Exhibit 10.1

 

AXESSTEL, INC.

 

SECURITIES PURCHASE AGREEMENT

 

March 16, 2004

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TABLE OF CONTENTS

 

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1.    Agreement to Sell and Purchase    1 2.    Fees and Warrant    1 3.   
Closing, Delivery and Payment    2      3.1.   Closing    2      3.2.   Delivery
   2 4.    Representations and Warranties of the Company    2      4.1.  
Organization, Good Standing and Qualification    2      4.2.   Subsidiaries    3
     4.3.   Capitalization; Voting Rights    3      4.4.   Authorization;
Binding Obligations    4      4.5.   Liabilities    4      4.6.   Agreements;
Action    4      4.7.   Obligations to Related Parties    5      4.8.   Changes
   5      4.9.   Title to Properties and Assets; Liens, Etc    6      4.10.  
Intellectual Property    6      4.11.   Compliance with Other Instruments    7  
   4.12.   Litigation    7      4.13.   Tax Returns and Payments    8      4.14.
  Employees    8      4.15.   Registration Rights and Voting Rights    8     
4.16.   Compliance with Laws; Permits    8      4.17.   Environmental and Safety
Laws    9      4.18.   Valid Offering    9      4.19.   Full Disclosure    9  
   4.20.   Insurance    9      4.21.   SEC Reports    10      4.22.   Listing   
10      4.23.   No Integrated Offering    10      4.24.   Stop Transfer    10  
   4.25.   Dilution    10 5.    Representations and Warranties of the Purchaser
   10      5.1.   No Shorting    11      5.2.   Requisite Power and Authority   
11      5.3.   Investment Representations    11      5.4.   Purchaser Bears
Economic Risk    11      5.5.   Acquisition for Own Account    11      5.6.  
Purchaser Can Protect Its Interest    11      5.7.   Accredited Investor    12  
   5.8.   Legends    12

 

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TABLE OF CONTENTS

(continued)

 

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6.    Covenants of the Company    13      6.1.   Stop-Orders    13      6.2.  
Listing    13      6.3.   Market Regulations    13      6.4.   Reporting
Requirements    13      6.5.   Use of Funds    13      6.6.   Access to
Facilities    13      6.7.   Taxes    14      6.8.   Insurance    14      6.9.  
Intellectual Property    14      6.10.   Properties    14      6.11.  
Confidentiality    14      6.12.   Required Approvals    14      6.13.  
Reissuance of Securities    15      6.14.   Opinion    15 7.    Covenants of the
Purchaser    15      7.1.   Confidentiality    15      7.2.   Non-Public
Information    15      7.3.   No Shorting    15 8.    Covenants of the Company
and Purchaser Regarding Indemnification    15      8.1.   Company
Indemnification    15      8.2.   Purchaser’s Indemnification    16      8.3.  
Procedures    16 9.    Conversion of Convertible Note    16      9.1.  
Mechanics of Conversion    16      9.2.   Maximum Conversion    17 10.   
Registration Rights    18      10.1.   Registration Rights Granted    18     
10.2.   Indemnification    18      10.3.   Offering Restrictions    20 11.   
Miscellaneous    20      11.1.   Governing Law    20      11.2.   Survival    21
     11.3.   Successors    21      11.4.   Entire Agreement    21      11.5.  
Severability    21      11.6.   Amendment and Waiver    21      11.7.   Delays
or Omissions    21      11.8.   Notices    21      11.9.   Attorneys’ Fees    22
     11.10.   Titles and Subtitles    22      11.11.   Facsimile Signatures;
Counterparts    22      11.12.   Broker’s Fees    22      11.13.   Construction
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SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is made and entered into
as of March 16, 2004, by and between AXESSTEL, INC., a Nevada corporation (the
“Company”), and Laurus Master Fund, Ltd., a Cayman Islands company (the
“Purchaser”).

 

Recitals

 

Whereas, the Company has authorized the sale to the Purchaser of a Convertible
Term Note in the aggregate principal amount of three million dollars
($3,000,000) (the “Note”), which Note is convertible into shares of the
Company’s common stock, $0.001 par value per share (the “Common Stock”) at a
fixed conversion price of $3.16 per share of Common Stock (“Fixed Conversion
Price”);

 

Whereas, the Company wishes to issue a warrant to the Purchaser to purchase up
to 100,000 shares of the Company’s Common Stock in consideration of Purchaser’s
agreement to purchase of the Note;

 

Whereas, Purchaser desires to purchase the Note and Warrant on the terms and
conditions set forth herein; and

 

Whereas, the Company desires to issue and sell the Note and Warrant to Purchaser
on the terms and conditions set forth herein.

 

Agreement

 

Now, Therefore, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

 

1. Agreement to Sell and Purchase. Pursuant to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company a Note in the amount of $3,000,000, convertible in
accordance with the terms thereof into shares of the Company’s Common Stock. The
Note purchased on the Closing Date shall be known as the “Offering.” A form of
the Note is annexed hereto as Exhibit A. The Note will have a Maturity Date (as
defined in the Note) thirty-six (36) months from the date of issuance.
Collectively, the Note and Warrant (as defined in Section 2) and Common Stock
issuable in payment of the Note, upon conversion of the Note and upon exercise
of the Warrant are referred to as the “Securities”.

 

2. Fees and Warrant. On the Closing Date:

 

2.1. The Company will issue and deliver to the Purchaser a Warrant to purchase
up to 100,000 shares of Common Stock in connection with the Offering (the
“Warrant”) pursuant to Section 1 hereof. A form of Warrant is annexed hereto as
Exhibit B. All the representations, covenants, warranties, undertakings, and
indemnification, and other rights made or granted to or for the benefit of the
Purchaser by the Company are hereby also made and granted in respect of the
Warrant and shares of the Company’s Common Stock issuable upon exercise of the
Warrant (the “Warrant Shares”).

