Exhibit 10.1

 

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (this “Agreement”) is made and entered into as of
September 24, 2014, by and between Axesstel, Inc. a Nevada corporation
(“Axesstel”), and Dragon Group International Ltd, a company formed under the
laws of Singapore (“DGI”), Loh Soon Gnee, an individual, and Shi Jie Fan, an
individual, (DGI, Mr. Loh and Mr. Fan, collectively the “Selling Stockholders”),
with respect to the following facts:

 

A. The Selling Stockholders own all of the outstanding capital stock of Flexcomm
Limited, a company formed under the laws of Hong Kong (“Flexcomm”).

 

B. Axesstel desires to purchase from the Selling Stockholders, and the Selling
Stockholders desire to sell to Axesstel, all of the outstanding capital stock of
Flexcomm on the terms and conditions contained in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and intending to be legally bound, Axesstel and the Selling
Stockholders agree as follows:

 

ARTICLE I.
DEFINITIONS

 

Definitions. In addition to the terms defined elsewhere in this Agreement, the
following terms have the meanings set forth in this Section 1.1:

 

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration,
inquiry, audit, notice of violation, proceeding, litigation, citation, summons,
subpoena or investigation of any nature, civil, criminal, administrative,
regulatory or otherwise, whether at law or in equity.

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.

 

“Axesstel Financial Statements” has the meaning set forth in Section 3.1(g).

 

“Axesstel Indemnitees” has the meaning set forth in Section 5.2.

 

“Board of Directors” means the board of directors of Axesstel.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of California are authorized or required by law or
other governmental action to close.

 

“Closing” means the closing of the purchase and sale of Flexcomm pursuant to
Section 2.1 of this Agreement.

 

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“Common Stock” means the common stock of Axesstel, Inc., par value $0.0001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.

 

“Direct Claim” shall have the meaning set forth in Section 5.5(c)

 

“Disclosure Schedules” means the Disclosure Schedules, if any, delivered by
Axesstel and the Selling Stockholders concurrently with the execution and
delivery of this Agreement.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Flexcomm Consolidated Financial Statements” has the meaning set forth in
Section 3.2(g).

 

“Flexcomm Indemnitees” has the meaning set forth in Section 5.3.

 

“GAAP” means United States generally accepted accounting principles in effect
from time to time.

 

“Governmental Authority” means any federal, state, local or foreign government
or political subdivision thereof, or any agency or instrumentality of such
government or political subdivision, or any self-regulated organization or other
non-governmental regulatory authority or quasi-governmental authority (to the
extent that the rules, regulations or orders of such organization or authority
have the force of Law), or any arbitrator, court or tribunal of competent
jurisdiction.

 

“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

 

“Intellectual Property Rights” means all patents, patent applications,
trademarks, trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other similar rights.

 

“Law” means any statute, law, ordinance, regulation, rule, code, order,
constitution, treaty, common law, judgment, decree, other requirement or rule of
law of any Governmental Authority.

 

“Liabilities” means an obligations or commitment of any nature whatsoever,
asserted or unasserted, known or unknown, absolute or contingent, accrued or
unaccrued, matured or unmatured or otherwise.

 

“Liens” means a lien, charge, pledge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction, other than (a) liens for
Taxes not yet due and payable; (ii) mechanics, carriers', workmen's, repairmen's
or other like liens arising or incurred in the ordinary course of business
consistent with past practice or amounts that are not delinquent and which are
not, individually or in the aggregate, material; or liens arising under original
purchase price conditional sales contracts and equipment leases with third
parties entered into in the ordinary course of business consistent with past
practice which are not, individually or in the aggregate, material to a party’s
business.

 

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“Losses” means losses, damages, liabilities, deficiencies, Actions, judgments,
interest, awards, penalties, fines, costs or expenses of whatever kind,
including reasonable attorneys' fees and the cost of enforcing any right to
indemnification hereunder and the cost of pursuing any insurance providers.

 

“Material Adverse Effect” means any event, occurrence, fact, condition or change
that is, or could reasonably be expected to become, individually or in the
aggregate, materially adverse to (a) the business, results of operations,
condition (financial or otherwise) or assets of Axesstel or Flexcomm and their
respective Subsidiaries taken as a whole, or (b) the ability of Axesstel or the
Selling Stockholders to consummate the transactions contemplated hereby on a
timely basis; provided, however, that "Material Adverse Effect" shall not
include any event, occurrence, fact, condition or change, directly or
indirectly, arising out of or attributable to: (i) general economic or political
conditions; (ii) conditions generally affecting the industries in which Axesstel
or Flexcomm operates; (iii) any changes in financial or securities markets in
general; (iv) acts of war (whether or not declared), armed hostilities or
terrorism, or the escalation or worsening thereof; or (v) any changes in
applicable Laws or accounting rules, including GAAP.

 

“Material Contract” means with respect to either party, a contract, agreement or
arrangement that is material to the operation of the party’s business, including
all modifications, amendments and supplements thereto and waivers thereunder.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“SEC” means the United States Securities and Exchange Commission.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Subsidiary” means (a) with respect to Axesstel, Axesstel Shanghai Ltd., a
company formed under the laws of the Peoples Republic of China (“Axesstel
Shanghai”); and (b) with respect to Flexcomm means (i) Flexcomm Technology
(Shenzhen) Limited, a company formed under the laws of the Peoples Republic of
China (“Flexcomm Shenzhen”), (ii) PT Scan Nusantara, a limited liability company
formed under the laws of Indonesia (“PT Scan”), and (iii) Technollis Sdn, Bhd a
Malaysian company limited by shares(“Technollis”).

 

“Tax” means all federal, state, local, foreign and other income, gross receipts,
sales, use, production, ad valorem, transfer, franchise, registration, profits,
license, lease, service, service use, withholding, payroll, employment,
unemployment, estimated, excise, severance, environmental, stamp, occupation,
premium, property (real or personal), real property gains, windfall profits,
customs, duties or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties.

 

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“Tax Return” means any return, declaration, report, claim for refund,
information return or statement or other document relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.

 

“Third Party Claims” has the meaning set forth in Section 5.5(a).

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
trading market such as the NYSE, Nasdaq or OTC, the daily volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is not
then listed or quoted for trading on the OTC Bulletin Board and if prices for
the Common Stock are then reported in the “Pink Sheets” published by Pink OTC
Markets, Inc. (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of the Common Stock so
reported, or (c) in all other cases, the fair market value of a share of Common
Stock as determined in good faith by the Board of Directors.

 

ARTICLE II.
PURCHASE AND SALE

 

2.1 Purchase and Sale. Each Selling Stockholder hereby transfers and conveys to
Axesstel, and Axesstel hereby purchases from each Selling Stockholder, all of
such Selling Stockholder’s right, title and interest in the capital stock of
Flexcomm, free and clear of any Liens, in exchange for the payment of the Shares
and the Earnout, as described Section Error! Reference source not found. and 2.3
below.

