EXHIBIT 10.1

 

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (this “Agreement”) is entered into as of the date
set forth on the signature page hereof by and between Axesstel, Inc., a Nevada
corporation (the “Issuer”), and ComVentures V, L.P., ComVentures V-B CEO Fund,
L.P. and ComVentures V Entrepreneurs’ Fund, L.P., each a Delaware limited
partnership (collectively the “Investor”). Capitalized terms used but not
otherwise defined herein shall have the meanings set forth in Section 9.1.

 

RECITALS

 

A. The Issuer and the Investor previously entered into Stock Purchase Agreements
dated as of October 12, 2004 and February 2, 2005 (the “Prior Agreements”)
pursuant to which the Issuer issued and sold to the Investor an aggregate of
1,103,605 shares of its common stock, par value $0.0001 per share (the “Common
Stock”).

 

B. Subject to the terms and conditions of this Agreement, the Investor desires
to purchase, and the Issuer desires to issue and sell to the Investor, 500,000
additional shares of Common Stock (the “Shares”), pursuant to the terms set
forth herein (the “Purchase”).

 

C. The Purchase is conditioned upon the closing of an underwritten public
offering of shares of Common Stock made by the Company and certain stockholders
of the Company at a price to the public of $4.00 per share, that is expected to
close on or about March 2, 2005 (the “Offering”).

 

D. Except as otherwise provided in Section 9.13 herein, each of the Prior
Agreements shall remain in full force and effect after the execution and
delivery of this Agreement, and no provision of this Agreement shall be read to
amend, update or supplement the Prior Agreements.

 

TERMS OF AGREEMENT

 

In consideration of the mutual representations and warranties, covenants and
agreements contained herein, the parties hereto agree as follows:

 

ARTICLE 1

PURCHASE AND SALE OF COMMON STOCK

 

1.1 Purchase and Sale of Common Stock. Subject to the terms and conditions of
this Agreement and the closing of the Offering, the Issuer will issue and sell
to the Investor and the Investor will purchase from the Issuer 500,000 shares of
Common Stock (the “Shares”) at $4.00 per Share for the aggregate purchase price
of Two Million Dollars and 00/100 ($2,000,000.00) (the “Purchase Price”), which
Purchase Price is equal, on a per share basis, to the offering price to the
public in the Offering. ComVentures V, L.P., ComVentures V-B CEO Fund, L.P. and
ComVentures V Entrepreneurs’ Fund, L.P., will purchase 469,003, 29,078 and 1,919
of the Shares, respectively.

 

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1.2 Transfer Restrictions. The Shares may be disposed of only in compliance with
state and federal securities laws. In connection with any transfer of Shares
other than pursuant to an effective registration statement, to the Issuer, or to
an Affiliate of Investor, the Issuer may require the transferor thereof to
provide to the Issuer an opinion of counsel selected by the transferor, at the
expense of the Investor or transferee, the form and substance of which opinion
shall be reasonably satisfactory to the Issuer, to the effect that such transfer
does not require registration of such transferred Shares under the Securities
Act. As a condition of transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of an Investor
under this Agreement.

 

1.3 Legend. Any certificate or certificates representing the Shares shall bear
the following legend:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND IN COMPLIANCE
WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO OR IN
ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH ANY APPLICABLE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A
STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE HOLDER, WHICH MAY RESTRICT
THE TRANSFER OF SUCH SECURITIES IN CERTAIN CIRCUMSTANCES. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY’S PRINCIPAL OFFICE.

 

1.4 Removal of Legends. Any legend endorsed on a certificate evidencing the
Shares shall be removed upon the request of the Investor, and the Issuer shall
issue a certificate without such legend to the holder of such Shares, if such
Shares are sold pursuant to an effective registration statement under the
Securities Act or pursuant to Rule 144(k) promulgated thereunder, and the
purchaser thereof may immediately resell such Shares without restriction and
without registration; provided, however, that in the case of a sale pursuant to
Rule 144(k), such holder of Shares shall provide such information as is
reasonably requested by the Issuer to ensure that such Shares may be sold in
reliance on Rule 144(k).

 

1.5 Legal, Tax or Investment Advice. The Investor understands that nothing in
this Agreement or any other materials presented to the Investor in connection
with the purchase and sale of the Shares constitutes legal, tax or investment
advice. The Investor has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of Shares.

 

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ARTICLE 2

CLOSING

 

2.1 Closing. The closing of the Purchase (the “Closing”) shall take place
immediately following the closing of the Offering or as soon thereafter as
possible. The closing of the Offering is currently scheduled to occur on March
2, 2005. The Closing shall take place at the offices of Sheppard, Mullin,
Richter & Hampton, LLP, 12544 High Bluff Drive, Suite 300, San Diego, California
92130. At the Closing, unless the Investor and the Issuer otherwise agree (i)
the Investor shall pay the Purchase Price to the Issuer, by wire transfer of
immediately available funds to an account designated in writing by the Issuer;
(ii) the Issuer shall issue the Shares to the Investor, and deliver to the
Investor certificates for the Shares duly registered in the name of the
Investor, within three business days, or as soon as practicable thereafter, and
(iii) all other agreements and other documents referred to in this Agreement
which are required for the Closing shall be executed and delivered (if that is
not done prior to the Closing).

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE ISSUER

 

As a material inducement to the Investor entering into this Agreement and
purchasing the Shares, the Issuer represents and warrants to the Investor that:

 

3.1 Corporate Power and Authority. The Issuer has the corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. At the time of
the Closing, the Issuer will have taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, and no further consent or
authorization of the Issuer or its Board of Directors or stockholders is
required.

 

3.2 Enforceability. This Agreement has been duly executed and delivered by the
Issuer and (assuming it has been duly authorized, executed and delivered by the
Investor) constitutes a legal, valid and binding obligation of the Issuer,
enforceable against the Issuer in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies, and (iii) with
respect to the indemnification provisions set forth herein, as and to the extent
limited by public policy.

 

3.3 No Violation. The execution and delivery by the Issuer of this Agreement,
the consummation of the transactions contemplated hereby, and the compliance by
the Issuer with the terms and provisions hereof (including, without limitation,
the Issuer’s issuance of the Shares to the Investor as contemplated by and in
accordance with this Agreement), will not result in a default under (or give any
other party the right, with the giving of notice or the passage of time (or
both), to declare a default or accelerate any obligation under) or violate (i)
any provision of the Articles of Incorporation (the “Charter”) or By-Laws of the
Issuer, (ii) any Contract to which the Issuer is a party (except to the extent
such a default, acceleration, or violation would not, in the case of a Contract,
have a Material Adverse Effect on the Issuer), or (iii) any Requirement of Law
applicable to the Issuer, or result in the creation or imposition of any Lien
upon any of the

 

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capital stock, properties or assets of the Issuer or any of its Subsidiaries
(except where such violations of any Requirement of Law or creations or
impositions of any Liens would not have a Material Adverse Effect on the
Issuer). The business of the Issuer and its subsidiaries is not being conducted
in violation of any laws, ordinances or regulations of any governmental entity,
except for violations which singularly or in the aggregate do not and will not
have a Material Adverse Effect. The Issuer is not required under any federal,
state or local law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, or issue and sell the Shares in accordance with the terms
hereof (other than any filings which may be required to be made by the Issuer
with the SEC or state securities administrators and any registration statement
which may be filed pursuant hereto); provided, however, that for purpose of the
representations made in this sentence, the Issuer is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investor
herein.

