Document:

Convertible Term Note

 Exhibit 10.7 
  
 THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES 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 UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AXESSTEL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED. 
  
 CONVERTIBLE TERM NOTE 
  
 FOR VALUE RECEIVED, AXESSTEL, INC., a Nevada corporation (the “Borrower”), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o
Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877 (the “Holder”) or its registered assigns or successors -in -interest, on order, the sum of
THREE MILLION DOLLARS ($3,000,000), together with any accrued and unpaid interest hereon, on March 11, 2007 (the “Maturity Date”) if not sooner paid. 
  
 Capitalized terms used herein without definition shall have the meanings ascribed to such terms in that certain Securities
Purchase Agreement dated as of the date hereof between the Borrower and the Holder (the “Purchase Agreement”). 
  
 The following terms shall apply to this Note: 
  
 ARTICLE I 
 INTEREST &
AMORTIZATION 
  
 1.1 Interest Rate and Payment.
Subject to Sections 4.9 and 5.6 hereof, interest payable on this Note shall accrue at a rate per annum (the “Contract Rate”) equal to the “prime rate” published in The Wall Street Journal from time to time, plus
three (3%). Interest shall be payable monthly in arrears commencing on April 1, 2004, on the first day of each consecutive calendar month thereafter (each, a “Repayment Date”), and on the Maturity Date, whether by acceleration or
otherwise. The prime rate shall be increased or decreased as the case may be for each increase or decrease in the prime rate in an amount equal to such increase or decrease in the prime rate; each change to be effective as of the day of the change
in such rate. In no event shall the Contract Rate be less than seven percent (7.00%) or greater than ten percent (10.00%). If a registration statement covering the Common Stock underlying this Note and the Warrant issued pursuant to the Purchase
Agreement becomes effective and remains effective (the “Registration Period”) and the volume weighted average price of the Common Stock for all trading days during any calendar month during such Registration Period (the
“Volume Weighted Average Price”) is greater than the Fixed Conversion Price, then the applicable annual interest rate for such month shall be decreased by twenty-five (25) basis points for each 25% increment by which the Volume
Weighted Average Price is greater than the Fixed Conversion Price. 
  
 1.2 Monthly Principal Payments. Amortizing payments of the aggregate principal amount outstanding under this Note at any time (the “Principal Amount”) shall begin on June 

 1, 2004 and shall recur on the first calendar day of each succeeding month thereafter until the Maturity Date (each, an
“Amortization Date”). Subject to Section 2.1 and Section 3.4(a) below, beginning on the first Amortization Date, the Borrower shall make monthly payments of principal to the Holder on each Repayment Date as set forth in the table
below in, each case together with any accrued and unpaid interest to date on such portion of the Principal Amount plus any and all other amounts which are then owing under this Note but which have not been paid (collectively, the “Monthly
Amount”). 
  

							
	 Date

	  	Principal Amount

	  	 Date

	  	Principal Amount

	 6/1/04
	  	$30,000	  	9/1/05	  	$95,000
	 7/1/04
	  	$30,000	  	10/1/05	  	$95,000
	 8/1/04
	  	$30,000	  	11/1/05	  	$95,000
	 9/1/04
	  	$30,000	  	12/1/05	  	$95,000
	 10/1/04
	  	$30,000	  	1/1/06	  	$95,000
	 11/1/04
	  	$30,000	  	2/1/06	  	$95,000
	 12/1/04
	  	$30,000	  	3/1/06	  	$130,000
	 1/1/05
	  	$30,000	  	4/1/06	  	$130,000
	 2/1/05
	  	$30,000	  	5/1/06	  	$130,000
	 3/1/05
	  	$95,000	  	6/1/06	  	$130,000
	 4/1/05
	  	$95,000	  	7/1/06	  	$130,000
	 5/1/05
	  	$95,000	  	8/1/06	  	$130,000
	 6/1/05
	  	$95,000	  	9/1/06	  	$130,000
	 7/1/05
	  	$95,000	  	10/1/06	  	$130,000
	 8/1/05
	  	$95,000	  	11/1/06	  	$130,000
	 	  	 	  	12/1/06	  	$130,000
	 	  	 	  	1/1/07	  	$130,000
	 	  	 	  	2/1/07	  	$160,000

  

