutes
part of the purchase price under the Merger Agreement, shall be deposited with
the Escrow Agent by the Principals and Buyer to be held and handled by Escrow
Agent in accordance with the terms and conditions herein set forth.
The XFone, Inc. Common Stock is currently traded under the symbol XFNE:OB
and the Buyer shall notify the Escrow Agent of any change in the market on which
the stock is listed or the symbol under which it is traded.
The parties, intending to be legally bound, hereby agree as follows:
1. ESTABLISHMENT OF ESCROW
(a) Deposit of XFone Common Stock and XFone Stock Warrants. The Principals
hereby deposit in escrow the number of shares of XFone Common Stock and XFone
Common Stock Warrants set out opposite their names on Exhibit "A" attached to
this Agreement ("Escrow Shares"), registered in the name of the Escrow Agent or
its nominee. As used herein, the "Pro-Rata Share" refers to a fraction of which
the numerator is the number of Escrow Shares deposited by and which remain for
such Principal and the denominator is the total number of Escrow Shares
deposited by and which remain for both Principals.
(b) Escrow Fund. The Escrow Shares, all dividends and distributions
thereon, and all income and property resulting therefrom ("Escrow Fund") shall
be held by the Escrow Agent for the benefit of the Principals and Buyer on the
terms set out herein.
(c) Voting Rights of Shares in Escrow. All voting rights with respect to
the XFone Common Stock composing a part of the Escrow Fund may be exercised by
the Principal who deposited such XFone Common Stock in escrow, and the Escrow
Agent shall from time to time execute and deliver to each Principal such
proxies, consents, or other documents as may be necessary to enable each
Principal to exercise such rights with respect to any XFone Common Stock
deposited by such Principal which remains a part of the Escrow Fund.
(d) Distributions on Escrow Fund. All dividends and other distributions
(whether in cash, securities, or other property) paid or made on the Escrow Fund
shall be deemed to have been paid or made to the Principals, in accordance with
their respective Pro-Rata Share in the Escrow Fund, for income tax purposes, but
shall be received by the Escrow Agent and constitute part of the Escrow Fund.
(e) Taxes and Charges on Escrow Fund. The Principals, with respect to
their respective Pro-Rata Share of the Escrow Fund, shall maintain the Escrow
Fund free and clear of all liens and encumbrances and shall, promptly upon
request by the Escrow Agent, pay and discharge all taxes, assessments, and
governmental charges imposed on or with respect to the Escrow Fund.
(f) Acceptance of Escrow. Escrow Agent hereby agrees to act as escrow
agent and to hold, safeguard and disburse the Escrow Fund pursuant to the terms
and conditions hereof.
(g) Notice of Claim. Buyer shall be entitled to recover under this Escrow
Agreement in respect of any Loss (as defined in Section 6.2 of the Merger
Agreement) and may give notice in writing in the form attached hereto as
Appendix A ("Pending Claims Notice") to the Escrow Agent and the Principals of
any claim on which a Loss may be based, which Pending Claims Notice shall
include a brief description of the nature of the claim, the identity of the
party by whom it is being asserted, and an estimate of the amount of loss that
may be sustained by Buyer (the "Estimated Loss").
2. DISTRIBUTIONS FROM ESCROW FUND
(a) Buyer Request. If Buyer (or either of them) submits a notice and
request to the Principals and Escrow Agent in substantially the form attached as
Appendix B stating that a Loss (as defined in the Merger Agreement) has been
determined in accordance with Section 6.2 of the Merger Agreement and specifying
the dollar amount of the Loss and the property from the Escrow Fund to be
released to the Buyer in satisfaction of the Loss (including specifying the
number of shares of the XFone Common Stock and the XFone Stock Warrants of each
Principal to be released to the Buyer or its designee from the Escrow Fund),
then on the 15th business day following such notice, Escrow Agent shall release
the number of shares of the XFone Common Stock and XFone Stock Warrants as
directed in said notice, unless the Escrow Agent has received a Counter-Notice
(as defined herein) from any Principal that it disputes the requested release
from the Escrow Fund for the Loss.
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(b) Request by Principals. If the Principals give a notice in
substantially the form attached as Appendix C to the Escrow Agent and Buyer
stating that they are entitled to a distribution from their respective Pro-Rata
Share of the Escrow Fund as required under Section 6.2(b)(ii) of the Merger
Agreement specifying the number of XFone Common Stock and XFone Stock Warrants
to be distributed to each Principal, then on the 15th business day following
such notice, the Escrow Agent shall release the XFone Common Stock and XFone
Stock Warrants pursuant to the directions given by the Principals in the notice,
unless the Escrow Agent shall have received from Buyer a Counter-Notice (as
defined herein) that it disputes the requested release from the Escrow Fund
requested by the Principals.