 

3.4 Consents/Approvals. Except for the filing of a registration statement in
accordance with Article 6 hereof and filings with the SEC, the securities
commissions of the states in which the Shares are to be issued, and the American
Stock Exchange (AMEX), no consents, permits, filings, authorizations or other
actions of any Governmental Authority are required to be obtained or made by the
Issuer for the Issuer’s execution, delivery and performance of this Agreement
which have not already been obtained or made. No consent, approval, waiver or
other action by any Person under any Contract to which the Issuer is a party or
by which the Issuer or any of its properties or assets are bound is required or
necessary for the execution, delivery or performance by the Issuer of this
Agreement and the consummation of the transactions contemplated hereby, except
where the failure to obtain such consents would not have a Material Adverse
Effect on the Issuer.

 

3.5 Valid Issuance. Upon payment of the Purchase Price by the Investor and
delivery to the Investor of the certificates for the Shares, such Shares will be
validly issued, fully paid and non-assessable, free from all Liens with respect
to the issuance of such Shares and will not be subject to any preemptive or
similar rights.

 

3.6 SEC Filings, Other Filings and AMEX Compliance. The Issuer is current with
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act. Since January 1, 2004, the Issuer has timely made all filings required to
be made by it under the Exchange Act. The Issuer has delivered or made
accessible to the Investor true, accurate and complete copies of (i) Issuer’s
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004; (ii)
all of the Issuer’s Current Reports on Form 8-K filed with the SEC since January
1, 2005 and (iii) the Issuer’s Prospectus delivered in connection with the
Offering and filed with the SEC on February 25, 2005 (the “SEC Reports”). The
Issuer has not provided to the Investor any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Issuer but which has not prior to the date hereof been so disclosed. None of the
SEC Reports, at the time of filing, nor the Release, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading in light of the circumstances in which they were made, except as may
have been corrected or supplemented in a subsequent SEC Report. The Issuer has
taken,

 

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or will have taken prior to the Closing, all necessary actions to ensure its
continued inclusion in, and the continued eligibility of the Common Stock for
trading on, the AMEX under all currently effective inclusion requirements. Each
financial statement included in the SEC Reports as amended (including any
related notes and schedules) and the Release complies as to form in all material
respects with applicable accounting requirements under GAAP and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto (except that the unaudited financial statements contained in the
Release do not contain footnotes). Each balance sheet included in such financial
statements as amended fairly presents in all material respects the consolidated
financial position of the Issuer as of its date, and each of the other financial
statements included in the SEC Reports as amended (including any related notes
and Schedules) and the Release fairly presents in all material respects the
consolidated results of operations of the Issuer for the periods or as of the
dates therein set forth in accordance with GAAP consistently applied during the
periods involved (except that the interim reports are subject to adjustments
which might be required as a result of year end audit and except as otherwise
stated therein, and the interim reports contained in the Release do not contain
footnotes).

 

3.7 Material Changes. Since December 31, 2004, no Material Adverse Effect has
occurred or exists with respect to the Issuer and its Subsidiaries taken as a
whole.

 

3.8 Exempt Transaction. Subject in part to the truth and accuracy of Investor’s
representations and warranties set forth in this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act and any applicable state
securities laws, and neither the Issuer nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.

 

3.9 The AMEX. The Common Stock is listed on the AMEX and, to the best of the
knowledge of the Issuer, there are no proceedings to revoke or suspend such
listing. The issuance of the Shares will not contravene any of the rules of the
AMEX. The Common Stock is registered pursuant to Section 12(g) of the Exchange
Act. The Issuer has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act or delisting the Common Stock from the AMEX. The Issuer
has not received any notification that, and has no knowledge that, the SEC or
the AMEX is contemplating terminating such listing or registration. The issuance
of the Shares does not require stockholder approval pursuant to the rules of the
AMEX or otherwise.

 

3.10 Absence of Certain Developments. Since December 31, 2004, other than as
disclosed in the SEC Reports, neither the Issuer nor any Significant Subsidiary
has:

 

(i) issued any stock, bonds or other corporate securities or any rights, options
or warrants with respect thereto;

 

(ii) borrowed any amount or incurred or become subject to any liabilities
(absolute or contingent) except current liabilities incurred in the ordinary
course of business which are comparable in nature and amount to the current
liabilities incurred in the ordinary course of business during the comparable
portion of its prior fiscal year, as adjusted to reflect the current nature and
volume of the Issuer’s or such Significant Subsidiary’s business;

 

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(iii) discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business;

 

(iv) declared or made any payment or distribution of cash or other property to
stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock;

 

(v) sold, assigned or transferred any other tangible assets, or canceled any
debts or claims, except in the ordinary course of business;

 

(vi) sold, assigned or transferred any patent rights, trademarks, trade names,
copyrights, trade secrets or other intangible assets or intellectual property
rights, or disclosed any proprietary confidential information to any person
except to customers in the ordinary course of business or to the Investor or its
representatives;

 

(vii) suffered any material losses (except for anticipated losses consistent
with prior quarters) or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
prospective business;

 

(viii) made any changes in employee compensation except in the ordinary course
of business and consistent with past practices;

 

(ix) made capital expenditures or commitments therefor that aggregate in excess
of $250,000;

 

(x) entered into any other material transaction, whether or not in the ordinary
course of business;

 

(xi) suffered any material damage, destruction or casualty loss, whether or not
covered by insurance;

 

(xii) experienced any material problems with labor or management in connection
with the terms and conditions of their employment; or

 

(xiii) effected any two or more events of the foregoing kind which in the
aggregate would be material to the Issuer or its subsidiaries.

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

 

As a material inducement to the Issuer entering into this Agreement and issuing
the Shares, the Investor represents and warrants to the Issuer as follows:

 

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4.1 Power and Authority. The Investor is an entity duly organized, validly
existing and in good standing under the laws of the state of its incorporation
or formation. The Investor has the corporate, partnership or other power and
authority under applicable law to execute and deliver this Agreement and
consummate the transactions contemplated hereby, and has all necessary authority
to execute, deliver and perform its obligations under this Agreement and
consummate the transactions contemplated hereby. The Investor has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby and, when delivered, this
Agreement will constitute the valid and legally binding obligation of the
Investor, enforceable against it in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies, and (iii) with
respect to the indemnification provisions set forth herein, as and to the extent
limited by public policy.

