Xfone 8-K
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
Report (Date of earliest event reported): October
12, 2005
XFONE,
INC.
(Exact
name of registrant as specified in its charter)
Nevada
(State
or
other jurisdiction of incorporation or organization)
Commission
File No. 333-67232
11-3618510
(I.R.S.
Employer Identification Number)
960
High Road
London
N12 9RY, United Kingdom
(Address
of principal executive offices) (Zip Code)
011.44.8451087777
(Registrant’s
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
oWritten
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
oSoliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
oPre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
oPre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01. Entry into a Material Definitive Agreement
MANAGEMENT
AGREEMENT WITH I-55 TELECOMMUNICATIONS, LLC
As
previously disclosed on Form 8-K filed on August 31, 2005, the Registrant had
announced the signing on August 26, 2005, of an Agreement and Plan of Merger
(the "Merger Agreement") to acquire I-55 Telecommunications, LLC ("I-55
Telecommunications"). Further, on September 13, 2005, the Registrant filed
a
Form 8-K discussing the impact of Hurricane Katrina on the transaction
contemplated by the Merger Agreement.
As
part
of the Registrant's intention to continue on with the transaction contemplated
by the Merger Agreement, the Registrant and I-55 Telecommunications executed
on
October 12, 2005 the Management Agreement, previously attached to the Merger
Agreement as Exhibit C, filed on Form 8-K on August 31, 2005.
The
parties decided to enter into this Management Agreement on October 12, 2005,
to
provide that I-55 Telecommunications hire and appoint the Registrant's
wholly-owned US subsidiary, Xfone USA, Inc., as manager ("Manager") to be
responsible for the operation and management of all of I-55 Telecommunication's
business operations, including:
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Personnel
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Supervising the current employees and independent contractors of
I-55
Telecommunications with the Manager having the authority to hire,
discharge and direct personnel for the conduct of the Business;
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Accounting
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Supervision and administration of all accounting and the maintenance
of
all books and records for the Business, including, without limitation,
(i)
all billing, communications and other services provided to customers
serviced under I-55 Telecommunications' licenses; (ii) collection
on
behalf of I-55 Telecommunications of all fees, charges and other
compensation relating to the Business; (iii) review of all bills
received
for services, work or supplies in connection with maintaining and
operating the Business and paying all such bills as and when the
same
shall become due and payable except for the Long Term Liabilities
(as
defined in the Merger Agreement); and (iv) preparation on a monthly
basis
of a balance sheet and income and expense statement with respect
to the
Business.
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Contracts
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Maintain all existing contracts necessary for the operation of the
Business and the authority to enter into or renew contracts in the
ordinary course of business in I-55 Telecommunication's name as necessary
for the continuing operation of the Business provided that the consent
of
I-55 Telecommunication shall be required for any new contracts or
renewals
of existing contracts that are not terminable on 60 days notice,
or that
require the commitment of more than $5,000.00, which is not included
in an
approved operating budget;
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Policies
and procedures
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Preparation of all policies and procedures for the operation of the
Business; and
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Budgets
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Preparation of all operating, capital or other
budgets.
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In
consideration of the management services to be provided under the Management
Agreement, I-55 Telecommunications assigns and transfers to Manager all revenues
generated from the operations of the Business (the "Revenues"), to be used
in
accordance with the Management Agreement and Manager agrees to pay and cause
to
be paid from the Revenues the normal operating, maintenance, administrative,
and
similar expenses of the Business incurred in the ordinary course of business
during the term of the Management Agreement, exclusive of Long Term Liabilities.
I-55
Telecommunications shall designate the Manager as the controlling party of
the
current operating accounts of the Business (the "Accounts") and all funds
collected from the operations, fees, sales and other collections and operations
of the Business shall be deposited in the Accounts and the Manager shall control
and have authority with respect to all disbursements from said Accounts and
the
Manager agrees that the normal operating expenses shall be paid from the
Revenues collected and deposited in such Accounts and then to the extent of
available funds, the Long Term Liabilities and other non-recurring liabilities
shall be paid.
The
Manager, in its discretion, shall have the right to make advances or loans
(the
"Manager Loans") to I-55 Telecom payable on demand (or if no demand payable
in
equal quarterly installments of principal and interest) for an amount up to
$500,000.00
with
interest at 7%
per
annum from the date advanced until paid for the payment of any amounts due
during the term of the Management Agreement under any of the Long Term
Liabilities or for any other liabilities the Manager deems appropriate for
which
there are not sufficient Revenues generated to pay such debts and expenses.
I-55
Telecommunications, by execution of the Management Agreement, granted to the
Manager a security interest in all of the assets, whether now owned or hereafter
acquired and wherever located, of I-55 Telecommunications, including without
limitation, all accounts, goods, equipment, inventory, contracts and contract
rights, instruments, chattel paper, securities and other investment property.
The Manager is authorized to file such financing statements and amendments
thereto and continuations thereof in such offices as necessary to perfect the
security interest granted by the Management Agreement.
The
term
of the Management Agreement shall commence on October 12, 2005, and shall
continue until the consummation of the Merger, provided that the Management
Agreement may be terminated by either party at any time after March 1, 2006
upon
30 days prior notice.
In
the
event that the Management Agreement is terminated by either party (other than
due to the consummation of the Merger), then the Registrant and I-55
Telecommunications agree that the "Net Revenue" or "Net Loss" during the term
of
the Management Agreement shall be divided 50% to I-55 Telecommunications and
50%
to the Manager, provided that in the event the Manager or any of its affiliates
has made any Manager Loans to I-55 Telecommunications, that the Manager may
offset against any amounts due under any Manager Loans any amounts due to I-55
Telecommunications for the "Net Revenue" and in the event there is a "Net Loss",
then I-55 Telecommunication's share of the "Net Loss" shall be added to the
principal due under the Manager Loans. If the Management Agreement is terminated
due to the consummation of the Merger, then in such event the Manager shall
be
entitled to all the Net Revenues or Net Losses. For purposes of the above "Net
Revenue" is the excess of gross revenues derived from the Business during the
Term, over expenses paid and losses incurred during the Term, and "Net Loss"
is
the excess of expenses paid and losses incurred during the Term, over gross
revenues derived from the Business during the Term.
I-55
Telecommunications shall include the Manager as an additional insured on all
insurance currently maintained and such insurance shall continue throughout
the
term of the Management Agreement.
This
Current Report on Form 8-K may contain, among other things, certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including, without limitation, statements with
respect to the Registrant’s plans, objectives, expectations and intentions and
other statements identified by words such as “may”, “could”, “would”, “should”,
“believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans” or similar
expressions. These statements are based upon the current beliefs and
expectations of the Registrant’s management and are subject to significant risks
and uncertainties. Actual results may differ from those set forth in the
forward-looking statements. These forward-looking statements involve certain
risks and uncertainties that are subject to change based on various factors
(many of which are beyond the Registrant’s control).
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Xfone,
Inc.
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Date:
October 17, 2005
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By:
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/s/ Guy
Nissenson
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Guy
Nissenson
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President
and Chief Executive Officer
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