 

2.2 Purchase Price. In exchange for the ownership interests in Flexcomm,
Axesstel hereby issues to the Selling Stockholders (in proportion to their
holdings of the capital stock of Flexcomm) an aggregate of 25,000,000 shares
(the “Shares”) of Axesstel’s authorized but unissued Common Stock.

 

2.3 Earn Out. In addition to the Shares, the Selling Stockholders shall be
entitled to earn an additional amount of cash and shares of Common Stock (the
“Earnout”) payable as follows:

 

(a) If PT Scan completes its planned listing and IPO on IDX, the Indonesia stock
exchange, on or before the 18 month period following the Closing, Axesstel will
pay to the Selling Stockholders (in proportion to their holdings of the capital
stock of Flexcomm) an aggregate amount equal to one-third of the value of
Axesstel’s ownership interest PT Scan, measured on the basis of a pre-money
valuation at the IPO price. The Earnout may be paid in cash; provided, however
that, at Axesstel’s discretion, up to 60% of the Earnout may be paid in
additional shares of Common Stock (valued at the VWAP for the Common Stock for
the 30 day period ending prior to the date of issuance). One half of the amount
of the Earnout will be paid promptly following the closing of the IPO and the
remaining amount will be paid six months following the closing of the IPO.

 

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(b) If PT Scan does not complete the IPO within 18 months following the Closing,
Axesstel will pay to the Selling Stockholders (in proportion to their holdings
of the capital stock of Flexcomm) an aggregate amount of cash equal to 25% of
the net income generated by Flexcomm and PT Scan, on a consolidated basis, in
each of the fiscal years ending December 31, 2015 and 2016. Net income for these
purposes will be calculated by Axesstel based on the amounts reflected in its
own consolidated financial statements prepared in accordance with GAAP,
consistent with the accounting policies that Axesstel uses in the preparation of
its audited financial reports, and as filed with the SEC; provided however, that
the net income attributed to any Flexcomm Subsidiary that is only partially
owned shall be reduced proportionally to the pro rata portion directly owned by
Axesstel (e.g. if Flexcomm owns 85% of PT Scan, only 85% of PT Scan’s net income
will be included in the consolidation). In addition to the cash, Axesstel will
issue to the Selling Stockholders additional shares of Common Stock each fiscal
year, based on the amount that the actual net income recognized compared to
mutually agreed net income targets for each fiscal year in accordance with the
following schedule:

 

Aggregate additional shares of Common Stock to be issued:

 

0 to 25% of Target Nil 26%-50% of Target 1,000,000 51%-75% of Target 1,500,000
76% to 125% of Target 2,500,000 Above 125% 3,750,000

 

The net income target for 2015 shall be $1.4 million and the net income target
for 2016 shall be $1.8 million. Payment of the Earnout for each fiscal year
shall be made within 30 days following the completion of Axesstel’s audit for
the consolidated enterprise for the related fiscal year.

 

During the period that the Earnout is being calculated, Axesstel will retain
Flexcomm and PT Scan as separate subsidiary entities for purposes of
facilitating the calculation of the Earnout. Axesstel will use commercially
reasonable efforts to operate Flexcomm and PT Scan in accordance with a mutually
agreed operating budget. Subject to the terms of this Agreement, subsequent to
the Closing, Axesstel shall have sole discretion with regard to all matters
relating to the operation of the Flexcomm business, including management,
employment determinations and compensation, operating expenses, capital
expenditures, sales and contract approval and customer credit policies. Axesstel
will have no obligation to contribute additional capital to Flexcomm or PT Scan,
or provide additional resources to those entities during the Earnout Period.
However, Axesstel shall not, directly or indirectly, take any actions in bad
faith that would have the purpose of avoiding or reducing any of the Earnout
payments hereunder.

 

2.4 Deliveries. Concurrently with the execution and delivery of this Agreement,
(a) the Selling Stockholders have delivered to Axesstel certificates evidencing
all of the outstanding capital stock of Flexcomm, duly endorsed and registered
in the name of Axesstel, Inc.; and (b) Axesstel has delivered to the Selling
Stockholders an irrevocable instruction letter to Axesstel’s transfer agent
directing it to issue certificates for the Shares to the Selling Stockholders.

 

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2.5 Restricted Shares. The Shares have not been registered with the SEC or with
the securities authority or any state or other jurisdiction. Accordingly the
Shares are “restricted securities” within the meaning of the Securities Act. The
Selling Stockholders agree that the Shares, and any Common Stock acquired
pursuant to the Earnout, may only be disposed of in compliance with federal and
state securities laws. In connection with any transfer of Shares or Common
Stock, Axesstel may require the transferor thereof to provide an opinion of
counsel, the form and substance of which opinion shall be reasonably
satisfactory to Axesstel, to the effect that such transfer does not require
registration of such transferred Shares under the Securities Act. The Selling
Stockholders acknowledge that any certificate representing the Shares may
contain a legend substantially in the following form:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of Axesstel. Except as set forth in the SEC
Reports or the Axesstel Disclosure Schedule, which shall be deemed a part hereof
and shall qualify any representation or otherwise made herein to the extent of
the disclosure contained in the corresponding Section of the Disclosure
Schedules, Axesstel hereby makes the following representations and warranties to
each Selling Stockholder:

 

(a) Organization. Axesstel is a corporation, duly organized and validly existing
under the laws of the state of Nevada. Axesstel owns 100% of the outstanding
Axesstel Shanghai free and clear of any Liens. Except for its Subsidiaries,
Axesstel does not, directly or indirectly, own, control or have any interest in
any shares or other ownership interest in any other Person. Axesstel and its
Subsidiaries are each an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither Axesstel nor any Subsidiary is in violation nor default of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.

 

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(b) Authorization; Enforcement. Axesstel has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Axesstel and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action and no
further action is required by Axesstel, its Board of Directors, or stockholders.
This Agreement has been duly executed by Axesstel and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of Axesstel enforceable against Axesstel in accordance with its
terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other Laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by Laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable Law.

 

(c) No Conflicts. The execution, delivery and performance by Axesstel of this
Agreement, the issuance and sale of the Shares, and the consummation by it of
the transactions contemplated hereby do not and will not: (i) conflict with or
violate any provision of Axesstel’s or any Subsidiary’s certificate or articles
of incorporation, bylaws or other organizational or charter documents, (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of Axesstel or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, credit facility, debt or other instrument or other understanding
to which Axesstel or any Subsidiary is a party or by which any property or asset
of Axesstel or any Subsidiary is bound or affected, or (iii) conflict with or
result in a violation of Law or any Governmental Order to which Axesstel or a
Subsidiary is subject, or by which any property or asset of Axesstel or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

 

(d) Consents and Approvals. Axesstel is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority having jurisdiction over Axesstel or its Subsidiaries, or
other Person in connection with the execution, delivery and performance by
Axesstel of this Agreement, other than a Current Report on Form 8-K to be filed
with the SEC within four Business Days following the execution and delivery of
this Agreement.