 

4.2 No Violation. The execution and delivery by the Investor of this Agreement,
the consummation of the transactions contemplated hereby, and the compliance by
the Investor with the terms and provisions hereof, will not result in a default
under (or give any other party the right, with the giving of notice or the
passage of time (or both), to declare a default or accelerate any obligation
under) or violate any charter or similar documents of the Investor, if other
than a natural person, or any Contract to which the Investor is a party or by
which it or its properties or assets are bound, or violate any Requirement of
Law applicable to the Investor, other than such violations or defaults which,
individually and in the aggregate, do not and will not have a Material Adverse
Effect on the Investor.

 

4.3 Consents/Approvals. No consents, filings, authorizations or actions of any
Governmental Authority are required for the Investor’s execution, delivery and
performance of this Agreement. No consent, approval, waiver or other actions by
any Person under any Contract to which the Investor is a party or by which the
Investor or any of its properties or assets are bound is required or necessary
for the execution, delivery and performance by the Investor of this Agreement
and the consummation of the transactions contemplated hereby.

 

4.4 Investment Intent. The Investor is acquiring the Shares hereunder for its
own account and with no present intention of distributing or selling such Shares
and further agrees not to transfer such Shares in violation of the Securities
Act or any applicable state securities law, and no one other than the Investor
has any beneficial interest in the Shares. The Investor agrees that it will not
sell or otherwise dispose of any of the Shares unless such sale or other
disposition has been registered under the Securities Act or, in the opinion of
counsel reasonably acceptable to the Issuer, is exempt from registration under
the Securities Act and has been registered or qualified or, in the opinion of
such counsel reasonably acceptable to the Issuer, is exempt from registration or
qualification under applicable state securities laws. The Investor understands
that the offer and sale by the Issuer of the Shares have not been registered
under the Securities Act by reason of their contemplated issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act pursuant to Section 4(2) thereof, and that the reliance of
the Issuer on such exemption from registration is predicated in part on these
representations and warranties of the Investor. The Investor acknowledges that
pursuant to Section 1.3 of this Agreement, a restrictive legend consistent with
the foregoing has been or will

 

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be placed on the certificates for the Shares. The Investor is acquiring the
Shares hereunder in the ordinary course of its business. The Investor does not
have any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Shares.

 

4.5 Investor Status. The Investor is an “accredited investor” as such term is
defined in Rule 501(a) of Regulation D under the Securities Act, and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment to be made by it hereunder.
ComVentures V, L.P. is a qualified institutional buyer as defined in Rule 144A.

 

4.6 Adequate Information. The Investor has received from the Issuer, and has
reviewed, such information as the Investor considers necessary or appropriate to
evaluate the risks and merits of an investment in the Shares, including without
limitation the SEC Reports and recent press releases of the Issuer. The Investor
acknowledges that each of the SEC Reports, including the risk factors contained
therein, are specifically incorporated herein by reference and form an integral
part of this Agreement.

 

4.7 Opportunity to Question. The Investor has had the opportunity to question,
and has questioned, to the extent deemed necessary or appropriate,
representatives of the Issuer so as to receive answers and verify information
obtained in the Investor’s examination of the Issuer, including the information
that the Investor has received and reviewed as referenced in Section 4.6 hereof
in relation to its investment in the Shares.

 

4.8 No Other Representations. No oral or written representations have been made
to the Investor in connection with the Investor’s acquisition of the Shares that
were in any way inconsistent with the information reviewed by the Investor. The
Investor acknowledges that no representations or warranties of any type or
description have been made to it by any Person with regard to the Issuer, any of
its Subsidiaries, any of their respective businesses, properties or prospects or
the investment contemplated herein, other than the representations and
warranties set forth in Article 3 hereof.

 

4.9 Knowledge and Experience. The Investor has such knowledge and experience in
financial, tax and business matters, including substantial experience in
evaluating and investing in common stock and other securities (including the
common stock and other securities of speculative companies), so as to enable the
Investor to utilize the information referred to in Section 4.6 hereof and any
other information made available by the Issuer to the Investor in order to
evaluate the merits and risks of an investment in the Shares and to make an
informed investment decision with respect thereto. The Investor is able to bear
the economic risk of an investment in the Shares and is able to afford a
complete loss of such investment.

 

4.10 Independent Decision. The Investor is not relying on the Issuer, any other
potential investor, or on any legal or other opinion in the materials reviewed
by the Investor with respect to the financial or tax considerations of the
Investor relating to its investment in the Shares. The Investor has relied
solely on the representations and warranties, covenants and agreements of the
Issuer in this Agreement and on its examination and independent investigation in
making its decision to acquire the Shares.

 

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4.11 General Solicitation. The Investor is not purchasing the Shares as a result
of any advertisement, article, notice or other communication regarding the
Shares published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.

 

4.12 Residence. The office of the Investor in which its investment decision was
made is located at the address of the Investor set forth on the signature page
hereto.

 

4.13 No Prior Short Selling. At no time during the 30 days prior to the Closing
has the Investor engaged in or effected, in any manner whatsoever, directly or
indirectly, in any “short sale” (as such term is defined in Rule 3b-3 of the
Exchange Act) of the Common Stock (a “Short Sale”). Prior to the Closing, except
as previously disclosed to the Issuer in writing, the Investor has never owned
securities of the Issuer.

 

4.14 Beneficial Ownership. At the Closing, the Investor will not, after giving
effect to the Shares purchased hereunder, beneficially own in excess of 19.99%
of the number of shares of Common Stock of the Issuer then outstanding,
determined in accordance with Rule 13d-3 of the Exchange Act).

 

4.15 Commissions. The Investor has not incurred any obligation for any finder’s
or broker’s or agent’s fees or commissions in connection with the transactions
contemplated hereby.

 

4.16 No Broker-Dealer. The Investor is not required to be registered as a
broker-dealer pursuant to Section 15 of the Exchange Act.

 

ARTICLE 5

COVENANTS

 

5.1 Public Announcements. Each party to this Agreement agrees that it shall not
issue or release any public announcement with respect to this Agreement or the
transactions provided for herein, which names the other party, without the prior
consent of the other party. Notwithstanding the foregoing, nothing in this
Section 5.1 shall prevent any party hereto from making such public announcements
or filings as it may consider necessary in order to satisfy its legal
obligations. On or before the third business day following the Closing, the
Issuer will issue a press release acceptable to each of the parties hereto
describing the transactions contemplated by this Agreement, and promptly
thereafter file a Current Report on Form 8-K with the SEC, attaching such press
release.