 2 

 ARTICLE II 
 BORROWER PAYMENT OPTIONS 
  
 2.1 Payment of Monthly Amount in Cash or Common Stock. Subject to the terms hereof, the Borrower shall have the sole option to determine whether to satisfy payment of the Monthly Amount on each Repayment Date either in cash or in
shares of Common Stock (as defined in the Purchase Agreement), or a combination of both. Each month by the tenth (10th) day prior to the Repayment Date, the Borrower shall deliver to the Holder a written notice in the form of Exhibit B attached hereto electing to pay the Monthly Amount payable on the next Repayment Date in either cash or
Common Stock, or a combination of both (each, a “Repayment Election Notice”) (the date by which such notice is required to be given being hereinafter referred to as the “Notice Date”). If a Repayment Election Notice
is not delivered to the Holder by the applicable Notice Date for such Repayment Date, then the Monthly Amount due on such Repayment Date shall be paid in cash. Any portion of the Monthly Amount paid in cash on a Repayment Date, shall be paid to the
Holder in an amount equal to 102% of the cash portion of the Monthly Amount then payable in satisfaction of such obligation. If the Borrower repays all or a portion of the Monthly Amount in shares of Common Stock, the number of such shares to be
issued for such Repayment Date shall be the number determined by dividing (x) the portion of the Monthly Amount to be paid in shares of Common Stock, by (y) the Fixed Conversion Price. For purposes hereof, the “Fixed Conversion
Price” means $ 3.16. 
  
 2.2 Monthly Amount
Common Stock Payment Guidelines. Subject to Sections 2.1 and 2.4 hereof, if the Borrower has elected to pay all or a portion of the Monthly Amount due on such Repayment Date in shares of Common Stock and the closing price of the Common Stock as
reported by Bloomberg, L.P. on the Principal Market (as defined in Section 4.7 hereof) for any of the ten (10) trading days preceding a Repayment Date was less than 107% of the Fixed Conversion Price, then the Borrower shall pay in cash instead. Any
part of the Monthly Amount due on such Repayment Date that the Borrower did not elect to pay in shares of Common Stock shall be paid by the Borrower in cash on such Repayment Date. Any part of the Monthly Amount due on such Repayment Date which the
Borrower elected to pay in shares of Common Stock but which must be paid in cash (because the closing price of the Common Stock on one or more of the ten (10) trading days preceding the applicable Repayment Date was less than 107% of the Fixed
Conversion Price) shall be paid within three (3) business days of the applicable Repayment Date. 
  
 2.3 Optional Prepayments in Common Stock. Subject to Section 2.4 hereof, if the average closing price of the Common Stock on the Principal Market
is greater than 117% of the Fixed Conversion Price for a period of at least ten (10) consecutive trading days, then the Borrower may, at its sole option, provide the Holder written notice (a “Prepayment Call Notice”) requiring the
conversion at the then applicable Fixed Conversion Price of all or a portion of the outstanding principal, interest and fees outstanding under this Note (subject to compliance with Section 2.3 and 3.2), together with accrued interest on the amount
being prepaid, as of the date set forth in such Prepayment Call Notice (the “Prepayment Call Date”). The Prepayment Call Date shall be at least ten (10) trading days following the date of the Prepayment Call Notice. On the
Prepayment Call Date, the Borrower shall deliver to the Holder 
  

 3 

 certificates evidencing the shares of Common Stock issued in satisfaction of the principal and interest being prepaid.
Notwithstanding the foregoing, the Borrower’s right to issue shares of Common Stock in satisfaction of its obligations under this Note shall be subject to the limitation that the number of shares of Common Stock issued in connection with any
Prepayment Call Notice shall not exceed thirty percent (30%) of the aggregate dollar trading volume of the Common Stock for the twenty-two (22) trading days immediately preceding the Prepayment Call Date (as such volume is reported by Bloomberg
L.P.). If the price of the Common Stock falls below 117% of the then applicable Fixed Conversion Price during the ten (10) trading day period immediately preceding the Prepayment Call Date, then the Holder will then be required to convert only such
amount of the Note as shall equal thirty percent (30%) of the aggregate dollar trading volume (as such volume is reported by Bloomberg L.P.) for each day that the Common Stock has exceeded 117% of the then applicable Fixed Conversion Price.

  
 The Borrower shall not be permitted to give the Holder more
than one Prepayment Call Notice under this Note during any 22-day period. 
  
 2.4 No Effective Registration. Notwithstanding anything to the contrary herein, the Borrower shall not repay any part of its obligations to the Holder hereunder in shares of Common Stock pursuant to this
Section 2 if (i) there fails to exist an effective current Registration Statement (as defined in the Registration Rights Agreement) covering the shares of Common Stock to be issued in connection with such payment, or (ii) an Event of Default
hereunder exists and is continuing, unless such Event of Default is cured within any applicable cure period or is otherwise waived in writing by the Holder in whole or in part at the Holder’s option. 
  