(c) If a counter-notice ("Counter-Notice") is given with respect to a
request for distributions from the Escrow Fund, then the Escrow Agent shall make
a distribution from the Escrow Fund only in accordance with (i) joint written
instructions of Buyer and the Principals or (ii) a final non-appealable order of
a court of competent jurisdiction. Any court order shall be accompanied by legal
opinion by counsel for the presenting party satisfactory to the Escrow Agent to
the effect that the order is final and non-appealable. Escrow Agent shall act on
such court order and legal opinion without further question.
(d) Notwithstanding anything to the contrary contained in this Agreement,
the Escrow Agent shall make distributions from the Escrow Fund in accordance
with the joint written instructions of Buyer and Principals.
3. DURATION AND TERMINATION OF ESCROW
(a) On the third anniversary date of this Agreement, the Escrow Agent
shall retain an amount of the Escrow Fund (taken on a pro-rata basis from each
Principal's portion of the Escrow Fund) equal to the aggregate dollar value of
the Estimated Losses for all outstanding Pending Claims Notices and the
remainder of each Principal's portion of the Escrow Fund shall be disbursed to
each Principal. For these purposes, the value of the Parent Common Stock and the
Parent Stock Warrants shall be determined in accordance with Exhibit "A."
(b) The Escrow Agreement shall continue in full force and effect until the
first to occur of the close of business on the last day during which there is
any Escrow Fund remaining with the Escrow Agent or December 31, 2020, at which
time this Escrow shall terminate and any Escrow Fund remaining shall be
interpled with the registry or custody of any court of competent jurisdiction
and thereupon the Escrow Agent shall be discharged of all further duties under
this Agreement.
4. DUTIES OF ESCROW AGENT
(a) Escrow Agent shall not be under any duty to give the Escrow Fund held
by it hereunder any greater degree of care than it gives its own similar
property and shall not be required
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to invest any funds held hereunder except as directed in this Agreement.
Uninvested funds held hereunder shall not earn or accrue interest.
(b) Escrow Agent shall not be liable, except for its own gross negligence
or willful misconduct and, except with respect to claims based upon such gross
negligence or willful misconduct that are successfully asserted against Escrow
Agent, the others hereto shall jointly and severally indemnify and hold harmless
Escrow Agent (and any successor Escrow Agent) from and against any and all
losses, liabilities, claims, actions, damages and expenses, including reasonable
attorneys' fees and disbursements, arising out of and in connection with this
Agreement.
(c) Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so. Escrow
Agent may conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person has full power and
authority to instruct Escrow Agent on behalf of that party unless written notice
to the contrary is delivered to Escrow Agent.
(d) Escrow Agent may act pursuant to the advice of counsel with respect to
any matter relating to this Agreement and shall not be liable for any action
taken or omitted by it in good faith in accordance with such advice.
(e) Escrow Agent does not have any interest in the Escrow Fund deposited
hereunder but is serving as escrow holder only and having only possession
thereof. Any payments of income from this Escrow Fund shall be subject to
withholding regulations then in force with respect to United States taxes. The
parties hereto will provide Escrow Agent with appropriate Internal Revenue
Service Forms W-9 for tax identification number certification, or non-resident
alien certifications. This Section 5(e) and Section 5(b) shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
(f) Escrow Agent makes no representation as to the validity, value,
genuineness or the collectibility of any security or other document or
instrument held by or delivered to it.
(g) Escrow Agent (and any successor Escrow Agent) may at any time resign
as such by delivering the Escrow Fund to any successor Escrow Agent jointly
designated by the other parties hereto in writing, or to any court of competent
jurisdiction, whereupon Escrow Agent shall be discharged of and from any and all
further obligations arising in connection with this Agreement. The resignation
of Escrow Agent will take effect on the earlier of (a) the appointment of a
successor (including a court of competent jurisdiction) or (b) the day which is
30 days after the date of delivery of its written notice of resignation to the
other parties hereto. If at that time Escrow Agent has not
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received a designation of a successor Escrow Agent, Escrow Agent's sole
responsibility after that time shall be to retain and safeguard the Escrow Fund
until receipt of a designation of successor Escrow Agent or a joint written
disposition instruction by the other parties hereto or a final non- appealable
order of a court of competent jurisdiction.