 

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2.2. Upon execution and delivery of this Agreement by the Company and Purchaser,
the Company shall pay to Laurus Capital Management, LLC, manager of Purchaser
(i) a closing payment in an amount equal to three and six-tenths percent (3.6%)
of the aggregate principal amount of the Note. The foregoing fee is referred to
herein as the “Closing Payment”.

 

2.3. The Company shall reimburse the Purchaser for its reasonable legal fees for
services rendered to the Purchaser in preparation of this Agreement and the
Related Agreements (as hereinafter defined), and expenses in connection with the
Purchaser’s due diligence review of the Company and relevant matters. Amounts
required to be paid hereunder will be paid at the Closing and shall not exceed
$22,000 for legal expenses and $17,500 for performing due diligence inquiries on
the Company.

 

2.4. The Closing Payment, legal fees and due diligence fees (net of deposits
previously paid by the Company) shall be paid at closing out of funds held
pursuant to a Funds Escrow Agreement of even date herewith among the Company,
Purchaser, and an Escrow Agent (the “Funds Escrow Agreement”) and a disbursement
letter (the “Disbursement Letter”).

 

3. Closing, Delivery and Payment.

 

3.1. Closing. Subject to the terms and conditions herein, the closing of the
transactions contemplated hereby (the “Closing”), shall take place on the date
hereof, at such time or place as the Company and Purchaser may mutually agree
(such date is hereinafter referred to as the “Closing Date”).

 

3.2. Delivery. Pursuant to the Funds Escrow Agreement in the form attached
hereto as Exhibit C, at the Closing, the Company will deliver to the Purchaser,
among other things, the Note and the Warrant and the Purchaser will deliver to
the Company, among other things, the amounts set forth in the Disbursement
Letter by certified funds or wire transfer.

 

4. Representations and Warranties of the Company.

 

The Company hereby represents and warrants to the Purchaser as of the date of
this Agreement as set forth below which disclosures are supplemented by, and
subject to the Company’s filings under the Securities Exchange Act of 1934
(collectively, the “Exchange Act Filings”), copies of which have been made
available to the Purchaser, and the Schedule of Exceptions attached hereto.

 

4.1. Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada. The Company has the corporate power and authority to own and
operate its properties and assets, to carry on its business as presently
conducted, to execute and deliver this Agreement, and the Note and the Warrant
to be issued in connection with this Agreement, the Security Agreement relating
to the Note even date herewith between the Company and the Purchaser, the
Registration Rights Agreement relating to the Securities of even date herewith
between the Company and the Purchaser and all other agreements referred to
herein (collectively, the

 

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“Related Agreements”), to issue and sell the Note and the shares of Common Stock
issuable upon conversion of the Note (the “Note Shares”), to issue and sell the
Warrant and the Warrant Shares, and to carry out the provisions of this
Agreement and the Related Agreements. The Company is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.

 

4.2. Subsidiaries. Except as disclosed on Schedule 4.2, the Company does not own
or control any equity security or other interest of any other corporation,
limited partnership or other business entity.

 

4.3. Capitalization; Voting Rights.

 

(a) The authorized capital stock of the Company, as of the date hereof consists
of Fifty Million (50,000,000) shares, all of which are shares of Common Stock,
par value $0.001 per share, Seven Million Nine Hundred Thirty Six Thousand Eight
Hundred Seventy One (7,987,451) shares of which are issued and outstanding.

 

(b) Except as disclosed on Schedule 4.3, other than (i) the shares reserved for
issuance under the Company’s stock option plans; and (ii) shares which may be
granted pursuant to this Agreement and the Related Agreements, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or stockholder agreements, or arrangements
or agreements of any kind for the purchase or acquisition from the Company of
any of its securities. Except as disclosed on Schedule 4.3, neither the offer,
issuance or sale of any of the Note or Warrant, or the issuance of any of the
Note Shares or Warrant Shares, nor the consummation of any transaction
contemplated hereby will result in a change in the price or number of any
securities of the Company outstanding, under anti-dilution or other similar
provisions contained in or affecting any such securities.

 

(c) All issued and outstanding shares of the Company’s Common Stock (i) have
been duly authorized and validly issued and are fully paid and nonassessable and
(ii) were issued in compliance with all applicable state and federal laws
concerning the issuance of securities.

 

(d) The rights, preferences, privileges and restrictions of the shares of the
Common Stock are as stated in the Company’s Articles of Incorporation (the
“Charter”). The Note Shares and Warrant Shares have been duly and validly
reserved for issuance. When issued in compliance with the provisions of this
Agreement and the Company’s Charter, the Securities will be validly issued,
fully paid and nonassessable, and will be free of any liens or encumbrances
other than those created by the Purchaser; provided, however, that the
Securities may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at the
time a transfer is proposed.

 

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4.4. Authorization; Binding Obligations. All corporate action on the part of the
Company, its officers and directors necessary for the authorization of this
Agreement and the Related Agreements, the performance of all obligations of the
Company hereunder at the Closing and, the authorization, sale, issuance and
delivery of the Note and Warrant has been taken or will be taken prior to the
Closing. The Agreement and the Related Agreements, when executed and delivered
and to the extent it is a party thereto, will be valid and binding obligations
of the Company enforceable in accordance with their terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors’ rights, and (b)
general principles of equity that restrict the availability of equitable or
legal remedies. The sale of the Note and the subsequent conversion of the Note
into Note Shares are not, and will not be, subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with. The
issuance of the Warrant and the subsequent exercise of the Warrant for Warrant
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.