 

(e) Issuance of the Shares. The Shares are duly authorized and, when issued and
paid for in accordance with this Agreement, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens.

 

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(f) Capitalization. Axesstel’s authorized capital stock consists of 250,000,000
shares of Common Stock, of which (a) 28,504,617 shares are issued and
outstanding, (b) 2,824,778 shares are reserved for issuance pursuant to
currently outstanding options and warrants to purchase Common Stock, and (c)
6,790,805 shares are reserved for issuance of additional awards issued pursuant
to the Axesstel, Inc. 2013 Equity Incentive Plan. All of the outstanding shares
of Common Stock are duly authorized, validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase securities.
There are no stockholders agreements, voting agreements or other similar
agreements with respect to Axesstel’s Common Stock to which Axesstel is a party
or, to the knowledge of Axesstel, between or among any of Axesstel’s
stockholders.

 

(g) Financial Statements. Axesstel has delivered to the Selling Stockholders the
most recent financial statements for Axesstel, including a balance sheet,
statement of operations and statement of cash flows (the “Axesstel Financial
Statements”). The Axesstel Financial Statements are based on the books and
records of Axesstel, and fairly present in all material respects the financial
condition of Axesstel as of the respective dates they were prepared and the
results of Axesstel’s operations for the periods indicated.

 

(h) No Undisclosed Liabilities. Axesstel has no Liabilities, except (a) those
which are adequately reflected or reserved against in the most recent balance
sheet contained in the Axesstel Financial Statements, and (b) those which have
been incurred in the ordinary course of business consistent with past practice
since the date of the most recent balance sheet contained in the Axesstel
Financial Statements.

 

(i) Material Changes. Since the date of the most recent balance sheet contained
in the Axesstel Financial Statements: (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Material Adverse Effect on Axesstel, (ii) Axesstel has not incurred any
liabilities (contingent or otherwise) that are material to Axesstel other than
(A) trade payables, accrued expenses and other Liabilities incurred in the
ordinary course of business consistent with past practice and (B) Liabilities
not required to be reflected in the Axesstel Financial Statements pursuant to
GAAP or disclosed in filings made with the SEC, (iii) Axesstel has not altered
its method of accounting, (iv) Axesstel has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) Axesstel has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Axesstel stock option plans.

 

(j) Title to Assets. Axesstel and its Subsidiaries have good and marketable
title in all personal property owned by them that is material to the business of
Axesstel and the Subsidiaries, in each case free and clear of all Liens, except
for (i) Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by Axesstel and the Subsidiary and (ii) Liens for the payment of federal, state
or other taxes, for which appropriate reserves have been made therefor in
accordance with GAAP and, the payment of which is neither delinquent nor subject
to penalties. Any real property and facilities held under lease by Axesstel and
the Subsidiary are held by them under valid, subsisting and enforceable leases
with which Axesstel and the Subsidiary are in compliance.

 

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(k) Intellectual Property. Axesstel and its Subsidiaries have, or have rights to
use, all Intellectual Property Rights as necessary or required for use in
connection with their respective businesses and which the failure to so have
could have a Material Adverse Effect. Neither Axesstel nor any Subsidiary has
received a notice (written or otherwise) that any of, the Intellectual Property
Rights has expired, terminated or been abandoned, or is expected to expire or
terminate or be abandoned, within two (2) years from the date of this Agreement.
Neither Axesstel nor any Subsidiary has received, since the date of the latest
audited financial statements included within the SEC Reports, a written notice
of a claim or otherwise has any knowledge that the Intellectual Property Rights
violate or infringe upon the rights of any Person, except as could not have or
reasonably be expected to not have a Material Adverse Effect. To the knowledge
of the Axesstel, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights. Axesstel and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l) Material Contracts. Complete and correct copies of each of Axesstel’s
Material Contracts has been filed in the SEC reports or has been made available
to the Selling Stockholders. Each Material Contract is valid and binding on
Axesstel in accordance with its terms and is in full force and effect. None of
Axesstel or, to Axesstel’s knowledge, any other party thereto is in breach of or
default under in any material respect, or has provided or received any notice of
any intention to terminate, any Material Contract. No event or circumstance has
occurred that, with notice or lapse of time or both, would constitute an event
of default under any Material Contract or result in a termination thereof or
would cause or permit the acceleration or other changes of any right or
obligation or the loss of any benefit thereunder.

 

(m) Employment Matters. No labor dispute exists or, to the knowledge of
Axesstel, is imminent with respect to any of the employees of Axesstel or any of
its Subsidiaries, which could reasonably be expected to result in a Material
Adverse Effect. None of Axesstel’s or its Subsidiaries’ employees is a member of
a union that relates to such employee’s relationship with Axesstel or such
Subsidiary, and neither Axesstel nor any of its Subsidiaries is a party to a
collective bargaining agreement. Axesstel and its Subsidiaries believe that
their relationships with their employees are good. To the knowledge of Axesstel,
no executive officer of Axesstel or any Subsidiary, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject Axesstel or any of its Subsidiaries to any
liability with respect to any of the foregoing matters. Axesstel and its
Subsidiaries are in compliance with all U.S. federal, state, local and foreign
Laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

 

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(n) Insurance. Axesstel and its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as Axesstel believes are prudent and customary in the businesses in
which Axesstel and the Subsidiaries are engaged.

 

(o) Taxes. Except for matters that would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, Axesstel
and its Subsidiaries each (i) has made or filed all United States federal, state
and local income and all foreign income and franchise Tax Returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all Taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations
and (iii) has set aside on its books provision reasonably adequate for the
payment of all material Taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid Taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of Axesstel or of any Subsidiary know of no basis for any such
claim.

 

(p) Legal Proceedings. Except as set forth in the SEC Reports there are no
Actions pending or, to Axesstel’s knowledge, threatened against or by Axesstel
affecting any of its properties or assets (or by or against Axesstel or any
Affiliate thereof and relating to Axesstel).

 

(q) Compliance with Laws. There are no outstanding Governmental Orders and no
unsatisfied judgments, penalties or awards against or affecting Axesstel or any
of its properties or assets. Neither Axesstel nor any Subsidiary is or has been
in violation of any Law, including without limitation all foreign, federal,
state and local Laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and labor matters,
except in each case as could not have or reasonably be expected to result in a
Material Adverse Effect.

 

(r) Permits. Axesstel and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses
as described in the SEC Reports, except where the failure to possess such
permits could not reasonably be expected to result in a Material Adverse Effect,
and neither Axesstel nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.