 2.5 Optional Redemption in Cash. The Borrower will have the option of
prepaying this Note in full (“Optional Redemption”) by paying to the Holder a sum of money equal to the Applicable Percentage (as hereafter defined) of the then-outstanding principal amount of this Note together with accrued but
unpaid interest thereon and any and all other sums due, accrued or payable to the Holder arising under this Note or the Purchase Agreement or any Related Document (as defined in the Purchase Agreement) (the “Redemption Amount”)
outstanding on the day written notice of redemption (the “Notice of Redemption”) is given to the Holder, which Notice of Redemption shall specify the date for such Optional Redemption (the “Redemption Payment
Date”). A Notice of Redemption shall not be effective with respect to any portion of this Note for which the Holder has a pending election to convert pursuant to Section 3.1 and the Redemption Amount shall be determined as if such election
to convert had been completed immediately prior to the date of the Notice of Redemption. The Redemption Payment Date shall be not earlier than the day after the date of the Notice of Redemption and not later than seven (7) days after the date of the
Notice of Redemption. On the Redemption Payment Date, the Redemption Amount must be paid in good funds to the Holder. In the event the Borrower fails to pay the Redemption Amount by the Redemption Payment Date, then such Redemption Notice will be
null and void. For purposes of this Section 2.5, the term “Applicable Percentage” means (1) 120% for the period commencing on the date hereof (the “Closing Date”) and ending on the first anniversary of the Closing Date,
(2) 115% for the period commencing on the first day following the first anniversary of the Closing Date and ending on the second anniversary of the Closing Date and (3) 110% for the period commencing on the first day following the second anniversary
of the Closing Date and ending on the day immediately preceding the Maturity Date. 
  

 4 

 ARTICLE III 
 CONVERSION RIGHTS 
  
 3.1 Holder’s Conversion Rights. The Holder shall have the right, but not the obligation, to convert all or any portion of the then aggregate outstanding principal amount of this Note, together with interest and fees due hereon,
into shares of Common Stock subject to the terms and conditions set forth in this Article III. The Holder may exercise such right by delivery to the Borrower of a written notice of conversion not less than one (1) day prior to the date upon which
such conversion shall occur. The date upon which such conversion shall occur is (the “Conversion Date”). 
  
 3.2 Notwithstanding anything contained herein to the contrary, the Holder shall not be entitled to convert pursuant to the terms of this Note an amount
that would be convertible into that number of Conversion Shares which would exceed the difference between the number of shares of Common Stock beneficially owned by such Holder or issuable upon exercise of warrants held by such Holder and 4.99% of
the outstanding shares of Common Stock of the Borrower. 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. Holder
shall from time to time and at the reasonable request of Borrower provide to Buyer information concerning Holder’s beneficial ownership of Borrower’s Common Stock. Holder may void the Conversion Share limitation described in this Section
3.2 upon 75 days prior notice to the Borrower or without any notice requirement upon an Event of Default 
  
 3.3 Mechanics of Holder’s Conversion. (a) In the event that the Holder elects to convert this Note into Common Stock, the Holder shall give
notice of such election by delivering an executed and completed notice of conversion (“Notice of Conversion”) to the Borrower and such Notice of Conversion shall provide a breakdown in reasonable detail of the Principal Amount,
accrued interest and fees being converted. On each Conversion Date and in accordance with its Notice of Conversion, the Holder shall make the appropriate reduction to the Principal Amount, accrued interest and fees as entered in its records and
shall provide written notice thereof to the Borrower within two (2) business days after the Conversion Date. A form of Notice of Conversion to be employed by the Holder is annexed hereto as Exhibit A. 
  
 (b) Pursuant to the terms of the Notice of Conversion, the Borrower will
issue instructions to the transfer agent accompanied by an opinion of counsel within two (2) business days of the date of the delivery to Borrower 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 Holder’s designated broker with the Depository Trust Corporation (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”)
system within three (3) business days after receipt by the Borrower of the Notice of Conversion (the “Delivery Date”). In the case of the exercise of the conversion rights set forth herein the conversion privilege shall be deemed to
have been exercised and the Conversion Shares issuable upon such conversion shall be deemed to have been issued upon the date of receipt by the Borrower of the Notice of Conversion. The Borrower shall send directly to Holder cash in lieu of any
fractional share to which Holder may be entitled as a result of the conversion. The Holder shall be treated for all purposes as the record holder of such Common Stock, unless the Holder provides the Borrower written instructions to the contrary.

  

 5 

 3.4 Conversion Mechanics. 
  
 (a) The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that
portion of the Principal Amount and interest and fees to be converted, if any, by the Fixed Conversion Price. In the event of any conversions of outstanding Principal Amount under this Note in part pursuant to this Article III, such conversions
shall be deemed to constitute conversions of outstanding Principal Amount applying to Monthly Amounts for the remaining Repayment Dates in chronological order. 
  

(b) The Fixed Conversion Price and number and kind of shares or other securities to be issued upon conversion is subject to adjustment from time to
time upon the occurrence of certain events, as follows: 
  
 A.
Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Fixed
Conversion Price or the Conversion Price, as the case may be, shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which
the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event. 
  