 

4.5. Liabilities. The Company, to the best of its knowledge, has no material
contingent liabilities, except current liabilities incurred in the ordinary
course of business and liabilities disclosed in any Exchange Act Filings.

 

4.6. Agreements; Action. Except as set forth on Schedule 4.6 or as disclosed in
any Exchange Act Filings:

 

(a) There are no agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Company is a
party or to its knowledge by which it is bound which may involve (i) obligations
(contingent or otherwise) of, or payments to, the Company in excess of $50,000
(other than obligations of, or payments to, the Company arising from purchase or
sale agreements entered into in the ordinary course of business), or (ii) the
transfer or license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than licenses arising from the purchase of
“off the shelf” or other standard products), or (iii) provisions restricting the
development, manufacture or distribution of the Company’s products or services,
or (iv) indemnification by the Company with respect to infringements of
proprietary rights.

 

(b) Since December 31, 2002, the Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than ordinary course obligations)
individually in excess of $50,000 or, in the case of indebtedness and/or
liabilities individually less than $50,000, in excess of $100,000 in the
aggregate, (iii) made any loans or advances to any person not in excess,
individually or in the aggregate, of $100,000, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.

 

(c) For the purposes of subsections (a) and (b) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions

 

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involving the same person or entity (including persons or entities the Company
has reason to believe are affiliated therewith) shall be aggregated for the
purpose of meeting the individual minimum dollar amounts of such subsections.

 

4.7. Obligations to Related Parties. Except as set forth on Schedule 4.7, there
are no obligations of the Company to officers, directors, stockholders or
employees of the Company other than (a) for payment of salary for services
rendered and for bonus payments, (b) reimbursement for reasonable expenses
incurred on behalf of the Company, (c) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company), and (d) obligations listed in the Company’s financial statements
or disclosed in any of its Exchange Act Filings. Except as described above or
set forth on Schedule 4.7, none of the officers, directors or, to the best of
the Company’s knowledge, key employees or stockholders of the Company or any
members of their immediate families, are indebted to the Company, individually
or in the aggregate, in excess of $50,000 or have any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, other than passive investments in
publicly traded companies (representing less than 1% of such company) which may
compete with the Company. Except as described above, no officer, director or to
the Company’s knowledge, stockholder, or any member of their immediate families,
is, directly or indirectly, interested in any material contract with the Company
and no agreements, understandings or proposed transactions are contemplated
between the Company and any such person. Except as set forth on Schedule 4.7,
the Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.

 

4.8. Changes. Since September 30, 2003, except as disclosed in any Exchange Act
Filing or in any Schedule to this Agreement or to any of the Related Agreements,
there has not been:

 

(a) Any change in the assets, liabilities, financial condition, prospects or
operations of the Company, other than changes in the ordinary course of
business, none of which individually or in the aggregate has had or is
reasonably expected to have a material adverse effect on such assets,
liabilities, financial condition, prospects or operations of the Company;

 

(b) Any resignation or termination of any officer, key employee or group of
employees of the Company;

 

(c) Any material change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;

 

(d) Any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, business or prospects or
financial condition of the Company;

 

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(e) Any waiver by the Company of a valuable right or of a material debt owed to
it;

 

(f) Any direct or indirect material loans made by the Company to any
stockholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;

 

(g) Any material change in any compensation arrangement or agreement with any
employee, officer, director or stockholder;

 

(h) Any declaration or payment of any dividend or other distribution of the
assets of the Company;

 

(i) Any labor organization activity related to the Company;

 

(j) Any debt, obligation or liability incurred, assumed or guaranteed by the
Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;

 

(k) Any sale, assignment or transfer of any patents, trademarks, copyrights,
trade secrets or other intangible assets;

 

(l) Any change in any material agreement to which the Company is a party or by
which it is bound which may materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the
Company;

 

(m) Any other event or condition of any character that, either individually or
cumulatively, has or may materially and adversely affect the business, assets,
liabilities, financial condition, prospects or operations of the Company; or

 

(n) Any arrangement or commitment by the Company to do any of the acts described
in subsection (a) through (m) above.

 

4.9. Title to Properties and Assets; Liens, Etc. Except as set forth on Schedule
4.9, the Company has good and marketable title to its properties and assets, and
good title to its leasehold estates, in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than (a) those resulting from
taxes which have not yet become delinquent, (b) minor liens and encumbrances
which do not materially detract from the value of the property subject thereto
or materially impair the operations of the Company, and (c) those that have
otherwise arisen in the ordinary course of business. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company are in good operating condition and repair, normal wear and tear
excepted, and are reasonably fit and usable for the purposes for which they are
being used. Except as set forth on Schedule 4.9, the Company is in compliance
with all material terms of each lease to which it is a party or is otherwise
bound.

 

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4.10. Intellectual Property.

 

(a) The Company owns or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes necessary for its
business as now conducted and to the Company’s knowledge as presently proposed
to be conducted (the “Intellectual Property”), without any known infringement of
the rights of others. There are no outstanding options, licenses or agreements
of any kind relating to the foregoing proprietary rights, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
of any other person or entity other than such licenses or agreements arising
from the purchase of “off the shelf” or standard products.

 

(b) The Company has not received any communications alleging that the Company
has violated any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity, nor is the Company aware of any basis therefor.

 

(c) The Company does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its employees
made prior to their employment by the Company, except for inventions, trade
secrets or proprietary information that have been rightfully assigned to the
Company.