 

5.2 Further Assurances. Each party shall execute and deliver such additional
instruments and other documents and shall take such further actions as may be
reasonably necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby. Each of
the Investor and the Issuer shall make on a prompt and timely basis all
governmental or regulatory notifications and filings required to be made by it
with or to any Governmental Authority in connection with the consummation of the
transactions contemplated hereby. The Issuer and the Investor each agree to
cooperate with the other in the preparation and filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to any Requirement of Law or the rules of the AMEX in
connection with the transactions contemplated by this

 

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Agreement and to use their respective commercially reasonable efforts to agree
jointly on a method to overcome any objections by any Governmental Authority to
any such transactions. The Issuer will use its reasonable best efforts to cause
the listing or trading of its Common Stock to be continued either on the AMEX or
on another national securities exchange and to comply in all respects with the
Issuer’s reporting, filing and other obligations under the bylaws or rules of
such exchange. Except as may be specifically required hereunder, neither of the
parties hereto or their respective Affiliates shall be required to agree to take
any action that in the reasonable opinion of such party would result in or
produce a Material Adverse Effect on such party.

 

5.3 Notification of Certain Matters. Each party hereto shall give prompt notice
to the other party of the occurrence, or non-occurrence, of any event which
would be likely to cause any representation and warranty herein to be untrue or
inaccurate, or any covenant, condition or agreement herein not to be complied
with or satisfied.

 

5.4 Confidential Information; Standstill.

 

(a) The Investor agrees that no portion of the Confidential Information (as
defined below) shall be disclosed to third parties, except as may be required by
law, without the prior written consent of the Issuer provided that the Investor
may share such information with such of its officers and professional advisors
as may need to know such information to assist the Investor in its evaluation
thereof on the condition that such parties agree to be bound by the terms
hereof. All Confidential Information received by the Investor shall be promptly
returned or destroyed, as directed by the Issuer. “Confidential Information”
means all written data, reports, records or materials and any and all other
confidential or disclosure information or materials obtained from the Issuer or
its professional advisors, which are not yet publicly available. Confidential
Information excludes information that is publicly available or already known to
the Investor through a source not bound by any confidentiality obligation.

 

(b) For a period of two years from the Closing Date, the Investor will not,
directly or indirectly, without the prior written consent of the Issuer (i)
propose to enter into any acquisition of all or substantially all of the assets
or stock of the Issuer or a merger or other business combination involving the
Issuer; (ii) seek to control the management, Board of Directors or policies of
the Issuer; (iii) form, join or in any way participate in a “group” (within the
meaning of Section 13(d)(3) of the Securities Act of 1934) or (iv) purchase or
acquire shares of the Issuer’s Common Stock if such purchase or acquisition
would cause the number of shares of Common Stock beneficially owned by the
Investor and its affiliates to exceed 20% of the Issuer’s outstanding Common
Stock.

 

5.5 Form D Filing. The Issuer agrees that it shall file in a timely manner a
Form D relating to the sale of the Shares under this Agreement, pursuant to
Regulation D promulgated under the Securities Act.

 

5.6 Other Agreements. The Issuer shall not enter into any agreement the terms of
which would restrict or impair the ability of the Issuer to perform its
obligations under this Agreement.

 

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5.7 Use of Proceeds. The proceeds from the sale of the Shares will be used by
the Issuer and its subsidiaries for general corporate purposes.

 

5.8 Investor’s Compliance with Law. The Investor agrees that its trading
activities with respect to shares of the Issuer’s Common Stock will be in
compliance with all applicable state and federal securities laws, rules and
regulations and rules and regulations of the AMEX. Without limiting the
generality of the foregoing, the Investor agrees that it will, whenever required
by federal securities laws, deliver the prospectus included in the Registration
Statement to any purchaser of Shares from the Investor.

 

ARTICLE 6

REGISTRATION RIGHTS

 

The Investor shall have the following registration rights with respect to the
Registrable Securities owned by it:

 

6.1 Transfer of Registration Rights. Subject to the provisions of this
Agreement, the Investor may assign the registration rights with respect to
Registrable Securities to any party or parties to which it may from time to time
transfer Registrable Securities, provided that the transferee agrees in writing
with the Issuer to be bound by the applicable provisions of this Agreement
regarding such registration rights and indemnification relating thereto. Upon
assignment of any registration rights pursuant to this Section 6.1, the Investor
shall deliver to the Issuer a notice of such assignment which includes the
identity and address of any assignee and such other information reasonably
requested by the Issuer in connection with effecting any such registration
(collectively, the Investor and each such subsequent holder of Registrable
Securities is referred to as a “Holder”). Notwithstanding anything to the
contrary herein, the rights of a Holder pursuant to Article 6 may be assigned
only to a transferee or assignee of any Registrable Securities if such
transferee or assignee (i) acquires at least 100,000 shares of such Holder’s
Registrable Securities (equitably adjusted for any stock splits, subdivisions,
stock dividends, changes, combinations or the like) or less if the shares being
transferred constitute all of such transferring Holder’s Registrable Securities
or (ii) is a wholly-owned subsidiary or affiliate, affiliated venture capital
fund, or partner, constituent partner, member, retired member or shareholder of
the Investor.

 

6.2 Required Registration. The Issuer shall use best efforts to file a
Registration Statement (the “Shelf Registration Statement”) on or before March
31, 2005, pursuant to which all of the Registrable Securities shall be
registered for resale. The Issuer may delay the filing of the Shelf Registration
Statement but shall use its best efforts to file the Shelf Registration
Statement before the expiration of forty-five (45) days from the effective date
of the registration statement for the Offering. The Investor and its counsel
shall have a reasonable period, not to exceed ten (10) business days, to review
the Shelf Registration Statement or any amendment thereto, prior to filing with
the SEC, and the Issuer shall provide the Investor with copies of any comment
letters received from the SEC with respect thereto within 2 business days of
receipt thereof. The Issuer shall use reasonable best efforts to cause the SEC
to declare the Shelf Registration Statement effective as soon as practicable
after filing, but in no event later than ninety (90) days of the date of filing
of the Shelf Registration Statement, and to thereafter maintain the
effectiveness of the Shelf Registration Statement until such time as the Issuer

 

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reasonably determines, based on an opinion of counsel, that the Holders will be
eligible to sell all of the Registrable Securities then owned by the Holders
without the need for continued registration of the Registrable Securities in the
three month period immediately following the termination of the effectiveness of
the Shelf Registration Statement. Notwithstanding the foregoing, if the Issuer’s
obligation to maintain the effectiveness of the Shelf Registration Statement has
not earlier terminated under the preceding sentence, the Issuer’s obligations
contained in this Section 6.2 shall terminate automatically on the second
anniversary of the effective date of the Shelf Registration Statement. The
Issuer covenants that it will provide written notice to the Investor that the
Shelf Registration Statement has been declared effective by the SEC, which
notice shall be given promptly after the Issuer has received notice of such
effectiveness from the SEC.