 

(s) Anti-Bribery Laws. Neither Axesstel nor any Subsidiary, nor to the knowledge
of Axesstel or any Subsidiary, any agent or other person acting on behalf of
Axesstel or any Subsidiary, has: (i) directly or indirectly, used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by Axesstel or any Subsidiary (or made by
any person acting on its behalf of which Axesstel is aware) which is in
violation of Law or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or any similar statute
applicable to it.

 

-10-

 

 

 

(t) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of Axesstel or any Subsidiary and, to
the knowledge of Axesstel, none of the employees of Axesstel or any Subsidiary
is presently a party to any transaction with Axesstel or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, providing for
the borrowing of money from or lending of money too or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of Axesstel, any entity in which any officer, director, or any such employee has
a substantial interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for: (i) payment of
salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of Axesstel and (iii) other employee benefits, including
stock option agreements under any stock option plan of Axesstel.

 

(u) No Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Axesstel.

 

(v) Full Disclosure. No representation or warranty by Axesstel in this Agreement
and no statement contained in the Disclosure Schedules to this Agreement or any
certificate or other document furnished or to be furnished to the Selling
Stockholders pursuant to this Agreement contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which they are
made, not misleading.

 

3.2 Representations and Warranties of the Selling Stockholders. Except as set
forth in the Selling Stockholder Disclosure Schedules, which Disclosure
Schedules shall be deemed a part hereof and shall qualify any representation or
otherwise made herein to the extent of the disclosure contained in the
corresponding Section of the Disclosure Schedules, the Selling Stockholders,
severally and not jointly, make the following representations and warranties to
Axesstel (provided that DGI makes only those representations and warranties in
clauses (a) through (f) below where such representations and warranties relate
to DGI only and, for the avoidance of doubt, DGI makes no representations and
warranties in relation to any other party, including but not limited to
Flexcomm, its Subsidiaries or any other Selling Shareholder):

 

-11-

 

 

 

(a) Organization. Flexcomm is a corporation, duly organized and validly existing
under the laws of Hong Kong. Flexcomm owns (i) 100% of the outstanding capital
stock of Flexcomm Shenzhen, (ii) 85% of the outstanding capital stock of PT
Scan, and (iii) 100% of the outstanding capital stock of Technollis. Except for
the Subsidiaries, Flexcomm does not, directly or indirectly, own, control or
have any interest in any shares or other ownership interest in any other Person.
Flexcomm and each Subsidiary are an entity duly incorporated or otherwise
organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither Flexcomm nor any Subsidiary is in violation nor
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.

 

(b) Authorization; Enforcement. Each Selling Stockholder has the requisite power
and authority, including the requisite corporate power and authority, to enter
into and to consummate the transactions contemplated by this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by each Selling Stockholder and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
action and no further action is required. This Agreement has been duly executed
by each Selling Stockholder and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of such Selling
Stockholder enforceable against the Selling Stockholder in accordance with its
terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other Laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by Laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable Law.

 

(c) No Conflicts. The execution, delivery and performance by each Selling
Stockholder of this Agreement, the sale of the capital stock of Flexcomm and the
consummation by it of the transactions contemplated hereby do not and will not:
(i) conflict with or violate any provision of the Selling Stockholder’s,
Flexcomm’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of Flexcomm or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement, credit
facility, debt or other instrument or other understanding to which Flexcomm or
any Subsidiary is a party or by which any property or asset of Flexcomm or any
Subsidiary is bound or affected, or (iii) conflict with or result in a violation
of Law or any Governmental Order other restriction of any court or Governmental
Authority to which Flexcomm or a Subsidiary is subject, or by which any property
or asset of Flexcomm or a Subsidiary is bound or affected; except in the case of
each of clauses (ii) and (iii), such as could not have or reasonably be expected
to result in a Material Adverse Effect.

 

-12-

 

 

 

(d) Consents and Approvals. Neither any Selling Stockholders, Flexcomm or any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority having jurisdiction over
Flexcomm or its Subsidiaries, or other Person in connection with the execution,
delivery and performance by the Selling Stockholders of this Agreement.

 

(e) Issuance of the Flexcomm Securities. The shares of capital stock of Flexcomm
being transferred by each Selling Stockholder to Axesstel are duly authorized,
validly issued, fully paid and nonassessable, free and clear of all Liens.

 

(f) Capitalization. The authorized capital stock of Flexcomm consists of
HK$100,000,000 of ordinary shares, of which 59,382,584 shares with a nominal
value of HK$0.20 per share, are issued and outstanding. There are no warrants,
options, subscription rights or other rights conveyed on any other Person to
acquire any of the capital stock of Flexcomm, except for options to purchase
308,000,000 ordinary shares held by Mr. Loh. The authorized share capital stock
of Flexcomm Shenzhen consists of RMB 8,859,655 of ordinary shares, par value RMB
1.00 per share, of which shares with a capital value of RMB 8,859,655 are issued
and outstanding, all of which are owned by Flexcomm. There are no warrants,
options, subscription rights or other rights conveyed on any other Person to
acquire any of the capital stock of Flexcomm Shenzhen. The authorized capital
stock of PT Scan consists of 2,000,000 shares of having a nominal value of Rp
9,188 per share, of which 1,385,600 shares are issued and outstanding, and
1,177,760 of which are owned by Flexcomm. There are no warrants, options,
subscription rights or other rights conveyed on any other Person to acquire any
of the capital stock of PT Scan. The authorized capital stock of Technollis
consists of 500,000 ordinary shares with a par value of RM 1.00 per ordinary
share, of which 363,840 shares are issued and outstanding, all of which are
owned by Flexcomm. There are no warrants, options, subscription rights or other
rights conveyed on any other Person to acquire any of the capital stock of
Technollis. All of the outstanding shares of capital stock of the Flexcomm and
its Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase securities.
There are no stockholders agreements, voting agreements or other similar
agreements with respect to Flexcomm’s capital stock to which the Selling
Stockholders is a party or between or among any of Flexcomm’s stockholders.

 

(g) Financial Statements. Flexcomm has delivered to the Axesstel the most recent
financial statements for Flexcomm and its Subsidiaries, including a balance
sheet, statement of operations and statement of cash flows (the “Flexcomm
Consolidated Financial Statements”). The Flexcomm Consolidated Financial
Statements are based on the books and records of Flexcomm, and fairly present in
all material respects the financial condition of Flexcomm as of the respective
dates they were prepared and the results of Flexcomm’s operations for the
periods indicated.

 

(h) No Undisclosed Liabilities. Flexcomm has no Liabilities, except (a) those
which are adequately reflected or reserved against in the most recent balance
sheet contained in the Flexcomm Consolidated Financial Statements, and (b) those
which have been incurred in the ordinary course of business consistent with past
practice since the date of the most recent balance sheet contained in the
Flexcomm Consolidated Financial Statements.

