EXHIBIT 10.5

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THIS PROMISSORY NOTE MAY NOT BE ENCUMBERED, PLEDGED, HYPOTHECATED,
SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE PROMISSORY NOTES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO THE CORPORATION AND
CONCURRED IN BY THE CORPORATION’S COUNSEL TO THE EFFECT THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR SUCH TRANSACTION COMPLIES WITH RULES
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER SAID ACT.

PROMISSORY NOTE

 

Principal Amount:   $ 346,950.00 Date of Issuance:   May 16, 2006

For value received, Axesstel, Inc., a Nevada corporation (“Axesstel”), promises
to pay to the order of Mike H.P. Kwon, an individual (“Kwon”), at the address
for notice set forth below or at such other place as the holder of this Note
(“Holder”) may from time to time designate in writing, in lawful money of the
United States, the principal sum of Three Hundred Forty-Six Thousand Nine
Hundred Fifty Dollars ($346,950.00), with interest at the rate, and due and
payable, as follows:

ARTICLE 1 - INTEREST

1.1 Rate of Interest. The principal balance outstanding from time to time under
this Promissory Note (“Note”) shall bear interest at the Prime Rate plus one
percent (1%) per annum. For these purposes, the Prime Rate shall be as quoted in
the “Money Rates” column of the Wall Street Journal on the date of this Note, as
adjusted annually on the second business day of each calendar year.

1.2 Computation of Interest. Interest shall be calculated on a 365/365 simple
interest basis; that is, by applying the ratio of the annual interest rate over
the number of days in a year (366 during leap years), multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding.

1.3 No Usurious Interest. In the event that any interest rate(s) provided for in
this Note shall be determined to be unlawful, such interest rate(s) shall be
computed at the highest rate permitted by applicable law. Any payment by
Axesstel of any interest amount in excess of that permitted by law shall be
considered a mistake, with the excess being applied to the principal amount of
this Note without prepayment premium or penalty; if no such principal amount is
outstanding, such excess shall be returned to Axesstel.

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ARTICLE 2 - PAYMENTS

2.1 Maturity Date. The entire principal balance and all accrued and unpaid
interest shall be paid in full without setoff, deduction or counterclaim on the
earlier to occur of (i) the date that Kwon’s employment with Axesstel is
terminated whether voluntarily or involuntarily, or (ii) May 15, 2008 (the
“Maturity Date”).

2.2 Prepayment. Axesstel shall have the right to prepay all or any part of the
principal balance of this Note at any time without charge or premium.

2.3 Application of Payments. All payments received, irrespective of how they may
be designated by Axesstel, shall be applied first to charges other than interest
and principal, if any, owing hereunder, then to accrued interest, then to
principal, except that, after the occurrence and during the continuation of any
Event of Default under this Note, all amounts received shall be applied in such
order as Holder, in its sole discretion, may elect.

ARTICLE 3 - DEFAULT

3.1 Default. The following shall constitute an “Event of Default” under this
Note:

(a) a default in the payment when due of any amount hereunder; or

(b) the filing of a petition by or against Axesstel under any provision of the
Bankruptcy Reform Act, Title 11 of the United States Code as amended or
recodified from time to time, or under any similar law relating to bankruptcy,
insolvency, or other relief for debtors, or appointment or a receiver, trustee,
custodian or liquidator of or for all or any party of the assets or property of
Axesstel, or the insolvency of Axesstel; or the making of a general assignment
for the benefit of creditors by Axesstel.

3.2 Acceleration Right. If an Event of Default occurs under Section 3.1(c), then
the outstanding principal of and all accrued and unpaid interest on this Note
shall automatically become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived.

3.3 Suits for Enforcement. Upon the occurrence of any one or more Events of
Default, the Holder of this Note may proceed to protect and enforce its rights
hereunder by suit in equity, action at law or by other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Note or in aid of the exercise of any power granted in this Note, or may
proceed to enforce the payment of this Note, or to enforce any other legal or
equitable right of the Holder of this Note. In case of any default under this
Note, Axesstel will pay to the Holder such amounts as shall be sufficient to
cover the costs and expenses (including reasonable attorneys’ fees) of such
Holder in protecting and enforcing its rights under this Note.

 

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ARTICLE 4 - ADDITIONAL TERMS AND CONDITIONS

4.1 Time of the Essence. Time is of the essence with respect to the payment and
performance of the obligations of this Note.

4.2 No Oral Waivers or Modifications. No provision of this Note may be waived or
modified orally, but only in a writing signed by Holder.

4.3 Governing Law. This Note shall be governed by and construed under the
internal laws of the State of California, without regard to conflict of law
provisions.

4.4 Notices. All notices, demands and other communications required or permitted
hereunder shall be in writing, addressed to the appropriate party as follows:

 

If to Kwon:

  Mr. Mike H.P. Kwon                   

If to Axesstel:

  Axesstel, Inc.      6815 Flanders Drive, Suite 210      San Diego, California
92121      Attn: Senior Vice President Finance   

The address for notice may be changed to such other address as may be designated
from time to time by notice to the other parties in the manner set forth herein,
and shall be effective upon the earliest of (i) actual delivery if delivered by
personal delivery or certified postage prepaid mail, or (ii) on the next day
after timely and proper deposit with an overnight air courier with request for
next day delivery.

4.5 Replacement of Note. On receipt by Axesstel of an affidavit of an authorized
representative of Holder stating the circumstances of the loss, theft,
destruction or mutilation of this Note (and in the case of any such mutilation,
on surrender and cancellation of such Note), Axesstel, at its expense, will
promptly execute and deliver, in lieu thereof, a new Note of like tenor. If
required by Axesstel, Holder must provide indemnity sufficient in the reasonable
judgment of Axesstel to protect Axesstel from any loss, which it may suffer if a
lost, stolen or destroyed Note is replaced.

 

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4.6 Successors and Assigns. This Note binds Axesstel and its successors,
assigns, heirs, administrators and executors, and inures to the benefit of
Holder and its successors, assigns, participants, heirs, administrators and
executors.

SIGNATURES

 

Axesstel:

AXESSTEL, INC.

By:  

/s/ Patrick L. Gray

 

Patrick L. Gray, Senior VP Finance

 

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