 

6.3 Registration Procedures.

 

(a) In case of the Shelf Registration Statement effected by the Issuer subject
to this Article 6, the Issuer shall keep the Investor, on behalf of each Holder,
advised in writing as to the initiation of such registration, and as to the
completion thereof. In addition, subject to Section 6.2 above, the Issuer shall,
to the extent applicable to the Shelf Registration Statement:

 

(i) prepare and file with the SEC such amendments and supplements to the Shelf
Registration Statement as may be necessary to keep such registration, effective
and comply with provisions of the Securities Act with respect to the disposition
of all securities covered thereby during the period referred to in Section 6.2,
and take all lawful action such that each of (A) the Shelf Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (B) the prospectus, and any amendment or supplement thereto, does not at any
time while it is effective include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;

 

(ii) update, correct, amend and supplement the Shelf Registration Statement as
necessary;

 

(iii) furnish such number of prospectuses, including preliminary prospectuses,
and other documents incident thereto as Holder may reasonably request from time
to time;

 

(iv) use its commercially reasonable efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions of the United States where an exemption is not available and as
Holder may reasonably request to enable it to consummate the disposition in such
jurisdiction of the Registrable Securities (provided that the Issuer will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this provision, or (ii)
consent to general service of process in any such jurisdiction, or (iii) subject
itself to taxation in any jurisdiction where it is not already subject to
taxation);

 

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(v) notify Holder at any time when a prospectus relating to the Registrable
Securities is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in the Shelf
Registration Statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading, and the Issuer
shall as promptly as commercially reasonable prepare a supplement or amendment
to such prospectus, so that, as thereafter delivered to purchasers of such
shares, such prospectus will not contain any untrue statements of a material
fact or omit to state any fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;

 

(vi) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Issuer are then listed and
obtain all necessary approvals from the AMEX for trading thereon;

 

(vii) provide a transfer agent and registrar for all such Registrable Securities
not later than the effective date of the Shelf Registration Statement;

 

(viii) upon the sale of any Registrable Securities pursuant to the Shelf
Registration Statement, direct the transfer agent to remove all restrictive
legends from all certificates or other instruments evidencing the Registrable
Securities; and

 

(ix) take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Holder of its Registrable Securities in
accordance with the intended methods therefore provided in the prospectus which
are customary for issuers to perform under the circumstances.

 

(b) Notwithstanding anything stated or implied to the contrary in Section 6.3(a)
above, the Issuer shall not be required to consent to any underwritten offering
of the Registrable Securities or to any specific underwriter participating in
any underwritten public offering of the Registrable Securities.

 

(c) Each Holder agrees that upon receipt of any notice from the Issuer of the
happening of any event of the kind described in Section 6.3(a)(v), such Holder
will forthwith discontinue such Holder’s disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such Holder’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 6.3(a)(v) and, if so directed by the Issuer,
will deliver to the Issuer at the Issuer’s expense all copies, other than
permanent file copies, then in such Holder’s possession, of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.

 

(d) Except as required by law, all expenses incurred by the Issuer in complying
with this Article 6, including but not limited to, all registration,
qualification and filing fees, printing expenses, fees and disbursements of
counsel and accountants for the Issuer, blue sky fees and expenses (including
fees and disbursements of counsel related to all blue sky matters)
(“Registration Expenses”) incurred in connection with any registration,
qualification or compliance pursuant to this Article 6 shall be borne by the
Issuer. All underwriting discounts and selling commissions applicable to a sale
incurred in connection with any registration of Registrable Securities and the
legal fees and other expenses of a Holder shall be borne by such Holder.

 

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6.4 Further Information; Listing of Selling Shareholders. If Registrable
Securities owned by a Holder are included in any registration, such Holder shall
furnish the Issuer such information regarding itself as the Issuer may
reasonably request and as shall be required in connection with any registration
(or amendment or supplement thereto), referred to in this Agreement, and Holder
shall indemnify the Issuer with respect thereto in accordance with Article 7
hereof. No Holder shall be entitled to use the prospectus forming a part of the
Resale Registration Statement for resales of Registrable Securities at any time
unless such Holder is named as a selling shareholder in such prospectus or in a
supplement or amendment thereto. No Holder shall be entitled to be listed as a
selling shareholder in the Shelf Registration Statement as of the date the Shelf
Registration Statement is declared effective unless such Holder has provided to
the Issuer all information requested by the Issuer pursuant to this Section 6.4
by the deadline established by the Issuer for a response to its request;
provided, however, that each Holder shall have at least five (5) business days
from the date on which the request is first mailed or otherwise delivered to the
Holder by the Issuer to provide the information to the Issuer. After the
effectiveness of the Shelf Registration Statement, the Issuer shall, upon the
request of any Holder not named as a selling shareholder, file a supplement to
the prospectus or amendment to the Shelf Registration Statement identifying such
Holder as a selling shareholder, provided that the Issuer shall be under no
obligation to do so unless the Holder has furnished to the Issuer all
information requested by the Issuer under this Section 6.4; and provided
further, that the Issuer shall not be obligated to file no more than one such
document within any period of thirty (30) days.

 

6.5 Right of Suspension.

 

(a) Notwithstanding any other provision of this Agreement or any related
agreement to the contrary, if any, the Issuer shall have the right, at any time,
to suspend the effectiveness of the Shelf Registration Statement and offers and
sales of the Registrable Securities covered thereby whenever, in the good faith
judgment of the Issuer, (i) continuing such effectiveness or permitting such
offers and sales could reasonably be expected to have an adverse effect upon a
proposed sale of all or substantially all of the assets of the Issuer or a
merger, acquisition, reorganization, recapitalization or similar current
transaction materially affecting the capital structure or equity ownership of
the Issuer, (ii) there exists a material development or a potential material
development with respect to or involving the Issuer that the Issuer would be
obligated to disclose in the prospectus used in connection with the Shelf
Registration Statement, which disclosure, in the good faith judgment of the
Issuer, after considering the advice of counsel, would be premature or otherwise
inadvisable at such time, or (iii) the Shelf Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances, not misleading (a “Suspension Event”).
In the event that the Issuer shall determine to so suspend the effectiveness of
the Shelf Registration Statement and offers and sales of the Registrable
Securities covered thereby, the Issuer shall, in addition to performing those
acts required to be performed under the Securities Act and/or the Exchange Act
or deemed advisable by the Issuer, deliver to each Holder written notice
thereof, signed by the

 

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Chief Financial Officer or Chief Executive Officer of the Issuer. Upon receipt
of such notice, the Holders shall discontinue disposition of the Registrable
Securities covered by the Shelf Registration Statement and prospectus until such
Holders (x) are advised in writing by the Issuer that the use of the Shelf
Registration Statement and prospectus (and offers and sales thereunder) may be
resumed, (y) have received copies of a supplemental or amended prospectus, if
applicable, and (z) have received copies of any additional or supplemental
filings which are incorporated or deemed to be incorporated by reference into
such prospectus. The Issuer will exercise commercially reasonable efforts to
ensure that the use of the Shelf Registration Statement and prospectus may be
resumed as quickly as practicable, provided, however, that in the event of a
Suspension Event, the Issuer’s obligation under Section 6.2 to maintain the
effectiveness of the Shelf Registration Statement until the second anniversary
of the date of the effectiveness of the Shelf Registration Statement, if that
obligation has not terminated prior to such anniversary pursuant to the
provisions of Section 6.2, shall be extended on a day-for-day basis equal to the
amount of time that such Shelf Registration Statement shall have been suspended.