 

-13-

 

 

 

(i) Material Changes. Since the date of the most recent balance sheet contained
in the Flexcomm Consolidated Financial Statements: (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect on Flexcomm, (ii) Flexcomm has not incurred
any Liabilities (contingent or otherwise) that are material to Flexcomm other
than (A) trade payables, accrued expenses and other Liabilities incurred in the
ordinary course of business consistent with past practice and (B) Liabilities
not required to be reflected in Flexcomm’s financial statements pursuant to GAAP
or disclosed in filings made with the SEC, (iii) Flexcomm has not altered its
method of accounting, (iv) Flexcomm has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) Flexcomm has not issued any equity securities to any officer,
director or Affiliate, except to Mr. Loh pursuant to existing stock options.

 

(j) Title to Assets. Flexcomm and its Subsidiaries have good and marketable
title in all personal property owned by them that is material to the business of
the Flexcomm and the Subsidiaries, in each case free and clear of all Liens,
except for (i) Liens as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by Axesstel and the Subsidiary and (ii) Liens for the payment of
federal, state or other taxes, for which appropriate reserves have been made
therefor in accordance with GAAP and, the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held under lease by
Flexcomm and any Subsidiary are held by them under valid, subsisting and
enforceable leases with which Flexcomm and any Subsidiary are in compliance.

 

(k) Intellectual Property. Flexcomm and its Subsidiaries have, or have rights to
use, all Intellectual Property Rights as necessary or required for use in
connection with their respective businesses and which the failure to so have
could have a Material Adverse Effect. Neither Flexcomm nor any Subsidiary has
received a notice (written or otherwise) that any of, the Intellectual Property
Rights has expired, terminated or been abandoned, or is expected to expire or
terminate or be abandoned, within two (2) years from the date of this Agreement.
Neither Flexcomm nor any Subsidiary has received, since the date of the latest
audited financial statements included within the Flexcomm Consolidated Financial
Statements, a written notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of any Person,
except as could not have or reasonably be expected to not have a Material
Adverse Effect. To the knowledge of the Selling Stockholders, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
Flexcomm and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

-14-

 

 

 

(l) Material Contracts. Complete and correct copies of each Material Contract
for Flexcomm and any Subsidiaries has been made available to Axesstel. Each
Material Contract is valid and binding on Flexcomm in accordance with its terms
and is in full force and effect. None of Flexcomm or, to the Selling
Stockholder’s knowledge, any other party thereto is in breach of or default
under (or is alleged to be in breach of or default under) in any material
respect, or has provided or received any notice of any intention to terminate,
any Material Contract. No event or circumstance has occurred that, with notice
or lapse of time or both, would constitute an event of default under any
Material Contract or result in a termination thereof or would cause or permit
the acceleration or other changes of any right or obligation or the loss of any
benefit thereunder.

 

(m) Employment Matters. No labor dispute exists or, to the knowledge of the
Selling Stockholders, is imminent with respect to any of the employees of
Flexcomm or any Subsidiary, which could reasonably be expected to result in a
Material Adverse Effect. None of Flexcomm’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with Flexcomm or
such Subsidiary, and neither Flexcomm nor any of its Subsidiaries is a party to
a collective bargaining agreement. Flexcomm and its Subsidiaries believe that
their relationships with their employees are good. To the knowledge of the
Selling Stockholders, no executive officer of the Flexcomm or any Subsidiary,
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or agreement or
any restrictive covenant in favor of any third party, and the continued
employment of each such executive officer does not subject Flexcomm or any of
its Subsidiaries to any Liability with respect to any of the foregoing matters.
Flexcomm and its Subsidiaries are in compliance with all federal, state, local
and foreign Laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except where
the failure to be in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

(n) Insurance. Flexcomm and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as Flexcomm believes are prudent and customary in the businesses in
which Flexcomm and the Subsidiaries are engaged.

 

(o) Taxes. Except for matters that would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, Flexcomm
and its Subsidiaries each (i) has made or filed all federal, state and local
income and all foreign income and franchise Tax Returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all Taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations
and (iii) has set aside on its books provision reasonably adequate for the
payment of all material Taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid Taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of Flexcomm or of any Subsidiary know of no basis for any such
claim.

 

-15-

 

 

 

(p) Legal Proceedings. There are no Actions pending or, to the Selling
Stockholder’s knowledge, threatened against or by Flexcomm or any Subsidiary
affecting any of its properties or assets (or by or against Flexcomm or any
Affiliate thereof and relating to Flexcomm).

 

(q) Compliance with Laws. There are no outstanding Governmental Orders and no
unsatisfied judgments, penalties or awards against or affecting Flexcomm or any
Subsidiary, or any of their respective properties or assets. Neither Flexcomm
nor any Subsidiary: is or has been in violation of any Law or Governmental
Order, including without limitation all foreign, federal, state and local Laws
relating to taxes, environmental protection, occupational health and safety,
product quality and safety and employment and labor matters, except in each case
as could not have or reasonably be expected to result in a Material Adverse
Effect.

 

(r) Permits. Flexcomm and each Subsidiary possesses all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses,
except where the failure to possess such permits could not reasonably be
expected to result in a Material Adverse Effect, and neither Flexcomm nor any
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any permit.

 

(s) Anti-Bribery Laws. Neither Flexcomm nor any Subsidiary, nor to the knowledge
of the Selling Stockholders, any agent or other person acting on behalf of
Flexcomm or any Subsidiary, has: (i) directly or indirectly, used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by Axesstel or any Subsidiary (or made by
any person acting on its behalf of which Axesstel is aware) which is in
violation of Law or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or any similar statute
applicable to its business.

 

(t) Transactions With Affiliates and Employees. None of the officers or
directors of Flexcomm or any Subsidiary and, to the knowledge of the Selling
Stockholders, none of the employees of Flexcomm or any Subsidiary is presently a
party to any transaction with Flexcomm or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, providing for
the borrowing of money from or lending of money too or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Selling Stockholder, any entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee,
stockholder, member or partner, in each case in excess of $120,000 other than
for: (i) payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of Flexcomm and (iii) other
employee benefits, including stock option agreements under any stock option plan
of Flexcomm.

 

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(u) No Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Selling Stockholders or Flexcomm.

 

(v) Full Disclosure. No representation or warranty by the Selling Stockholders
in this Agreement and no statement contained in the Disclosure Schedules to this
Agreement or any certificate or other document furnished or to be furnished to
the Axesstel pursuant to this Agreement contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which they are
made, not misleading.

 

ARTICLE IV.
COVENANTS

 

4.1 Working Capital. The Selling Stockholders will use commercially reasonable
efforts to assist Axesstel in refinancing its existing loans with Silicon Valley
Bank ($1.6 million) and Bank of Communications Co., Ltd ($1.6 million) into a
three year term loan.