(h) In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the Escrow
Fund or in the event that Escrow Agent is in doubt as to what action it should
take hereunder, Escrow Agent shall be entitled to retain the Escrow Fund until
Escrow Agent shall have received (i) a final non-appealable order of a court of
competent jurisdiction directing delivery of the Escrow Fund or (ii) a written
agreement executed by the other parties hereto directing delivery of the Escrow
Fund, in which event Escrow Agent shall disburse the Escrow Fund in accordance
with such order or agreement. Any court order shall be accompanied by a legal
opinion by counsel for the presenting party satisfactory to Escrow Agent to the
effect that the order is final and non-appealable. Escrow Agent shall act on
such court order and legal opinion without further question.
(i) Buyers and Principals shall pay Escrow Agent compensation (as payment
in full) for the services to be rendered by Escrow Agent hereunder in the amount
of $_________ at the time of execution of this Agreement and $_____________
annually thereafter and agree to reimburse Escrow Agent for all reasonable
expenses, disbursements and advances incurred or made by Escrow Agent in
performance of its duties hereunder (including reasonable fees, expenses and
disbursements of its counsel). Any such compensation and reimbursement to which
Escrow Agent is entitled shall be borne 50% by Buyer, 44.3% by Spooner and 5.7%
by Xxxxxxx. Any fees or expenses of Escrow Agent or its counsel that are not
paid as provided for herein may be taken from any property held by Escrow Agent
hereunder.
(j) No printed or other matter in any language (including, without
limitation, prospectuses, notices, reports and promotional material) that
mentions Escrow Agent's name or the rights, powers, or duties of Escrow Agent
shall be issued by the other parties hereto or on such parties' behalf unless
Escrow Agent shall first have given its specific written consent thereto.
5. LIMITED RESPONSIBILITY
This Agreement expressly sets forth all the duties of Escrow Agent with
respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this agreement against Escrow Agent. Escrow Agent
shall not be bound by the provisions of any agreement among the other parties
hereto except this Agreement.
6. OWNERSHIP FOR TAX PURPOSES
Principals agree that, for purposes of federal and other taxes based on
income, Xxxxxxx and Xxxxxxx will be treated as the owner of their pro-rata share
of the Escrow Fund, respectively, and that Xxxxxxx and Xxxxxxx will report all
income, if any, that is earned on, or derived from, the Escrow
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Fund as their income, in such proportions, in the taxable year or years in which
such income is properly includible and pay any taxes attributable thereto.
7. NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt) provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
IF TO PRINCIPALS, TO:
___________________________________
___________________________________
___________________________________
Telephone: ________________________
Facsimile: ________________________
___________________________________
___________________________________
___________________________________
Telephone:_________________________
Facsimile:_________________________
IF TO BUYER, TO:
XFone, Inc.
Xxxxxxxxx Xxxxx
000 Xxxx Xxxx
Xxxxxx, X000XX
Xxxxxx Xxxxxxx
Attention: Xxx Xxxxxxxxx
Telephone: x00 000-000-0000
Facsimile: x00 000-000-0000
Email: xxx@xxxxx.xxx
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with a copy to:
The Oberon Group, LLC
00 Xxxxxxx Xxx., 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxx@xxxxxxxxxxx.xxx
Xxxxxxx Xxxxxx Winter & Stennis, P.A.
000 Xxxxx Xxxxx Xxxxxx (39202)
P. O. Xxx 000 Xxxxxxx, XX 00000-0000 Attention: Xxxx X. Xxxxxx
Telephone: 000-000-0000 Facsimile: 601-949-4804
Email: xxxxxxx@xxxxxxxxxxxxx.xxx
8. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Mississippi or, if it has or can acquire
jurisdiction, in the United States District Court for the Southern District of
Mississippi, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world.
9. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original and all of which, when taken together, will be
deemed to constitute one and the same.
10. SECTION HEADINGS
The headings of sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation.
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11. WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12. EXCLUSIVE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the Buyer, the
Principals and the Escrow Agent.
13. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Mississippi,
without regard to conflicts of law principles.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYERS: PRINCIPALS:
XFone, Inc.
By:________________________________ ________________________________________
Title: Xxxx Xxxxxxx, Individually
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XFone USA, Inc.