 

4.11. Compliance with Other Instruments. Except as set forth on Schedule 4.11,
the Company is not in violation or default of any term of its Charter or Bylaws,
or of any material provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is party or by which it is bound or of any
judgment, decree, order or writ. The execution, delivery and performance of and
compliance with this Agreement and the Related Agreements to which it is a
party, and the issuance and sale of the Note by the Company and the other
Securities by the Company each pursuant hereto, will not, with or without the
passage of time or giving of notice, result in any such material violation, or
be in conflict with or constitute a default under any such term or provision, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.

 

4.12. Litigation. Except as set forth on Schedule 4.12 hereto, there is no
action, suit, proceeding or investigation pending or, to the Company’s
knowledge, currently threatened against the Company that could be reasonably
expected to prevent the Company from entering into this Agreement or the Related
Agreements, or consummating the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for any of the
foregoing. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.

 

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4.13. Tax Returns and Payments. The Company has timely filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and to the Company’s
knowledge all other taxes due and payable by the Company on or before the
Closing, have been paid or will be paid prior to the time they become
delinquent. Except as set forth on Schedule 4.13, the Company has not been
advised (a) that any of its returns, federal, state or other, have been or are
being audited as of the date hereof, or (b) of any deficiency in assessment or
proposed judgment to its federal, state or other taxes. The Company has no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.

 

4.14. Employees. Except as set forth on Schedule 4.14, the Company has no
collective bargaining agreements with any of its employees. There is no labor
union organizing activity pending or, to the Company’s knowledge, threatened
with respect to the Company. Except as disclosed in the Exchange Act Filings or
on Schedule 4.14, the Company is not a party to or bound by any currently
effective employment contract, deferred compensation arrangement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. To the Company’s knowledge, no employee of the
Company, nor any consultant with whom the Company has contracted, is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company; and to the Company’s knowledge
the continued employment by the Company of its present employees, and the
performance of the Company’s contracts with its independent contractors, will
not result in any such violation. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
their duties to the Company. Except for employees who have a current effective
employment agreement with the Company, no employee of the Company has been
granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. Except as set
forth on Schedule 4.14, the Company is not aware that any officer, key employee
or group of employees intends to terminate his, her or their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.

 

4.15. Registration Rights and Voting Rights. Except as set forth on Schedule
4.15 and except as disclosed in Exchange Act Filings, the Company is presently
not under any obligation, and has not granted any rights, to register any of the
Company’s presently outstanding securities or any of its securities that may
hereafter be issued. Except as set forth on Schedule 4.15 and except as
disclosed in Exchange Act Filings, to the Company’s knowledge, no stockholder of
the Company has entered into any agreement with respect to the voting of equity
securities of the Company.

 

4.16. Compliance with Laws; Permits. Except as set forth on Schedule 4.16, to
its knowledge, the Company is not in violation in any material respect of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities,

 

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financial condition, operations or prospects of the Company. No governmental
orders, permissions, consents, approvals or authorizations are required to be
obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of this Agreement and the issuance of
any of the Securities, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. The Company has all material franchises,
permits, licenses and any similar authority necessary for the conduct of its
business as now being conducted by it, the lack of which would materially and
adversely affect the business, properties, prospects or financial condition of
the Company.

 

4.17. Environmental and Safety Laws. The Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation. Except as set forth on Schedule 4.17, no Hazardous Materials (as
defined below) are used or have been used, stored, or disposed of by the Company
or, to the Company’s knowledge, by any other person or entity on any property
owned, leased or used by the Company. For the purposes of the preceding
sentence, “Hazardous Materials” shall mean (a) materials which are listed or
otherwise defined as “hazardous” or “toxic” under any applicable local, state,
federal and/or foreign laws and regulations that govern the existence and/or
remedy of contamination on property, the protection of the environment from
contamination, the control of hazardous wastes, or other activities involving
hazardous substances, including building materials, or (b) any petroleum
products or nuclear materials.

 

4.18. Valid Offering. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the “Securities Act”), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.

 

4.19. Full Disclosure. The Company has provided the Purchaser with all
information requested by the Purchaser in connection with its decision to
purchase the Note and Warrant. Neither this Agreement, the exhibits and
schedules hereto, the Related Agreements nor any other document delivered by the
Company to Purchaser or its attorneys or agents in connection herewith or
therewith or with the transactions contemplated hereby or thereby, contain any
untrue statement of a material fact nor omit to state a material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading. Any financial projections
and other estimates provided to the Purchaser by the Company were based on the
Company’s experience in the industry and on assumptions of fact and opinion as
to future events which the Company, at the date of the issuance of such
projections or estimates, believed to be reasonable.

 

4.20. Insurance. The Company has general commercial, product liability, fire and
casualty insurance policies with coverages which the Company believes are
customary for companies similarly situated to the Company in the same or similar
business.

 

9

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4.21. SEC Reports. Except as set forth on Schedule 4.21, the Company has filed
all proxy statements, reports and other documents required to be filed by it
under the Exchange Act. The Company has made available to the Purchaser copies
of (i) its Annual Report on Form 10-KSB for the fiscal year ended December 31,
2002 and (ii) its Quarterly Reports on Form 10-QSB for the fiscal quarters ended
March 31, 2003, June 30, 2003 and September 30, 2003 and the Form 8-K filings
which it has made during 2003 to date (collectively, the “SEC Reports”). Except
as set forth on Schedule 4.21, each SEC Report was, at the time of its filing,
in substantial compliance with the requirements of its respective form and none
of the SEC Reports, nor the financial statements (and the notes thereto)
included in the SEC Reports, as of their respective filing dates, contained any
untrue statement of a material fact or omitted 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.