 

(b) The Issuer’s right to suspend the effectiveness of the Shelf Registration
Statement and the offers and sales of the Registrable Securities covered
thereby, as described above, shall be for a period of time (the “Suspension
Period”) beginning on the date of the occurrence of the Suspension Event and
expiring on the earlier to occur of (i) the date on which the Suspension Event
ceases, or (ii) forty five (45) days after the occurrence of the Suspension
Event; provided, however, that there shall not be more than two Suspension
Periods in any 12 month period.

 

ARTICLE 7

INDEMNIFICATION

 

7.1 Indemnification Relating to Registration Rights.

 

(a) With respect to any registration, effected or to be effected pursuant to
Article 6 of this Agreement, the Issuer shall indemnify each Holder of
Registrable Securities whose securities are included in a registration
statement, each of such Holder’s directors and officers, each underwriter (as
defined in the Securities Act) of the securities sold by such Holder (if any),
and each Person who controls (within the meaning of the Securities Act) any such
Holder or underwriter (a “Controlling Person”) from and against all losses,
damages, liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses (including, without limitation, reasonable
attorneys’ fees and expenses) or deficiencies of any such Holder or any such
underwriter or Controlling Person if any of the foregoing (or actions in respect
thereof) arise out of or are based upon:

 

(i) any untrue statement (or alleged untrue statement) of a material fact
contained in the Shelf Registration Statement, or any related preliminary
prospectus, prospectus or amendment or supplement thereto, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration;

 

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(ii) any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein, in the
light of the circumstances under which it was made, not misleading; or

 

(iii) any violation by the Issuer of the Securities Act or any rule or
regulation promulgated thereunder applicable to the Issuer, or of any blue sky
or other state securities laws or any rule or regulation promulgated thereunder
applicable to the Issuer,

 

in each case, relating to any action or inaction required of the Issuer in
connection with any such registration, and subject to Section 7.2 below will
reimburse each such Person entitled to indemnity under this Section 7.1 for all
legal and other expenses reasonably incurred in connection with investigating or
defending any such loss, damage, liability, claim, charge, action, proceeding,
demand, judgment, settlement or deficiency; provided, however, that, the
foregoing indemnity and reimbursement obligation shall not be applicable to the
extent that any such matter arises out of or is based on (A) any untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in reliance upon and in conformity with written information furnished to the
Issuer by or on behalf of such Holder or by or on behalf of such an underwriter
specifically for use in such Shelf Registration Statement, or any related
preliminary prospectus, prospectus or amendment or supplement thereto, offering
circular or other document, or (B) the failure of the Holder to comply with its
obligations to discontinue disposition of Registrable Securities during the
suspension of a registration statement as set forth in Section 6.5(a). This
indemnity agreement will be in addition to any liability which the Issuer may
otherwise have.

 

(b) With respect to any registration, qualification or compliance effected or to
be effected pursuant to this Agreement, each Holder of Registrable Securities
whose securities are included in a registration statement, shall indemnify the
Issuer or any Controlling Person, and the directors and officers of the Issuer
or any Controlling Person, from and against all losses, damages, liabilities,
claims, charges, actions, proceedings, demands, judgments, settlement costs and
expenses of any nature whatsoever (including, without limitation, reasonable
attorneys’ fees and expenses) or deficiencies of the Issuer if any of the
foregoing arise out of:

 

(i) any untrue statement (or alleged untrue statement) of a material fact
contained in the Shelf Registration Statement, or any related preliminary
prospectus, prospectus or amendment or supplement thereto, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance;

 

(ii) any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein, in the
light of the circumstances under which it was made, not misleading; or

 

(iii) any violation by such Holder of the Securities Act or any rule or
regulation promulgated thereunder applicable to the Issuer or such Holder or of
any blue sky or other state securities laws or any rule or regulation
promulgated thereunder applicable to the Issuer or such Holder,

 

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in each case, relating to any action or inaction required of such Holder in
connection with any such registration, qualification or compliance, and subject
to Section 7.2 below will reimburse the Issuer for all legal and other expenses
reasonably incurred in connection with investigating or defending any such loss,
damage, liability, claim, charge, action, proceeding, demand, judgment,
settlement or deficiency; provided, however, that, the foregoing indemnity and
reimbursement obligation shall only be applicable to the extent that any such
matter arises out of or is based on any untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in reliance upon and in
conformity with written information furnished to the Issuer by or on behalf of
the Holder specifically for use in such Shelf Registration Statement, or any
related preliminary prospectus, prospectus or amendment or supplement thereto,
offering circular or other document; provided, however, that, the obligation of
the Holder hereunder shall be limited to an amount equal to the net proceeds to
the Holder of Registrable Securities sold as contemplated hereunder.

 

7.2 Indemnification Procedures. Each Person entitled to indemnification under
this Section (an “Indemnified Party”) shall give notice as promptly as
reasonably practicable to each party required to provide indemnification under
this Section (an “Indemnifying Party”) of any action commenced against or by it
in respect of which indemnity may be sought hereunder, but failure to so notify
an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it may have otherwise than on account of this indemnity agreement
so long as such failure shall not have materially prejudiced the position of the
Indemnifying Party. Upon such notification, the Indemnifying Party shall assume
the defense of such action if it is a claim brought by a third party, if and
after such assumption the Indemnified Party shall not be entitled to
reimbursement of any expenses incurred by it in connection with such action
except as described below. In any such action, any Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the contrary or
(ii) the named parties in any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing or conflicting interests between them. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent (which shall not be unreasonably withheld or delayed by such
Indemnifying Party), but if settled with such consent or if there be final
judgment for the plaintiff, the Indemnifying Party shall indemnify the
Indemnified Party from and against any loss, damage or liability by reason of
such settlement or judgment.