 

4.2 Board Representation. For so long as the Selling Stockholders hold more than
20% of Axesstel’s outstanding Common Stock, the Selling Stockholders will have
the right to designate two members to Axesstel’s Board of Directors. Promptly
following the Closing Axesstel shall cause its Board of Directors to take such
action, including expanding the size of the Board of Directors if necessary, to
appoint two nominees designated by the Selling Stockholders to the Board of
Directors. Thereafter, for so long as the Selling Stockholders, in the
aggregate, own more than 20% of Axesstel’s outstanding Common Stock, Axesstel
shall cause two nominees designated by the Selling Stockholders to be included
as nominees on management’s slate of directors for any proxy statement or
written consent for the election of directors. In the event that any of the
Selling Stockholders directors resigns, creating a vacancy on the Board of
Directors while the Selling Stockholders continue to hold 20% or more of
Axesstel’s outstanding Common Stock, Axesstel shall appoint a designee nominated
by the Selling Stockholders to fill the vacancy.

 

4.3 Resignations. The Selling Stockholders shall promptly deliver to Buyer
written resignations, effective as of the Closing Date, of the officers and
directors of Flexcomm and its Subsidiaries, in accordance with the written
instructions of Axesstel.

 

4.4 Confidentiality. From and after the Closing, the Selling Stockholders shall,
and shall cause their Affiliates to, hold in confidence any and all information,
whether written or oral, concerning Flexcomm and PT Scan, except to the extent
that the Selling Stockholders can show that such information (a) is generally
available to and known by the public through no fault of Selling Stockholder,
any of its Affiliates or their respective representatives; or (b) is lawfully
acquired by Selling Stockholder, any of its Affiliates or their respective
representatives from and after the Closing from sources which are not prohibited
from disclosing such information by a legal, contractual or fiduciary
obligation. If a Selling Stockholder or any of its Affiliates or their
respective representatives are compelled to disclose any information by judicial
or administrative process or by other requirements of Law, such Selling
Stockholder shall promptly notify Axesstel in writing and shall disclose only
that portion of such information which Selling Stockholder is advised by its
counsel in writing is legally required to be disclosed, provided that such
Selling Stockholder shall use reasonable best efforts to obtain an appropriate
protective order or other reasonable assurance that confidential treatment will
be accorded such information.

 

-17-

 

 

 

4.5 Publicity. Axesstel will file a Current Report on Form 8-K and press release
disclosing the material terms of the transactions contemplated hereby within
four Business Days following the execution and delivery of this Agreement.
Unless otherwise required by applicable Law (based upon the reasonable advice of
counsel), no party to this Agreement shall make any public announcements in
respect of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the prior written consent of the other
party (which consent shall not be unreasonably withheld or delayed), and the
parties shall cooperate as to the timing and contents of any such announcement.

 

4.6 Further Assurances. Following the Closing, each of the parties hereto shall,
and shall cause their respective Affiliates to, execute and deliver such
additional documents, instruments, conveyances and assurances and take such
further actions as may be reasonably required to carry out the provisions hereof
and give effect to the transactions contemplated by this Agreement. If any
consent, approval or authorization necessary to preserve any right or benefit
under any Material Contract to which Flexcomm or any Subsidiary is a party is
not obtained prior to the Closing, the Selling Stockholders shall, subsequent to
the Closing, cooperate with Axesstel in attempting to obtain such consent,
approval or authorization as promptly thereafter as practicable. If such
consent, approval or authorization cannot be obtained, the Selling Stockholders
shall use its reasonable best efforts to provide Axesstel with the rights and
benefits of the affected Material Contract for the term thereof, and, if the
Selling Stockholders provide such rights and benefits, Axesstel shall assume all
obligations and burdens thereunder.

 

ARTICLE V.
INDEMNIFICATION

 

5.1 Survival. Subject to the limitations and other provisions of this Agreement,
the representations and warranties contained herein shall survive the Closing
and shall remain in full force and effect until the date that is one year from
the Closing Date; provided, that the representations and warranties in (a)
Section 3.1(a), Section 3.1(b), Section 3.1(e), Section 3.1(f), Section 3.2(a),
Section 3.2(b), Section 3.2(e), and Section 3.2(f) shall survive indefinitely,
and (b) Section 3.1(o) and Section 3.2(o) shall survive for the full period of
all applicable statutes of limitations (giving effect to any waiver, mitigation
or extension thereof) plus 60 days. All covenants and agreements of the parties
contained herein shall survive the Closing indefinitely or for the period
explicitly specified therein. Notwithstanding the foregoing, any claims asserted
in good faith with reasonable specificity (to the extent known at such time) and
in writing by notice from the non-breaching party to the breaching party prior
to the expiration date of the applicable survival period shall not thereafter be
barred by the expiration of the relevant representation or warranty and such
claims shall survive until finally resolved.

 

-18-

 

 

 

5.2 Indemnification By Selling Stockholders. Subject to the other terms and
conditions of this ARTICLE V, each Selling Stockholder shall, severally and not
jointly, indemnify and defend each of Axesstel and its Affiliates (including
Flexcomm) and their respective representatives (collectively, the “Axesstel
Indemnitees”) against, and shall hold each of them harmless from and against,
and shall pay and reimburse each of them for, any and all Losses incurred or
sustained by, or imposed upon, the Axesstel Indemnitees based upon, arising out
of, with respect to or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
such Selling Stockholder contained in this Agreement or in any certificate or
instrument delivered by or on behalf of the Selling Stockholders pursuant to
this Agreement, as of the date such representation or warranty was made or as if
such representation or warranty was made on and as of the Closing Date (except
for representations and warranties that expressly relate to a specified date,
the inaccuracy in or breach of which will be determined with reference to such
specified date); or

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be
performed by the Selling Stockholders pursuant to this Agreement.

 

5.3 Indemnification By Axesstel. Subject to the other terms and conditions of
this ARTICLE V, Axesstel shall indemnify and defend each Selling Stockholder and
its Affiliates and their respective representatives (collectively, the “Flexcomm
Indemnitees”) against, and shall hold each of them harmless from and against,
and shall pay and reimburse each of them for, any and all Losses incurred or
sustained by, or imposed upon, the Flexcomm Indemnitees based upon, arising out
of, with respect to or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
Axesstel contained in this Agreement or in any certificate or instrument
delivered by or on behalf of Axesstel pursuant to this Agreement, as of the date
such representation or warranty was made or as if such representation or
warranty was made on and as of the Closing Date (except for representations and
warranties that expressly relate to a specified date, the inaccuracy in or
breach of which will be determined with reference to such specified date); or

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be
performed by Axesstel pursuant to this Agreement.