 

4.22. Listing. The Company’s Common Stock is listed for trading on the OTC
Bulletin Board and satisfies all requirements for the continuation of such
listing. The Company has not received any notice that its Common Stock will be
delisted from the OTC Bulletin Board or that its Common Stock does not meet all
requirements for listing.

 

4.23. No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offering of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the Securities Act which would prevent the Company from selling the
Securities pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its affiliates or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.

 

4.24. Stop Transfer. The Securities are restricted securities as of the date of
this Agreement. The Company will not issue any stop transfer order or other
order impeding the sale and delivery of any of the Securities at such time as
the Securities are registered for public sale or an exemption from registration
is available, except as required by state and federal securities laws.

 

4.25. Dilution. The Company specifically acknowledges that its obligation to
issue the shares of Common Stock upon conversion of the Note and exercise of the
Warrant is binding upon the Company and enforceable regardless of the dilution
such issuance may have on the ownership interests of other shareholders of the
Company.

 

5. Representations and Warranties of the Purchaser.

 

The Purchaser hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement).

 

10

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5.1. No Shorting. Neither the Purchaser nor any of its affiliates or investment
partners has, or caused any person or entity to, directly or indirectly, engage
in “short sales” of the Company’s Common Stock or any other hedging strategies.

 

5.2. Requisite Power and Authority. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out the provisions thereof.
All corporate action on Purchaser’s part required for the lawful execution and
delivery of this Agreement and the Related Agreements has been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors’ rights, and (b) as
limited by general principles of equity that restrict the availability of
equitable and legal remedies.

 

5.3. Investment Representations. Purchaser understands that the Securities are
being offered and sold pursuant to an exemption from registration contained in
the Securities Act of 1933, as amended (the “Securities Act”) based in part upon
Purchaser’s representations contained in the Agreement, including, without
limitation, that the Purchaser is an “accredited investor” within the meaning of
Regulation D under the Securities Act. The Purchaser confirms that it has
received or has had full access to all the information it considers necessary or
appropriate to make an informed investment decision with respect to the
Securities. The Purchaser further confirms that it has had an opportunity to ask
questions and receive answers from the Company regarding the Company’s business,
management and financial affairs and the terms and conditions of the Offering
and the Securities and to obtain additional information (to the extent the
Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to the
Purchaser or to which the Purchaser had access.

 

5.4. Purchaser Bears Economic Risk. Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Purchaser must bear the economic risk of this investment until
the Securities are sold pursuant to (a) an effective registration statement
under the Securities Act, or (b) an exemption from registration is available
with respect to such sale.

 

5.5. Acquisition for Own Account. Purchaser is acquiring the Securities for
Purchaser’s own account for investment only, and not as a nominee or agent and
not with a view towards or for resale in connection with their distribution.

 

5.6. Purchaser Can Protect Its Interest. Purchaser represents that by reason of
its, or of its management’s, business and financial experience, Purchaser has
the capacity to evaluate the merits and risks of its investment in the Note, the
Warrant and the Securities and to protect its own interests in connection with
the transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement or the Related Agreements.

 

11

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5.7. Accredited Investor. Purchaser represents that it is an accredited investor
within the meaning of Regulation D under the Securities Act.

 

5.8. Legends.

 

(a) The Note shall bear substantially the following legend:

 

“THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE,
STATE SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION
OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO AXESSTEL, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”

 

(b) The Note Shares and the Warrant Shares, if not issued by DWAC system (as
hereinafter defined), shall bear a legend which shall be in substantially the
following form until such shares are covered by an effective registration
statement filed with the SEC:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.
THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
AXESSTEL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

(c) The Warrant shall bear substantially the following legend:

 

“THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE

 

12

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REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING SHARES OF COMMON
STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO AXESSTEL, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”

 

6. Covenants of the Company.

 

The Company covenants and agrees with the Purchaser as follows:

 

6.1. Stop-Orders. The Company will advise the Purchaser, promptly after it
receives notice of issuance by the Securities and Exchange Commission (the
“SEC”), any state securities commission or any other regulatory authority of any
stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.

 

6.2. Listing. The Company shall promptly secure the listing of the shares of
Common Stock issuable upon conversion of the Note and upon the exercise of the
Warrant on the OTC Bulletin Board (the “Principal Market”) upon which shares of
Common Stock are listed (subject to official notice of issuance) and shall
maintain such listing so long as any other shares of Common Stock shall be so
listed. The Company will maintain the listing of its Common Stock on the
Principal Market, and will comply in all material respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers (“NASD”) and such exchanges, as
applicable.

 

6.3. Market Regulations. The Company shall notify the SEC, NASD and applicable
state authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to Purchaser and
promptly provide copies thereof to Purchaser.

 

6.4. Reporting Requirements. The Company will timely file with the SEC all
reports required to be filed pursuant to the Exchange Act and refrain from
terminating its status as an issuer required by the Exchange Act to file reports
thereunder even if the Exchange Act or the rules or regulations thereunder would
permit such termination.

 

6.5. Use of Funds. The Company agrees that it will use the proceeds of the sale
of the Note and Warrant to repay in full the Company’s existing obligations to
Agilent Financial Services and for general corporate purposes only.