 B. Share Issuances. Subject to the provisions of this Section 3.4, if the Borrower shall at any time prior to the
conversion or repayment in full of the Principal Amount issue any shares of Common Stock or securities convertible into Common Stock to a person other than the Holder (except (i) pursuant to Subsections A or B above; (ii) pursuant to options,
warrants, or other obligations to issue shares outstanding on the date hereof as disclosed to Holder in writing; or (iii) pursuant to options that may be issued to officers, directors, employees and consultants under any employee incentive stock
option and/or any stock option plan adopted by the Borrower or (iv) in connection with acquisition of businesses or assets by the Borrower in the ordinary course of its business consistent with past practices, for a consideration per share (the
“Offer Price”) less than the Fixed Conversion Price in effect at the time of such issuance, then the Fixed Conversion Price shall be immediately reset pursuant to the formula below. For purposes hereof, the issuance of any
security of the Borrower convertible into or exercisable or exchangeable for Common Stock shall result in an adjustment to the Fixed Conversion Price at the time of issuance of such securities. 
  
 If the Corporation issues any additional shares pursuant to this subsection B
then, and thereafter successively upon each such issue, the Fixed Conversion Price shall be adjusted by multiplying the then applicable Fixed Conversion Price by the following fraction: 
  

	
	A + B
	

	(A + B) + [((C – D) X B) / C]

  
 A = Actual shares
outstanding prior to such offering 
  

 6 

 B = Actual shares sold in the offering 
  
 C = Fixed Conversion Price 
  
 D = Offering price 
  
 C. Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of
securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change. 
  

3.5 Reservation of Shares. During the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of this Note. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. The
Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for
shares of Common Stock upon the conversion of this Note. 
  
 3.6
Issuance of New Note. Upon any partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this
Note and interest which shall not have been converted or paid. The Borrower will pay no costs, fees or any other consideration to the Holder for the production and issuance of a new Note. 
  
 ARTICLE IV 
 EVENTS OF DEFAULT 
  
 If an Event of
Default (as defined below) occurs and is continuing, the Borrower’s rights under Sections 2.1, 2.3 and 2.4 shall immediately cease and be of no further effect until such time as the Event of Default has been cured, or has been waived by the
Holder. Upon the occurrence and continuance of an Event of Default beyond any applicable grace period, the Holder may make all sums of principal, interest and other fees then remaining unpaid hereon and all other amounts payable hereunder due and
payable within five (5) days after written notice from Holder to Borrower (each occurrence being a “Default Notice Period”). In the event of such an acceleration, the amount due and owing to the Holder shall be 110% of the
outstanding principal amount of the Note (plus accrued and unpaid interest and fees, if any). If, with respect to any Event of Default other than a payment default described in Section 4.1 below, within the Default Notice Period the Borrower cures
the Event of Default, the Event of Default will be deemed to no longer exist and any rights and remedies of Holder pertaining to such Event of Default will be of no further force or effect. 
  
 The occurrence of any of the following events is an “Event of
Default”: 
  
 4.1 Failure to Pay Principal, Interest
or other Fees. The Borrower fails to pay when due any installment of principal, interest or other fees hereon in accordance herewith, or the Borrower fails to pay within five (5) days of the date when due any amount due under any other
promissory note issued by Borrower. 
  

 7 

 4.2 Breach of Covenant. The Borrower breaches any material covenant or other term or condition of
this Note or the Purchase Agreement in any material respect and such breach, if subject to cure, continues for a period of thirty (30) days after the occurrence thereof. 
  
 4.3 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made herein, in
the Purchase Agreement, or in any Related Document (as defined in the Purchase Agreement) shall be materially false or misleading and shall not be cured for a period of ten (10) days after written notice thereof is received by the Borrower from the
Holder. 
  
 4.4 Receiver or Trustee. The Borrower shall
make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed.

  
 4.5 Judgments. Any money judgment, writ or similar
final process shall be entered or filed against the Borrower or any of its property or other assets for more than $250,000, and shall remain unvacated, unbonded or unstayed for a period of ninety (90) days. 
  
 4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower, and, in the case of any involuntary proceeding or relief under such bankruptcy laws, not stayed
or dismissed within forty-five (45) days after the date of commencement thereof. 
  
 4.7 Stop Trade. An SEC stop trade order or Principal Market trading suspension of the Common Stock shall be in effect for 5 consecutive days or 5 days during a period of 10 consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the Borrower shall not have been able to cure such trading suspension within 30 days of the notice thereof or list the Common Stock on another Principal Market within 60 days of
such notice. The “Principal Market” for the Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, or New York Stock Exchange (whichever of the foregoing is
at the time the principal trading exchange or market for the Common Stock, or any securities exchange or other securities market on which the Common Stock is then being listed or traded. 
  