 

5.4 Certain Limitations. The indemnification provided for in Section 5.2 and
Section 5.3 shall be subject to the following limitations:

 

(a) The Selling Stockholders shall not be liable to the Axesstel Indemnitees for
indemnification under Section 5.2 until the aggregate amount of all Losses in
respect of indemnification under Section 5.2 exceeds $500,000 (the “Basket”), in
which event Selling Stockholders shall be required to pay or be liable for all
such Losses from the first dollar. The aggregate amount of all Losses for which
the Selling Stockholders shall be liable pursuant to Section 5.2 shall not
exceed $1.5 million (the “Cap”).

 

-19-

 

 

 

(b) Axesstel shall not be liable to the Flexcomm Indemnitees for indemnification
under Section 5.3 until the aggregate amount of all Losses in respect of
indemnification under Section 5.3 exceeds the Basket, in which event Axesstel
shall be required to pay or be liable for all such Losses from the first dollar.
The aggregate amount of all Losses for which Axesstel shall be liable pursuant
to Section 5.3 shall not exceed the Cap.

 

(c) Notwithstanding the foregoing, the limitations set forth in Section 5.4(a)
and Section 5.4(b) shall not apply to Losses based upon, arising out of, with
respect to or by reason of any inaccuracy in or breach of any representation or
warranty in (a) Section 3.1(a), Section 3.1(b), Section 3.1(e), Section 3.1(f),
Section 3.2(a), Section 3.2(b), Section 3.2(e), and Section 3.2(f).

 

(d) For purposes of this ARTICLE V, any inaccuracy in or breach of any
representation or warranty shall be determined without regard to any
materiality, Material Adverse Effect or other similar qualification contained in
or otherwise applicable to such representation or warranty.

 

5.5 Indemnification Procedures. The party making a claim under this ARTICLE V is
referred to as the “Indemnified Party”, and the party against whom such claims
are asserted under this ARTICLE V is referred to as the “Indemnifying Party”.

 

(a) Third Party Claims. If any Indemnified Party receives notice of the
assertion or commencement of any Action made or brought by any Person who is not
a party to this Agreement or an Affiliate of a party to this Agreement or a
representative of the foregoing (a “Third Party Claim”) against such Indemnified
Party with respect to which the Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnified Party shall give the
Indemnifying Party reasonably prompt written notice thereof. The failure to give
such prompt written notice shall not, however, relieve the Indemnifying Party of
its indemnification obligations, except and only to the extent that the
Indemnifying Party forfeits rights or defenses by reason of such failure. Such
notice by the Indemnified Party shall describe the Third Party Claim in
reasonable detail, shall include copies of all material written evidence thereof
and shall indicate the estimated amount, if reasonably practicable, of the Loss
that has been or may be sustained by the Indemnified Party. The Indemnifying
Party shall have the right to participate in, or by giving written notice to the
Indemnified Party, to assume the defense of any Third Party Claim at the
Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and
the Indemnified Party shall cooperate in good faith in such defense; provided,
that if the Indemnifying Party is a Selling Stockholder, such Indemnifying Party
shall not have the right to defend or direct the defense of any such Third Party
Claim that (x) is asserted directly by or on behalf of a Person that is a
supplier or customer of Axesstel, Flexcomm or any of its Subsidiaries, or (y)
seeks an injunction or other equitable relief against the Indemnified Party. In
the event that the Indemnifying Party assumes the defense of any Third Party
Claim, subject to Section 8.05(b), it shall have the right to take such action
as it deems necessary to avoid, dispute, defend, appeal or make counterclaims
pertaining to any such Third Party Claim in the name and on behalf of the
Indemnified Party. The Indemnified Party shall have the right to participate in
the defense of any Third Party Claim with counsel selected by it subject to the
Indemnifying Party’s right to control the defense thereof. The fees and
disbursements of such counsel shall be at the expense of the Indemnified Party,
provided, that if in the reasonable opinion of counsel to the Indemnified Party,
(A) there are legal defenses available to an Indemnified Party that are
different from or additional to those available to the Indemnifying Party; or
(B) there exists a conflict of interest between the Indemnifying Party and the
Indemnified Party that cannot be waived, the Indemnifying Party shall be liable
for the reasonable fees and expenses of counsel to the Indemnified Party in each
jurisdiction for which the Indemnified Party determines counsel is required. If
the Indemnifying Party elects not to compromise or defend such Third Party
Claim, fails to promptly notify the Indemnified Party in writing of its election
to defend as provided in this Agreement, or fails to diligently prosecute the
defense of such Third Party Claim, the Indemnified Party may, subject to Section
5.5(b), pay, compromise, defend such Third Party Claim and seek indemnification
for any and all Losses based upon, arising from or relating to such Third Party
Claim. Axesstel and the Selling Stockholders shall cooperate with each other in
all reasonable respects in connection with the defense of any Third Party Claim,
including making available records relating to such Third Party Claim and
furnishing, without expense (other than reimbursement of actual out-of-pocket
expenses) to the defending party, management employees of the non-defending
party as may be reasonably necessary for the preparation of the defense of such
Third Party Claim.

 

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(b) Settlement of Third Party Claims. Notwithstanding any other provision of
this Agreement, the Indemnifying Party shall not enter into settlement of any
Third Party Claim without the prior written consent of the Indemnified Party,
except as provided in this Section 5.5(b). If a firm offer is made to settle a
Third Party Claim without leading to liability or the creation of a financial or
other obligation on the part of the Indemnified Party and provides, in customary
form, for the unconditional release of each Indemnified Party from all
liabilities and obligations in connection with such Third Party Claim and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party shall give written notice to that effect to the Indemnified Party. If the
Indemnified Party fails to consent to such firm offer within ten Business Days
after its receipt of such notice, the Indemnified Party may continue to contest
or defend such Third Party Claim and in such event, the maximum liability of the
Indemnifying Party as to such Third Party Claim shall not exceed the amount of
such settlement offer. If the Indemnified Party fails to consent to such firm
offer and also fails to assume defense of such Third Party Claim, the
Indemnifying Party may settle the Third Party Claim upon the terms set forth in
such firm offer to settle such Third Party Claim. If the Indemnified Party has
assumed the defense pursuant to Section 5.5(a), it shall not agree to any
settlement without the written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld or delayed).