 

6.6. Access to Facilities. The Company will permit any representatives
designated by the Purchaser (or any successor of the Purchaser), upon reasonable
notice and during normal business hours, at such person’s expense and
accompanied by a representative of the Company, to (a) visit and inspect any of
the properties of the Company, (b) examine the corporate and financial records
of the Company (unless such examination is not permitted by federal, state or
local law or by contract) and make copies thereof or extracts therefrom and

 

13

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(c) discuss the affairs, finances and accounts of the Company with the
directors, officers and independent accountants of the Company. Notwithstanding
the foregoing, the Company will not provide any material, non-public information
to the Purchaser unless the Purchaser signs a confidentiality agreement and
otherwise complies with Regulation FD, under the federal securities laws.

 

6.7. Taxes. The Company will promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property or business of the
Company; provided, however, that any such tax, assessment, charge or levy need
not be paid if the validity thereof shall currently be contested in good faith
by appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefor.

 

6.8. Insurance. The Company will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, explosion and other risks customarily insured against by
companies in similar business similarly situated as the Company; and the Company
will maintain, with financially sound and reputable insurers, insurance against
other hazards and risks and liability to persons and property to the extent and
in the manner which the Company reasonably believes is customary for companies
in similar business similarly situated as the Company and to the extent
available on commercially reasonable terms.

 

6.9. Intellectual Property. The Company shall maintain in full force and effect
its corporate existence, rights and franchises and all licenses and other rights
to use the Intellectual Property owned or possessed by it and reasonably deemed
to be necessary to the conduct of its business.

 

6.10. Properties. The Company will keep its properties in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time
make all needful and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected to have a
material adverse effect on the Company.

 

6.11. Confidentiality. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of the Purchaser, unless
expressly agreed to by the Purchaser or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.

 

6.12. Required Approvals. For so long as 25% of the principal amount of the Note
is outstanding, the Company, without the prior written consent of the Purchaser,
shall not:

 

(a) directly or indirectly declare or pay any dividends, other than dividends
with respect to its preferred stock;

 

14

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(b) liquidate, dissolve or effect a material reorganization;

 

(c) become subject to (including, without limitation, by way of amendment to or
modification of) any agreement or instrument which by its terms would (under any
circumstances) restrict the Company’s right to perform the provisions of this
Agreement or any of the agreements contemplated thereby;

 

(d) materially alter or change the scope of the business of the Company; or

 

(e) make investments in, make any loans or advances to, or transfer assets to,
any of its subsidiaries, other than (in each case) in the ordinary course of
business.

 

6.13. Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Section 5.7 above
at such time as (a) the holder thereof is permitted to dispose of such
Securities pursuant to Rule 144(k) under the Securities Act, or (b) upon resale
subject to an effective registration statement after such Securities are
registered under the Securities Act. The Company agrees to cooperate with the
Purchaser in connection with all resales pursuant to Rule 144(d) and Rule 144(k)
and provide legal opinions necessary to allow such resales provided the Company
and its counsel receive reasonably requested representations from the selling
Purchaser and broker, if any.

 

6.14. Opinion. On the Closing Date, the Company will deliver to the Purchaser an
opinion in the form attached hereto as Exhibit D from the Company’s legal
counsel. The Company will provide, at the Company’s expense, such other legal
opinions in the future as are reasonably necessary for the conversion of the
Note and exercise of the Warrant.

 

7. Covenants of the Purchaser.

 

The Purchaser covenants and agrees with the Company as follows:

 

7.1. Confidentiality. The Purchaser agrees that it will not disclose, and will
not include in any public announcement, the name of the Company, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.

 

7.2. Non-Public Information. The Purchaser agrees not to effect any sales in the
shares of the Company’s Common Stock while in possession of material, non-public
information regarding the Company if such sales would violate applicable
securities law.

 

7.3. No Shorting. Neither the Purchaser nor any of its affiliates or investment
partners will, or cause any person or entity to, directly or indirectly, engage
in “short sales” of the Company’s Common Stock or any other hedging strategies.

 

15

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8. Covenants of the Company and Purchaser Regarding Indemnification.

 

8.1. Company Indemnification. The Company agrees to indemnify, hold harmless,
reimburse and defend Purchaser, each of Purchaser’s officers, directors, agents,
affiliates, control persons, and principal shareholders, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the Purchaser which results,
arises out of or is based upon (i) any misrepresentation by Company or breach of
any warranty by Company in this Agreement or in any exhibits or schedules
attached hereto or any Related Agreement, or (ii) any breach or default in
performance by Company of any covenant or undertaking to be performed by Company
hereunder, or any other agreement entered into by the Company and Purchaser
relating hereto.

 

8.2. Purchaser’s Indemnification. Purchaser agrees to indemnify, hold harmless,
reimburse and defend the Company and each of the Company’s officers, directors,
agents, affiliates, control persons and principal shareholders, at all times
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Company which results, arises out of or is based upon (i) any misrepresentation
by Purchaser or breach of any warranty by Purchaser in this Agreement or in any
exhibits or schedules attached hereto or any Related Agreement; or (ii) any
breach or default in performance by Purchaser of any covenant or undertaking to
be performed by Purchaser hereunder, or any other agreement entered into by the
Company and Purchaser relating hereto.

 

8.3. Procedures. The procedures and limitations set forth in Section 10.2(c) and
(d) shall apply to the indemnifications set forth in Sections 8.1 and 8.2 above.