By:________________________________
Title:__________________________
ESCROW AGENT:
___________________________________ ________________________________________
Xxx Xxxxxxx, Individually
By:________________________________
Title:__________________________
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EXHIBIT "A"
XFone Common Stock XFone Stock Warrants
------------------ --------------------
Xxxx Xxxxxxx
Xxx Xxxxxxx
Valuation
Parent Stock Warrants - $_________ per warrant
Parent Common Stock - the average of the closing price for the ten (10) trading
days immediately preceding the date of valuation.
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APPENDIX A
PENDING CLAIM NOTICE
To: _______________________, or its successor ("Escrow Agent")
From: XFone, Inc. and/or XFone USA, Inc. ("XFone")
Xxxx Xxxxxxx ("Principal")
Xxx Xxxxxxx ("Principal")
Date:
Please be advised that, pursuant to Section 1(g) of the Escrow Agreement
dated ____________, 2004 by and among the undersigned, the Escrow Agent, and the
Principals, each of you are hereby notified that, Buyer believes that the Buyer
has or may suffer a Loss pursuant to the provisions of Article 6.2 of the Merger
Agreement dated as of _______________, 2004 ("Merger Agreement") by virtue of
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
XFone estimates that the Loss is $_____________ ("Estimated Loss").
Signed this _____ day of _________________, 20__.
XFONE, INC./XFone USA, Inc.
By:____________________________________
Title:_________________________________
00
XXXXXXXX X
BUYER DEPOSITION NOTICE REQUEST
To: ______________________, or its successor ("Escrow Agent")
Xxxx Xxxxxxx ("Principal")
Xxx Xxxxxxx ("Principal")
From: XFone, Inc./XFone USA, Inc. ("XFone")
Date: _______________________
Re: Escrow Agreement Dated ____________, 2004 Among the Above-referenced
Parties ("Escrow Agreement")
Please be advised that pursuant to Section 2(a) of the Escrow Agreement
you are hereby notified that a Loss (as defined in the Merger Agreement dated
________________, 2004) has been determined and you are hereby instructed to
deliver to XFone, Inc. the following XFone Common Stock and XFone Stock Warrants
endorsed for transfer to XFone from the Escrow Fund.
(1) _________ total shares XFone Common Stock as follows:
(a) ____________ shares of Xxxx Xxxxxxx'x XFone Common Stock deposited
in the Escrow Fund.
(b) ____________ shares of Xxx Xxxxxxx' XFone Common Stock deposited in
the Escrow Fund.
(2) _________ shares XFone Stock Warrants as follows:
(a) ____________ XFone Stock Warrants from Xxxx Xxxxxxx'x XFone Stock
Warrants deposited in the Escrow Fund.
(b) ____________ XFone Stock Warrants from Xxx Xxxxxxx' XFone Stock
Warrants deposited in the Escrow Fund.
(3) Cash Dividends $________.
Check One:
____ This is the Loss as determined for Pending Claims Notice dated .
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____ This notice also constitutes a Pending Claims Notice and the Loss arises
out of the following:
Sincerely,
XFone, Inc./XFone USA, Inc.
By:_____________________________________
Title:__________________________________
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APPENDIX C
PRINCIPALS DEPOSITION NOTICE REQUEST
To: ______________________, or its successor ("Escrow Agent")
XFone, Inc./XFone USA, Inc. ("XFone")
From: Xxxx Xxxxxxx ("Principal")
Xxx Xxxxxxx ("Principal")
Date: _____________________
Re: Escrow Agreement Dated ____________, 2004 Among the Above-referenced
Parties ("Escrow Agreement")
Please be advised that pursuant to Section 2(b) of the Escrow Agreement
you are hereby notified that each Principal is entitled to a distribution as set
forth below from the Escrow Fund pursuant to Section 6.2(b)(ii) of the Merger
Agreement dated ______________, 2004, and you are hereby requested to deliver to
each Principal the following XFone Common Stock and Parent Stock Warrants
endorsed as follows for transfer from the Escrow Fund:
To Xxxx Xxxxxxx:
__________ shares of XFone Common Stock Xxxx Xxxxxxx deposited in the
Escrow Fund.
__________ XFone Stock Warrants from Xxxx Xxxxxxx'x XFone Stock Warrants
deposited in the Escrow Fund.
To Xxx Xxxxxxx:
__________ shares of XFone Common Stock Xxx Xxxxxxx deposited in the
Escrow Fund.
__________ XFone Stock Warrants from Xxx Xxxxxxx' XFone Stock Warrants he
deposited in the Escrow Fund.
Sincerely,
________________________________________
Xxxx Xxxxxxx
________________________________________
Xxx Xxxxxxx
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