 

(c) Direct Claims. Any Action by an Indemnified Party on account of a Loss which
does not result from a Third Party Claim (a “Direct Claim”) shall be asserted by
the Indemnified Party giving the Indemnifying Party reasonably prompt written
notice thereof. The failure to give such prompt written notice shall not,
however, relieve the Indemnifying Party of its indemnification obligations,
except and only to the extent that the Indemnifying Party forfeits rights or
defenses by reason of such failure. Such notice by the Indemnified Party shall
describe the Direct Claim in reasonable detail, shall include copies of all
material written evidence thereof and shall indicate the estimated amount, if
reasonably practicable, of the Loss that has been or may be sustained by the
Indemnified Party. The Indemnifying Party shall have 30 days after its receipt
of such notice to respond in writing to such Direct Claim. The Indemnified Party
shall allow the Indemnifying Party and its professional advisors to investigate
the matter or circumstance alleged to give rise to the Direct Claim, and whether
and to what extent any amount is payable in respect of the Direct Claim and the
Indemnified Party shall assist the Indemnifying Party’s investigation by giving
such information and assistance (including access to Flexcomm’s premises and
personnel and the right to examine and copy any accounts, documents or records)
as the Indemnifying Party or any of its professional advisors may reasonably
request. If the Indemnifying Party does not so respond within such 30 day
period, the Indemnifying Party shall be deemed to have rejected such claim, in
which case the Indemnified Party shall be free to pursue such remedies as may be
available to the Indemnified Party on the terms and subject to the provisions of
this Agreement.

 

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5.6 Payments. Once a Loss is agreed to by the Indemnifying Party or finally
adjudicated to be payable pursuant to this ARTICLE V, the Indemnifying Party
shall satisfy its obligations within 15 Business Days of such final,
non-appealable adjudication by wire transfer of immediately available funds. The
parties hereto agree that should an Indemnifying Party not make full payment of
any such obligations within such 15 Business Day period, any amount payable
shall accrue interest from and including the date of agreement of the
Indemnifying Party or final, non-appealable adjudication to but excluding the
date such payment has been made at a rate per annum equal to eight percent. Such
interest shall be calculated daily on the basis of a 365/366 day year and the
actual number of days elapsed.

 

5.7 Tax Treatment of Indemnification Payments. All indemnification payments made
under this Agreement shall be treated by the parties as an adjustment to the
Purchase Price for Tax purposes, unless otherwise required by Law.

 

5.8 Effect of Investigation. The representations, warranties and covenants of
the Indemnifying Party, and the Indemnified Party’s right to indemnification
with respect thereto, shall not be affected or deemed waived by reason of any
investigation made by or on behalf of the Indemnified Party (including by any of
its representatives) or by reason of the fact that the Indemnified Party or any
of its representatives knew or should have known that any such representation or
warranty is, was or might be inaccurate.

 

5.9 Exclusive Remedies(a) . Subject to Section 6.8, the parties acknowledge and
agree that their sole and exclusive remedy with respect to any and all claims
(other than claims arising from fraud, criminal activity or willful misconduct
on the part of a party hereto in connection with the transactions contemplated
by this Agreement) for any breach of any representation, warranty, covenant,
agreement or obligation set forth herein or otherwise relating to the subject
matter of this Agreement, shall be pursuant to the indemnification provisions
set forth in this ARTICLE V. In furtherance of the foregoing, each party hereby
waives, to the fullest extent permitted under Law, any and all rights, claims
and causes of action for any breach of any representation, warranty, covenant,
agreement or obligation set forth herein or otherwise relating to the subject
matter of this Agreement it may have against the other parties hereto and their
Affiliates and each of their respective Representatives arising under or based
upon any Law, except pursuant to the indemnification provisions set forth in
this ARTICLE V. Nothing in this Section 5.9 shall limit any Person’s right to
seek and obtain any equitable relief to which any Person shall be entitled or to
seek any remedy on account of any party’s fraudulent, criminal or intentional
misconduct.

 

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ARTICLE VI.
MISCELLANEOUS

6.1

Fees and Expenses. Except as expressly set forth in this Agreement, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
All transfer, documentary, sales, use, stamp, registration, value added and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any real property transfer Tax and any
other similar Tax) shall be borne and paid by Selling Stockholders. Each Selling
Stockholders shall, at its own expense, timely file any Tax Return or other
document with respect to such Taxes or fees (and Axesstel shall cooperate with
respect thereto as necessary).

 

6.2 Notices. All notices, requests, consents, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
given (a) when delivered by hand (with written confirmation of receipt); (b)
when received by the addressee if sent by a nationally recognized overnight
courier (receipt requested); or (c) on the date sent by facsimile or e-mail of a
PDF document (with confirmation of transmission) if sent during normal business
hours of the recipient, and on the next Business Day if sent after normal
business hours of the recipient. Such communications must be sent to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section.

 

If to Axesstel:

Axesstel, Inc.

6815 Flanders Drive, Suite 210

San Diego, CA 92121

E-mail: pgray@axesstel.com

Attention: Chief Executive Officer

    If to Selling Stockholders:

Selling Stockholders

c/o Dragon Group International

13th Floor, SangDa Science and Technology Building, No. 1 Keji Road,

Hi-Tech Industrial Park, Nanshan District,

Shenzhen 518057 P.R.C.

E-mail: michael90908282@gmail.com 

Attention: Michael Loh

 

 

 

 

 

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6.3 Interpretation. This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting an instrument or causing any instrument to be drafted. Any disclosure
schedules or exhibits referred to herein shall be construed with, and as an
integral part of, this Agreement to the same extent as if they were set forth
verbatim herein.

 

6.4 Entire Agreement. This Agreement constitutes the sole and entire agreement
of the parties to this Agreement with respect to the subject matter contained
herein, and supersedes all prior and contemporaneous understandings and
agreements, both written and oral, with respect to such subject matter. This
Agreement may only be amended, modified or supplemented by an agreement in
writing signed by each party hereto.

 

6.5 Successors and Assigns. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Neither party may assign its rights or obligations hereunder
without the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. No assignment shall relieve the assigning
party of any of its obligations hereunder.

 

6.6 No Third-Party Beneficiaries. Except as provided in ARTICLE V, this
Agreement is for the sole benefit of the parties hereto and their respective
successors and permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.

 

6.7 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal Laws of the State of
California, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of San
Diego. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of San Diego, County of San
Diego for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper or is an inconvenient
venue for such proceeding. If any party shall commence an Action to enforce any
provisions of this Agreement, then the prevailing party in such Action shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such Action.

 

6.8 Specific Performance. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
parties will be entitled to specific performance under this Agreement. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations contained in this Agreement
and hereby agree to waive and not to assert in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.

 

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6.9 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall be deemed to be one
and the same agreement. A signed copy of this Agreement delivered by facsimile,
e-mail or other means of electronic transmission shall be deemed to have the
same legal effect as delivery of an original signed copy of this Agreement.

 

(Signature Pages Follow)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

 

 

  AXESSTEL, INC.           By: /s/ PATRICK GRAY                                
       Patrick Gray, CEO       DRAGON GROUP INTERNATIONAL           By: /s/
TIMOTHY LIM                                          Timothy Lim, Director      
    /s/ LOH SOON GNEE                                     Loh Soon Gnee        
  /s/ SHI JIE FAN                                              Shi Jie Fan

 

 

 

 

 

 

 

 

 

 

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