 

9. Conversion of Convertible Note.

 

9.1. Mechanics of Conversion.

 

(a) Provided the Purchaser has notified the Company of the Purchaser’s intention
to sell the Note Shares and the Note Shares are included in an effective
registration statement or are otherwise exempt from registration when sold: (i)
Upon the conversion of the Note or part thereof, the Company shall, at its own
cost and expense, take all necessary action (including the issuance of an
opinion of counsel) to assure that the Company’s transfer agent shall issue
shares of the Company’s Common Stock in the name of the Purchaser (or its
nominee) or such other persons as designated by the Purchaser in accordance with
Section 9.1(b) hereof and in such denominations to be specified representing the
number of Note Shares issuable upon such conversion; and (ii) The Company
warrants that no instructions other than these instructions have been or will be
given to the transfer agent of the Company’s Common Stock and that after the
Effective Date (as hereinafter defined) the Note Shares issued will be freely
transferable subject to the prospectus delivery requirements of the Securities
Act and the provisions of this Agreement, and will not contain a legend
restricting the resale or transferability of the Note Shares.

 

(b) Purchaser will give notice of its decision to exercise its right to convert
the Note or part thereof by telecopying or otherwise delivering an executed and
completed notice of the number of shares to be converted to the Company (the
“Notice of Conversion”). The Purchaser will not be required to surrender the
Note until the

 

16

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Purchaser receives a credit to the account of the Purchaser’s prime broker
through the DWAC system (as defined below), representing the Note Shares or
until the Note has been fully satisfied. Each date on which a Notice of
Conversion is telecopied or delivered to the Company in accordance with the
provisions hereof shall be deemed a “Conversion Date.” Pursuant to the terms of
the Notice of Conversion, the Company will issue instructions to the transfer
agent accompanied by an opinion of counsel within one (1) business day of the
date of the delivery to Company of the Notice of Conversion and shall cause the
transfer agent to transmit the certificates representing the Conversion Shares
to the Holder by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission
(“DWAC”) system within three (3) business days after receipt by the Company of
the Notice of Conversion (the “Delivery Date”).

 

(c) The Company understands that a delay in the delivery of the Note Shares in
the form required pursuant to Section 9 hereof beyond the Delivery Date could
result in economic loss to the Purchaser. In the event that the Company fails to
direct its transfer agent to deliver the Note Shares to the Purchaser via the
DWAC system within the time frame set forth in Section 9.1(b) above and the Note
Shares are not delivered to the Purchaser by the Delivery Date, as compensation
to the Purchaser for such loss, the Company agrees to pay late payments to the
Purchaser for late issuance of the Note Shares in the form required pursuant to
Section 9 hereof upon conversion of the Note in the amount equal to the greater
of (i) $500 per business day after the Delivery Date or (ii) the Purchaser’s
actual damages from such delayed delivery. Notwithstanding the foregoing, the
Company will not owe the Purchaser any late payments if the delay in the
delivery of the Note Shares beyond the Delivery Date is out of the control of
the Company and the Company is actively trying to cure the cause of the delay.
The Company shall pay any payments incurred under this section in immediately
available funds upon demand and, in the case of actual damages, accompanied by
reasonable documentation of the amount of such damages. Such documentation shall
show the number of shares of Common Stock the Purchaser is forced to purchase
(in an open market transaction) which the Purchaser anticipated receiving upon
such conversion, and shall be calculated as the amount by which (a) the
Purchaser’s total purchase price (including customary brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (b) the aggregate
principal and/or interest amount of the Note, for which such Conversion Notice
was not timely honored.

 

Nothing contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required to
be paid or other charges hereunder exceed the maximum amount permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to a Purchaser and thus refunded to the Company.

 

9.2. Maximum Conversion. The Purchaser shall not be entitled to convert on a
Conversion Date, nor shall the Company be permitted to require the Purchaser to
accept, that amount of a Note in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the

 

17

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Purchaser on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this proviso is being made on a Conversion Date, which would result in
beneficial ownership by the Purchaser of more than 4.99% of the outstanding
shares of Common Stock of the Company on such Conversion Date. For the purposes
of the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act and Regulation 13d-3
thereunder. Purchaser shall from time to time and as reasonably requested by the
Company provide the Company with information concerning its beneficial ownership
of the Company’s Common Stock. Upon an Event of Default under the Note, the
conversion limitation in this Section 9.2 shall become null and void.

 

10. Registration Rights.

 

10.1. Registration Rights Granted. The Company hereby grants registration rights
to the Purchaser pursuant to a Registration Rights Agreement dated as of even
date herewith between the Company and the Purchaser.

 

10.2. Indemnification.

 

(a) In the event of a registration of any Registrable Securities under the
Securities Act pursuant to the Registration Rights Agreement, the Company will
indemnify and hold harmless the Purchaser, and its officers, directors and each
other person, if any, who controls the Purchaser within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the Purchaser, or such persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the Securities Act pursuant to the Registration Rights
Agreement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Purchaser, and each such person for any reasonable legal or
other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished to the Company in writing by or on behalf
of the Purchaser or any such person specifically for use in any such document.

 

(b) In the event of a registration of the Registrable Securities under the
Securities Act pursuant to the Registration Rights Agreement, the Purchaser will
indemnify and hold harmless the Company, and its officers, directors and each
other person, if any, who controls the Company within the meaning of the
Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such persons may become subject under the
Securities Act or otherwise, insofar as

 

18

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such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the registration statement under which such
Registrable Securities were registered under the Securities Act pursuant to the
Registration Rights Agreement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such person for any
reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the Purchaser will be liable in any such case if and
only to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished in writing to
the Company by or on behalf of the Purchaser specifically for use in any such
document.

 

(c) Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 10.2(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.2(c) if and to the extent the indemnifying party is prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 10.2(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof; if the
indemnified party retains its own counsel, then the indemnified party shall pay
all fees, costs and expenses of such counsel, provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
one separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.