 

7.3 Contribution. In order to provide for just and equitable contribution under
the Securities Act in any case in which (i) the indemnified party makes a claim
for indemnification pursuant to this Section 7 but is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of Section 7 hereof provide for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
part of any indemnified party, then the Issuer and the Holder shall contribute
to the aggregate losses, damages, liabilities, claims, charges, actions,
proceedings, demands, judgments, settlement costs and expenses (including,
without limitation, reasonable attorneys’ fees and expenses) or deficiencies to
which they may be subject (which shall, for purposes of this Agreement included,
but not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys’ fees), in either

 

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such case (after contribution from others) on the basis of relative fault as
well as any other relevant equitable considerations. The relative fault should
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuer on the one hand or
the Holder on the other hand, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Issuer and the Holder agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in this Section 7. The amount paid or
payable by an Indemnified Party as a result of the losses, damages, liabilities,
claims, charges, actions, proceedings, demands, judgments, settlement costs and
expenses (including, without limitation, reasonable attorneys’ fees and
expenses) or deficiencies (or actions in respect thereof) referred to above in
this Section 7 shall be deemed to include any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

 

Notwithstanding any other provision of this Section 7, in no event shall any (i)
Holder be required to undertake liability to any Person under this Section 7 for
any amounts in excess of the dollar amount of the net proceeds to be received by
the Holder from the sale of the Holder’s Registrable Securities (after deducting
any fees, discounts and commissions applicable thereto) pursuant to any
registration statement under which such Registrable Securities are or were to be
registered under the Securities Act, and (ii) underwriter be required to
undertake liability to any person hereunder for any amounts in excess of the
aggregate discount, commission or other compensation payable to such underwriter
with respect to the Registrable Securities underwritten by it and distributed
pursuant to the Shelf Registration Statement.

 

ARTICLE 8

CONDITIONS TO CLOSING

 

8.1 Conditions to the Obligations of the Investor. The obligations of the
Investor to proceed with the Closing is subject to the following conditions any
and all of which may be waived, in whole or in part, to the extent permitted by
applicable law:

 

(a) Representations and Warranties. Each of the representations and warranties
of the Issuer contained in this Agreement shall be true and correct as of the
Closing as though made on and as of the Closing, except (i) for changes
specifically permitted by this Agreement, and (ii) that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date. Unless the Investor receives written notice to
the contrary at the Closing, Investor shall be entitled to assume that the
preceding is accurate in all respects at the Closing.

 

(b) Agreement and Covenants. The Issuer shall have performed or complied with
all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing. Unless the Investor receives
written notice to the contrary at the Closing, Investor shall be entitled to
assume that the preceding is accurate in all respects at the Closing.

 

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(c) No Order. No governmental authority or other agency or commission or federal
or state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction, or other order (whether temporary, preliminary or permanent)
which is in effect and which restricts, prevents or prohibits consummation of
the Closing or any transaction contemplated by this Agreement.

 

(d) Securities Exemptions. The offer and sale of the Shares pursuant to this
Agreement shall be exempt from the registration requirements of the Securities
Act and the registration and/or qualification requirements of all applicable
state securities laws.

 

(e) No Suspension of Trading or Listing of Common Stock. The Common Stock of the
Issuer (i) shall be designated for quotation or listed on the AMEX and (ii)
shall not have been suspended from trading on the AMEX.

 

(f) Approval of the AMEX. The AMEX shall have approved an application for
listing of additional shares filed by the Issuer with respect to the Shares.

 

8.2 Conditions to the Obligations of the Issuer. The obligations of the Issuer
to proceed with the Closing is subject to the following conditions any and all
of which may be waived, in whole or in part, to the extent permitted by
applicable law:

 

(a) Representations and Warranties. Each of the representations and warranties
of the Investor contained in this Agreement shall be true and correct as of the
Closing as though made on and as of the Closing, except (i) for changes
specifically permitted by this Agreement, and (ii) that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date. Unless the Issuer receives written
notification to the contrary at the Closing, the Issuer shall be entitled to
assume that the preceding is accurate in all respects at the Closing.

 

(b) Agreement and Covenants. The Investor shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing.
Unless the Issuer receives written notification to the contrary at the Closing,
the Issuer shall be entitled to assume that the preceding is accurate in all
respects at the Closing.

 

(c) No Order. No governmental authority or other agency or commission or federal
or state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction, or other order (whether temporary, preliminary or permanent)
which is in effect and which materially restricts, prevents or prohibits
consummation of the Closing or any transaction contemplated by this Agreement.

 

(d) Securities Exemptions. The offer and sale of the Shares pursuant to this
Agreement shall be exempt from the registration requirements of the Securities
Act and the registration and/or qualification requirements of all applicable
state securities laws.

 

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(e) No Suspension of Trading or Listing of Common Stock. The Common Stock of the
Issuer (i) shall be or listed on the AMEX and (ii) shall not have been suspended
from trading on the AMEX.

 

(f) Approval of the AMEX. The AMEX shall have approved an application for
listing of additional shares filed by the Issuer with respect to the Shares.

 

ARTICLE 9

MISCELLANEOUS

 

9.1 Defined Terms. As used herein the following terms shall have the following
meanings:

 

“Affiliate” shall have the meaning ascribed to it in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act, as in effect on the date hereof.

 

“AMEX” means the American Stock Exchange.

 

“Articles of Incorporation” means the Issuer’s Articles of Incorporation, as the
same may be supplemented, amended or restated from time to time.

 

“Closing” has the meaning in Article 2 of this Agreement.

 

“Common Stock” has the meaning specified in the Recitals to this Agreement.

 

“Contract” means any indenture, lease, sublease, loan agreement, mortgage, note,
restriction, commitment, obligation or other contract, agreement or instrument.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

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

 

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any entity or official exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

 

“Investor” has the meaning specified in the Recitals to this Agreement.

 

“Issuer” means Axesstel, Inc., a Nevada corporation.

 

“Lien” means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code or comparable law
or any jurisdiction in connection with such mortgage, pledge, security interest,
encumbrance, lien or charge).

 

“Material Adverse Change (or Effect)” means a material and adverse change in (or
effect on) the financial condition, properties, assets, liabilities, rights,
obligations, operations

 

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or business, of a Person and its Subsidiaries taken as a whole. As used in this
Agreement with reference to the Issuer, “Material Adverse Change (or Effect)”
shall not include any change, event, violation, inaccuracy, circumstance or
effect directly and primarily resulting from (i) changes in general economic
conditions or changes affecting the industry generally in which the Issuer
operates (provided that such changes do not affect the Issuer in a substantially
disproportionate manner) or (ii) changes in the trading prices for the Issuer’s
Common Stock which are unrelated to a breach by the Issuer of this Agreement.

 

“Person” means an individual, partnership, corporation, business trust, joint
stock company, estate, trust, unincorporated association, joint venture,
Governmental Authority or other entity, of whatever nature.

 

“Purchase Price” has the meaning specified in Section 1.1 of this Agreement.

 

“Register,” “registered” and “registration” refer to a registration of the
offering and sale or resale of Common Stock effected by preparing and filing a
registration statement in compliance with the Securities Act and the declaration
or ordering of the effectiveness of such registration statement.