 4.8 Failure to Deliver Common Stock or Replacement Note. The Borrower’s failure to timely deliver Common Stock
to the Holder pursuant to and in the form required by this Note, and Section 9 of the Securities Purchase Agreement, or if required, a replacement Note if such failure to timely deliver Common Stock shall not be cured within two (2) days or such
failure to deliver a replacement Note is not cured within seven (7) Business Days. 
  
 4.9 Security Agreement Default. An Event of Default shall have occurred under and as defined in the Security Agreement dated as of the date hereof made by the Borrower in favor of the Holder, which is not cured
during any applicable cure or grace period, or waived in writing. 
  

 8 

 ARTICLE V 
 DEFAULT RELATED PROVISIONS 
  
 5.1 Payment Grace Period. The Borrower shall have a five (5) day grace period to pay any monetary amounts due under this Note or the Purchase Agreement or any Related Document, after which grace period a
default interest rate of five percent (5%) per annum above the then applicable interest rate hereunder shall apply to the monetary amounts due. 
  
 5.2 Conversion Privileges. The conversion privileges set forth in Article III shall remain in full force and effect immediately from the date
hereof and until this Note is paid in full. 
  
 ARTICLE VI

 MISCELLANEOUS 
  
 6.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 
  
 6.2 Notices. Any notice herein required or permitted to be given shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five 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 Borrower at the address provided in the Purchase Agreement executed in connection herewith,
and to the Holder at the address provided in the Purchase Agreement for such Holder, with a copy 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 Borrower or the Holder may designate by ten days advance written notice to the other parties hereto. Notwithstanding the foregoing, delivery of a Notice of Conversion shall be governed by Article III hereof. 
  
 6.3 Amendment Provision. The term “Note” and all reference
thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument issued pursuant to Section 3.5 hereof, as it may be
amended or supplemented. 
  
 6.4 Assignability. This Note
shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder in accordance with the requirements of the Purchase Agreement.

  

 9 

 6.5 Governing Law. This Note 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 Note 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 individual signing this Note on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs. In the event that any provision of this Note 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 unenforceability of any other provision of this Note.

  
 6.6 Maximum Payments. Nothing contained herein 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 required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 
  
 6.7 Security Interest. The holder of this Note has been granted a security interest in certain assets of the Borrower
more fully described in a Security Agreement. 
  
 6.8
Construction. Each party acknowledges that its legal counsel participated in the preparation of this Note 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 Note to favor any party against the other. 
  
 [Remainder of Page Intentionally Left Blank] 
  

 10 

 IN WITNESS WHEREOF, each Borrower has caused this Convertible Term Note to be signed in its name
effective as of this 11th day of March, 2004. 
  

			
	AXESSTEL, INC.
		
	 By:
	 	 /s/ David Morash

	 Name:
	 	 David Morash

	 Title:
	 	 Chief Operating Officer

  
 WITNESS: 
  

  

 11 

 EXHIBIT A 
  

NOTICE OF CONVERSION 
  
 (To be executed by the Holder in order to convert all or part of the Note into Common Stock 
  
 [Name and Address of Holder] 
  
 The Undersigned hereby elects to convert $             of the principal
due on [specify applicable Repayment Date] under the Convertible Term Note issued by AXESSTEL, INC. dated March 11, 2004 by delivery of Shares of Common Stock of AXESSTEL, INC. on and subject to the conditions set forth in Article II
of such Note. 
  
 a. Date of Conversion
                                       
                                        
              
  
 b. Shares To Be Delivered
                                       
                                        
       
  
 Date:
             
  

			
	 By:
	 	  

	 Name:
	 	  

	 Title:
	 	  

  

 EXHIBIT B 
  

REPAYMENT ELECTION NOTICE 
  
 (To be executed by the Borrower in order to pay all or part of a Monthly Amount with Common Stock) 
  
 [Name and Address of Holder] 
  
 AXESSTEL, INC. hereby elects to pay $              of the Monthly Amount
due on [specify applicable Repayment Date] under the Convertible Term Note issued by AXESSTEL, INC. dated March 11, 2004 by delivery of Shares of Common Stock of AXESSTEL, INC. on and subject to the conditions set forth in Article II of such Note.

  
 1. Fixed Conversion
Price:                                       
                                        
     
$                                        

  
 a. Amount to be paid:
                                       
                                        
                                        
  
  
 b. Shares To Be Delivered (2 divided by
1):                                        
                                        
      
  

					
	 Date:             
	 	 AXESSTEL, INC.