 

(d) In order to provide for just and equitable contribution in the event of
joint liability under the Securities Act in any case in which either (i) the
Purchaser, or any controlling person of the Purchaser, makes a claim for
indemnification pursuant to this Section 10.2 but it is judicially determined
(by the entry of a final judgment or decree

 

19

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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 this Section 10.2 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of the Purchaser or controlling person of the
Purchaser in circumstances for which indemnification is provided under this
Section 10.2; then, and in each such case, the Company and the Purchaser will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that the
Purchaser is responsible only for the portion represented by the percentage that
the public offering price of its securities offered by the registration
statement bears to the public offering price of all securities offered by such
registration statement, provided, however, that, in any such case, (a) the
Purchaser will not be required to contribute any amount in excess of the public
offering price of all such securities offered by it pursuant to such
registration statement; and (b) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10 of the Act) will be entitled
to contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.

 

10.3. Offering Restrictions. Except as previously disclosed in the SEC Reports
or in the Exchange Act Filings, or stock or stock options granted to employees
or directors of the Company; or shares of preferred stock issued to pay
dividends in respect of the Company’s preferred stock; or equity or debt issued
in connection with an acquisition of a business or assets by the Company; or the
issuance by the Company of stock in connection with the establishment of a joint
venture partnership or licensing arrangement (these exceptions hereinafter
referred to as the “Excepted Issuances”), the Company will not issue any
securities with a continuously variable/floating conversion feature which are or
could be (by conversion or registration) free-trading securities (i.e., common
stock subject to a registration statement) prior to the full repayment or
conversion of the Note (the “Exclusion Period”).

 

11. Miscellaneous.

 

11.1. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER
CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE BROUGHT ONLY
IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF
NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND OTHER
AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH
COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY PROVISION OF THIS
AGREEMENT OR ANY OTHER AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID OR
UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION
SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT THEREWITH AND
SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH
PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT
AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF ANY AGREEMENT.

 

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11.2. Survival. The representations, warranties, covenants and agreements made
herein shall survive any investigation made by the Purchaser and the closing of
the transactions contemplated hereby to the extent provided therein. All
statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.

 

11.3. Successors. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
heirs, executors and administrators of the parties hereto and shall inure to the
benefit of and be enforceable by each person who shall be a holder of the
Securities from time to time, other than the holders of Common Stock which has
been sold by the Purchaser pursuant to Rule 144 or an effective registration
statement. Purchaser may not assign its rights hereunder to a competitor of the
Company.

 

11.4. Entire Agreement. This Agreement, the exhibits and schedules hereto, the
Related Agreements and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.

 

11.5. Severability. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

 

11.6. Amendment and Waiver.

 

(a) This Agreement may be amended or modified only upon the written consent of
the Company and the Purchaser.

 

(b) The obligations of the Company and the rights of the Purchaser under this
Agreement may be waived only with the written consent of the Purchaser.

 

(c) The obligations of the Purchaser and the rights of the Company under this
Agreement may be waived only with the written consent of the Company.

 

11.7. Delays or Omissions. It is agreed that no delay or omission to exercise
any right, power or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement or the Related Agreements,
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance thereafter
occurring. All remedies, either under this Agreement, the Note or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.

 

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11.8. Notices. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party
to be notified, (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, (c)
three (3) business days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address as set forth on the signature page hereof, to the Purchaser at
the address set forth on the signature page hereto for such Purchaser, with a
copy in the case of the Purchaser to Scott J. Giordano, Esq., Loeb & Loeb LLP,
345 Park Avenue, New York, New York 10154, facsimile number (212) 407-4990, or
at such other address as the Company or the Purchaser may designate by written
notice to the other parties hereto given in accordance herewith.

 

11.9. Attorneys’ Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including, without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

 

11.10. Titles and Subtitles. The titles of the sections and subsections of the
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.

 

11.11. Facsimile Signatures; Counterparts. This Agreement may be executed by
facsimile signatures and in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument.

 

11.12. Broker’s Fees. Except as set forth on Schedule 11.12 hereof, each party
hereto represents and warrants that no agent, broker, investment banker, person
or firm acting on behalf of or under the authority of such party hereto is or
will be entitled to any broker’s or finder’s fee or any other commission
directly or indirectly in connection with the transactions contemplated herein.
Each party hereto further agrees to indemnify each other party for any claims,
losses or expenses incurred by such other party as a result of the
representation in this Section 11.12 being untrue.

 

11.13. Construction. Each party acknowledges that its legal counsel participated
in the preparation of this Agreement and the Related Agreements and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Agreement to favor any party against the other.

 

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In Witness Whereof, the parties hereto have executed the Securities Purchase
Agreement as of the date set forth in the first paragraph hereof.

 

COMPANY:   PURCHASER: AXESSTEL, INC.   Laurus Master Fund, Ltd.

By:

 

 

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By:

 

 

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Name:

 

 

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Name:

 

 

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Title:

 

 

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Title:

 

 

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Address:

     

Address: c/o Ironshore Corporate Services Ltd.

P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand Cayman, Cayman
Islands

 

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List of Exhibits

 

Form of Convertible Term Note   Exhibit A Form of Warrant   Exhibit B Form of
Escrow Agreement   Exhibit C Form of Opinion   Exhibit D

 

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EXHIBIT A

 

FORM OF CONVERTIBLE NOTE

 

25

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EXHIBIT B

 

FORM OF WARRANT

 

26

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EXHIBIT C

 

FORM OF ESCROW AGREEMENT

 

27

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EXHIBIT D

 

FORM OF OPINION

 

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