 

“Registrable Securities” means (i) all shares of Common Stock acquired by the
Investor hereunder, (ii) all shares of Common Stock acquired by the Investor
pursuant to the Prior Agreements, (iii) all shares of Common Stock acquired by
the Investor from shareholders of the Issuer on or prior to October 14, 2004,
but only to the extent that such shares are restricted securities, as defined in
Rule 144, and the Investor has advised the Issuer in writing of their
acquisition by the close of business on October 14, 2004, (iv) 170,000 shares of
Common Stock acquired by the Investor in open market transactions during
February 2005 and (v) any other shares of Common Stock or other securities
issued in respect of such shares by way of a stock dividend or stock split or in
connection with a combination or subdivision of the Common Stock or by way of a
recapitalization, merger or consolidation or reorganization of the Issuer;
provided, however, that, as to any particular securities, such securities will
cease to be Registrable Securities when they have been sold subsequent to their
acquisition by the Investor pursuant to registration or in a transaction exempt
from the registration and prospectus delivery requirements of the Securities Act
under Section 4(1) thereof so that all transfer restrictions and restrictive
legends with respect thereto are removed upon the consummation of such sale.

 

“Requirements of Law” means as to any Person, the articles of incorporation,
by-laws or other organizational or governing documents of such person, and any
domestic or foreign and federal, state or local law, rule, regulation, statute
or ordinance or determination of any arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
properties or to which such Person or any of its property is subject.

 

“SEC” means the Securities and Exchange Commission.

 

“SEC Reports” has the meaning specified in Section 3.6 of this Agreement.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Shares” has the meaning specified in Section 1.1 of this Agreement.

 

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“Subsidiary” means as to any Person, a corporation or limited partnership of
which more than 50% of the outstanding capital stock or partnership interests
having full voting power is at the time directly or indirectly owned or
controlled by such Person.

 

9.2 Other Definitional Provisions.

 

(a) All terms defined in this Agreement shall have the defined meanings when
used in any certificates, reports or other documents made or delivered pursuant
hereto or thereto, unless the context otherwise requires.

 

(b) Terms defined in the singular shall have a comparable meaning when used in
the plural, and vice versa.

 

(c) All accounting terms shall have a meaning determined in accordance with
GAAP.

 

(d) As used herein, the neuter gender shall also denote the masculine and
feminine, and the masculine gender shall also denote the neuter and feminine,
where the context so permits.

 

(e) The words “hereof,” “herein” and “hereunder,” and words of similar import,
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement.

 

9.3 Notices. All notices, requests, demands, claims, and other communications
hereunder shall be in writing and shall be delivered by certified or registered
mail (first class postage pre-paid), guaranteed overnight delivery, or facsimile
transmission if such transmission is confirmed by delivery by certified or
registered mail (first class postage pre-paid) or guaranteed overnight delivery,
to the following addresses and Fax numbers (or to such other addresses or Fax
numbers which such party shall subsequently designate in writing to the other
party):

 

(a) if to the Issuer to:

 

Axesstel, Inc.

6815 Flanders Drive, Suite 210

San Diego, California 92121

Attention: David Morash, President and Chief Operating Officer

Fax: (858) 625-2110

 

With a copy to:

 

Helen Chao, Esq., General Counsel

Fax: (858) 625-2110

 

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And a copy to:

 

John J. Hentrich, Esq.

Sheppard Mullin Richter & Hampton, LLP

12544 High Bluff Drive, Suite 300

San Diego, California 92130

Fax: (858) 509-3691

 

(b) if to the Investor, to the address set forth next to its name on the
signature page hereto.

 

Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered by
hand, by messenger or by courier, or if sent by facsimile, upon confirmation of
receipt.

 

9.4 Stock Splits, Dividends and other Similar Events. The provisions of this
Agreement shall be appropriately adjusted to reflect any stock split, stock
dividend, reorganization or other similar event that may occur with respect to
the Issuer after the date hereof.

 

9.5 Entire Agreement. This Agreement and other documents delivered at the
Closing pursuant hereto, contain the entire understanding of the parties in
respect of its subject matter and supersedes all prior agreements and
understandings between or among the parties with respect to such subject matter.

 

9.6 Expenses; Taxes. Except as otherwise provided in this Agreement, the parties
shall pay their own fees and expenses, including their own counsel fees,
incurred in connection with this Agreement or any transaction contemplated
hereby. Any sales tax, stamp duty, deed transfer or other tax (except taxes
based on the income of the Investor) arising out of the initial issuance of the
Shares (but not with respect to subsequent transfers) by the Issuer to the
Investor and consummation of the transactions contemplated by this Agreement
shall be paid by the Issuer.

 

9.7 Amendment; Waiver. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Issuer and Investors holding, or obligated to purchase, at least two thirds of
the Registrable Securities or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No failure to exercise, and no
delay in exercising, any right, power or privilege under this Agreement shall
operate as a waiver, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude the exercise of any other right, power or
privilege. No waiver of any breach of any provision shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision,
nor shall any waiver be implied from any course of dealing between the parties.
No extension of time for performance of any obligations or other acts hereunder
or under any other agreement shall be deemed to be an extension of the time for
performance of any other obligations or any other acts. The rights and remedies
of the parties under this Agreement are in addition to all other rights and
remedies, at law or equity, that they may have against each other.

 

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9.8 Binding Effect; Assignment. The rights and obligations of this Agreement
shall bind and inure to the benefit of the parties and their respective
successors and legal assigns. The rights and obligations of this Agreement may
not be assigned by any party without the prior written consent of the other
party.

 

9.9 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute
one and the same instrument.

 

9.10 Headings. The headings contained in this Agreement are for convenience of
reference only and are not to be given any legal effect and shall not affect the
meaning or interpretation of this Agreement.

 

9.11 Governing Law; Interpretation. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
California applicable to contracts executed and to be wholly performed within
such State.

 

9.12 Severability. The parties stipulate that the terms and provisions of this
Agreement are fair and reasonable as of the date of this Agreement. However, any
provision of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. If,
moreover, any of those provisions shall for any reason be determined by a court
of competent jurisdiction to be unenforceable because excessively broad or vague
as to duration, activity or subject, it shall be construed by limiting, reducing
or defining it, so as to be enforceable.

 

9.13 Amendment to Prior Agreements. Each of the Prior Agreements is hereby
amended to delete Article 6 (Registration Rights), and the definition of
“Registrable Securities” set forth in Section 9.1 (Defined Terms) of each such
agreement.

 

(Signatures on next page)

 

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IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to be duly executed and delivered as of the date set forth below.

 

COMVENTURES V, L.P.,

COMVENTURES V-B CEO FUND, L.P., and

COMVENTURES V ENTREPRENEURS’ FUND, L.P.

By: COMVEN V, L.L.C., each of their General Partner

By:  

/s/ Roland Van der Meer

--------------------------------------------------------------------------------

 

Dated: March 3, 2005

 

Name:   Roland Van der Meer     Title:   Member    

 

305 Lytton Avenue

Palo Alto, CA 94301

Attention: Roland Van der Meer, Partner

Fax: 650-325-9608

 

AXESSTEL, INC.     By:  

/s/ David Morash

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Dated: March 3, 2005

 

   

David Morash

President and Chief Operating Officer

   

 

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