			
	 	 	By:	 	  

	 	 	Name:	 	  

	 	 	Title:Security Agreement

 Exhibit 10.8 
  
 AXESSTEL, INC. 
 SECURITY AGREEMENT 
  

			
	 To:
	  	 Laurus Master Fund, Ltd.
 c/o Ironshore Corporate Services, Ltd.
 P.O. Box 1234 G.T
 Queensgate House
 South Church Street
 Grand Cayman, Cayman Islands

  
 Gentlemen: 
  
 1. To secure the payment of all
Obligations (as hereafter defined), we hereby grant to you a continuing security interest in all of the following property now owned or at any time hereafter acquired by us, or in which we now have or at any time in the future may acquire any right,
title or interest (the “Collateral”): all accounts, inventory, equipment, goods, documents, instruments (including, without limitation, promissory notes), contract rights, general intangibles (including, without limitation,
payment intangibles), chattel paper, supporting obligations, investment property, letter-of-credit rights, trademarks, tradestyles patents and copyrights in which we now have or hereafter may acquire any right, title or interest, all proceeds and
products thereof (including, without limitation, proceeds of insurance) and all additions, accessions and substitutions thereto or therefor. 
  
 2. The term “Obligations” as used herein shall mean and include all debts, liabilities and obligations owing by (a) us to you
hereunder and under the Convertible Term Note dated as of the date hereof made by us in favor of you in the original principal amount of $3,000,000, as amended, modified and supplemented from time to time or otherwise (as amended, modified and
supplemented from time to time, the “Note”) and (b) all other debts, liabilities and obligations owing by us to you, loans, advances, extensions of credit, endorsements, guaranties, benefits and/or financial accommodations
heretofore or hereafter made, granted or extended by you to us or which you have or will become obligated to make, grant or extend to us or for our account and any and all interest, charges and/or expenses heretofore or hereafter owing by us to you
and any and all renewals or extensions of any of the foregoing, no matter how or when arising, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether under any present or future agreement or instruments between or among
us. 
  
 3. We hereby represent, warrant and covenant to you that:
(a) we are a company validly existing, in good standing and formed under the laws of the State of Nevada with an organization identification number of C5389-1996 and we will provide you thirty (30) days’ prior written notice of any change in
our jurisdiction of formation or change in our organizational identification number; (b) our legal name is Axesstel, Inc., as set forth in our Certificate of Incorporation as amended through the date hereof and we will provide you thirty (30)
days’ prior written notice of any change in our legal name; (c) we are the lawful owner of the Collateral and have the sole right to grant a security interest therein and will use commercially reasonable efforts to defend the Collateral against
all claims and demands of all 

 persons and entities; (d) we will keep the Collateral free and clear of all attachments, levies, taxes, liens, security
interests and encumbrances of every kind and nature (“Encumbrances”), except to the extent said Encumbrance does not secure aggregate indebtedness for all such Encumbrances in excess of $100,000 and each such Encumbrance is
removed or otherwise released within 10 days of the creation thereof and except with respect to Permitted Encumbrances, as defined below; (e) we will at our own cost and expense keep the Collateral in good state of repair (ordinary wear and tear
excepted) and will not waste or destroy the same or any part thereof other than ordinary course discarding of items no longer used or useful in our business; (f) we will not without your prior written consent, sell, exchange, lease or otherwise
dispose of the Collateral, whether by sale, lease or otherwise, except for the sale of inventory in the ordinary course of business and for the disposition or transfer in the ordinary course of business during any fiscal year of obsolete and
worn-out equipment having an aggregate fair market value of not more than $50,000 and only to the extent that (i) the proceeds of any such disposition are used to acquire replacement equipment which is subject to your first priority security
interest or are used to repay Obligations or to pay general corporate expenses, or (ii) following the occurrence of an Event of Default which continues to exist, the proceeds of which are remitted to you to be held as cash collateral for the
Obligations; (g) we will insure the Collateral against loss or damage by fire, theft, burglary, pilferage, loss in transit and such other hazards under policies by insurers reasonably acceptable to you and in such amounts ordinarily insured against
by other owners in similar businesses conducted in the locations where Borrower’s business is conducted, and all premiums thereon shall be paid by us and copies of the policies and certificates for the policies naming you as Lender’s loss
payee and additional insured shall be delivered to you. If we fail to do so, you may procure such insurance and the cost thereof shall constitute Obligations; (h) we will at all reasonable times upon prior notice (provided that no such prior notice
shall be required following the occurrence and during the continuance of an Event of Default or in the event such access is necessary to preserve or protect the Collateral) and during normal business hours and at your expense allow you or your
representatives free access to and the right of inspection of the Collateral; (i) we hereby indemnify and save you harmless from all loss, costs, damage, liability and/or expense, including reasonable attorneys’ fees, that you may sustain or
incur to enforce payment, performance or fulfillment of any of the Obligations and/or in the enforcement of this Agreement or in the prosecution or defense of any action or proceeding either against you or us concerning any matter growing out of or
in connection with this Agreement, and/or any of the Obligations and/or any of the Collateral, except to the extent caused by your own gross negligence or willful misconduct; (j) with respect to all accounts arising out of contracts between us and
the United States of America, or any state, or any department, agency or instrumentality of any of them (each, a “Government Contract”), we will so notify you in writing and use commercially reasonable efforts to comply with
any governmental notice or approval requirements, including, without limitation, compliance with the Federal Assignment of Claims Act, (k) each account shall conform to the following criteria: (i) shipment of the merchandise or rendition of services
has been completed, (ii) merchandise or services shall not have been rejected or disputed by the account debtor and there shall not have been asserted any offset, defense or counterclaim (other than any such rejections, disputes, offsets, defenses
or counterclaims which in the aggregate do not at any time exceed $100,000), and (iii) each such account is a good and valid account representing an undisputed bona fide indebtedness incurred by the account debtor liable therefor, for a fixed sum as
set forth in the invoice relating thereto with respect to an unconditional sale 
  

 2 

 and delivery upon the stated terms of goods sold by us, or work, labor and/or services rendered by us, as applicable. As
used herein, “Permitted Encumbrances” means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance (collectively, “Liens”): (a) existing on the date hereof as set
forth on Exhibit A hereto or arising under this Agreement; (b) for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings, provided the same have no
priority over any of your security interests; (c) (i) upon or in any equipment which was not financed by you, acquired or held by us to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of its acquisition; (d) securing subordinated debt, on terms and conditions and subject to subordination and intercreditor documentation reasonably satisfactory to you;
(e) constituting or considered licenses or sublicenses granted in the ordinary course of our business and any interest or title of a licensor or under any license or sublicense; (f) in favor of financial institutions arising in connection with our
deposit accounts held at such institutions; (g) not described above arising in the ordinary course of business and subject to intercreditor documentation reasonably satisfactory to you and not having or not reasonably likely to have a material
adverse effect on the Collateral or our ability to repay you; (h) Liens securing (x) letters of credit issued as backstop letters of credit in support of letters of credit issued by financial institutions and (y) letters of credit issued in the
ordinary course of our business in an aggregate stated amount not to exceed $2,000,000 at any time outstanding; (i) Liens on letters of credit held by us in favor of financial institutions for the purpose of discounting promissory notes made by us
in favor of such financial institutions; and (j) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by any of the Liens expressly permitted above, provided that any extension, renewal or replacement
Lien shall be limited to the property encumbered by the existing Lien, the principal amount of the indebtedness being extended, renewed or refinanced does not increase and such Liens are subject to the same terms and conditions (including
subordination and intercreditor documentation) as the existing Liens that are being extended, renewed or replaced. 
  
 4. Following the occurrence and during the continuance of an Event of Default, you shall have the right to instruct all of our account debtors to remit
payments on all accounts in accordance with your express written instructions. If, despite such instructions, we shall receive any payments with respect to accounts, we shall receive such payments in trust for your benefit, shall segregate such
payments from our other funds and shall deliver or cause to be delivered to you, in the same form as so received with all necessary endorsements, all such payments as soon as practicable, but in no event later than five (5) business days after our
receipt thereof. After the occurrence and during the continuance of an Event of Default, you shall have full power and authority to collect each account, through legal action or otherwise, and may settle, compromise, or assign (in whole or in part)
the claim for any account, or otherwise exercise any other right now existing or hereafter arising with respect to any account if such action will facilitate collection. 
  
 5. We shall be in default under this Agreement upon the happening of any of the following events or conditions, each such
event or condition an “Event of Default” (a) we shall fail to pay when due (including any applicable grace or cure period) or punctually perform any of the Obligations; (b) any covenant, warranty, representation or statement
(taken together to the extent any of the same cover the same subject matter) made or furnished to you by us was false 
  

 3 

 in any material respect; (c) we shall breach any provision of this Agreement or any other document, instrument or
agreement delivered to you in connection with the transactions contemplated hereby, as the same may be amended, modified and supplemented from time to time, and such breach shall not have been cured during any applicable cure or grace period; (d)
the loss, theft, substantial damage, destruction, sale or encumbrance to or of any of the Collateral or the making of any levy, seizure or attachment thereof or thereon, except to the extent said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or attachment has not been removed or otherwise released within 10 days of the creation or the assertion thereof; or (e) an Event of Default shall have occurred and be continuing under and as
defined in the Note. 
  
 6. Upon the occurrence and during the
continuance of any Event of Default and at any time thereafter, you may declare all Obligations immediately due and payable and you shall have the remedies of a secured party provided in the Uniform Commercial Code as in effect in the State of New
York, this Agreement and other applicable law. Upon the occurrence and during the continuance of any Event of Default and at any time thereafter, you will have the right to take possession of the Collateral and to maintain such possession on our
premises or to remove the Collateral or any part thereof to such other premises as you may desire. Upon your prior written request, we shall assemble the Collateral and make it available to you at a place reasonably designated by you. If any
notification of intended disposition of any Collateral is required by law, such notification, if mailed, shall be deemed properly and reasonably given if mailed at least ten (10) days before such disposition, postage prepaid, addressed to us either
at our address shown herein or at any address last provided to you by us in writing. Any proceeds of any disposition of any of the Collateral shall be applied by you to the payment of all expenses in connection with the sale of the Collateral,
including reasonable attorneys’ fees and other legal expenses and disbursements and the reasonable expense of retaking, holding, preparing for sale, selling, and the like, and any balance of such proceeds may be applied by you toward the
payment of the Obligations in such order of application as you may elect, and we shall be liable for any deficiency. 
  
 7. If we default in the performance or fulfillment of any of the terms, conditions, promises, covenants, provisions or warranties on our part to be
performed or fulfilled under or pursuant to this Agreement, you may, at your option without waiving your right to enforce this Agreement according to its terms, immediately or at any time thereafter and with notice to us, perform or fulfill the same
or cause the performance or fulfillment of the same for our account and at our sole cost and expense, and the cost and expense thereof (including reasonable attorneys’ fees) shall be added to the Obligations and shall be payable on demand with
interest thereon at the highest rate permitted by law or, at your option. 
  
 8. Effective after the occurrence and during the continuance of an Event of Default, we hereby appoint you, any of your officers, employees or any other person or entity whom you may designate as our attorney, with
power to execute such documents in our behalf and to supply any omitted information and correct patent errors in any documents executed by us or on our behalf and to sign our name on public records; and to do all other things you deem reasonably
necessary to carry out this Agreement; and, irrespective of the occurrence or continuance of an Event of Default, to file financing statements against us covering the Collateral. We hereby ratify and approve all acts of the attorney and neither you
nor the attorney will be liable for any 
  

 4 

 acts of commission or omission, nor for any error of judgment or mistake of fact or law other than gross negligence or
willful misconduct. This power being coupled with an interest, is irrevocable so long as any Obligations remains unpaid. 
  
 9. No delay or failure on your part in exercising any right, privilege or option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in writing, signed by you and then only to the extent therein set forth, and no waiver by you of any default shall operate as a waiver of any other default or of the same
default on a future occasion. Your books and records containing entries with respect to the Obligations shall be admissible in evidence in any action or proceeding, shall be binding upon us for the purpose of establishing the items therein set forth
and shall constitute prima facie proof thereof, absent manifest error. You shall have the right to enforce any one or more of the remedies available to you, successively, alternately or concurrently. We agree to join with you in executing financing
statements or other instruments to the extent required by the Uniform Commercial Code in form satisfactory to you and in executing such other documents or instruments as may be required or deemed necessary by you for purposes of affecting or
continuing your security interest in the Collateral. 
  
 10. This
Agreement shall be governed by and construed in accordance with the laws of the State of New York and cannot be terminated orally. All of the rights, remedies, options, privileges and elections given to you hereunder shall enure to the benefit of
your successors and assigns. The term “you” as herein used shall include your company, any parent of your company, any of your subsidiaries and any co-subsidiaries of your parent, whether now existing or hereafter created or acquired, and
all of the terms, conditions, promises, covenants, provisions and warranties of this Agreement shall enure to the benefit of and shall bind the representatives, successors and assigns of each of us and them. You and we hereby (a) waive any and all
right to trial by jury in litigation relating to this Agreement and the transactions contemplated hereby and we agree not to assert any counterclaim in such litigation, (b) submit to the nonexclusive jurisdiction of any New York State court sitting
in the borough of Manhattan, the city of New York; provided that nothing contained in this Agreement shall be deemed to preclude you from bringing suit or taking other legal action in any other jurisdiction and (c) waive any objection you or we may
have as to the bringing or maintaining of such action with any such court. We hereby waiver personal service of process in any such action and agree that service of such process may be made by registered or certified mail addressed to us at the
address set forth below. 
  
 11. All notices from you to us shall
be sufficiently given if mailed or delivered to us at our address set forth below in accordance with the provisions of the Purchase Agreement (as defined in the Note). 
  
 [Signature Lines on following page] 
  

 5 

 [Signature page to Axesstel Security Agreement] 
  

			
	 Very truly yours,

	
	AXESSTEL, INC.
		
	 By:
	 	 /s/ David Morash

	 Name:
	 	 David Morash

	 Title:
	 	 Chief Operating Officer

		
	 Address:
	 	 
	
	 Dated as of: March 12, 2004

  

			
	 ACKNOWLEDGED:

	
	LAURUS MASTER FUND, LTD.
		
	 By:
	 	 /s/ David Grin

	 Name:
	 	 David Grin

	 Title:
	 	  

  

 6 

 EXHIBIT A 
  

Existing Liens 
  
 None. 
  

 7

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