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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) SEPTEMBER 9, 1998
AXCESS INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-11933 85-0294536
(State or other jurisdiction of (Commission File Number) (I.R.S. employer
incorporation or organization) identification no.)
3208 COMMANDER DRIVE, CARROLLTON, TEXAS 75006
(Address of principal executive offices) (Zip Code)
(972) 407-6080
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 9, 1998, AXCESS Inc. (the "Company") consummated the
acquisition of the RF-ID based (Radio Frequency Identification) intellectual
property assets of ASGI, Inc. and Nauta, Inc. (collectively, the "Sellers").
The intellectual property assets included a patent, trade secret rights,
software, hardware, product designs and all other technical information
necessary for the Company to manufacture and market radio frequency
identification products in the areas of access control and asset management.
The Company accomplished the asset acquisition pursuant to an Asset Purchase
Agreement dated September 9, 1998, by and among the Company and the Sellers.
The aggregate purchase price for this acquisition of up to $7,100,000 was
determined as a result of arm's length negotiations between the Company and the
Sellers. At closing, the Company made a cash payment of $415,000, signed a
promissory note for $685,000 and delivered 400,000 shares of its common stock.
Up to an aggregate of $6,000,000 is payable by the Company to Sellers only if
certain net operating profit targets are realized during each of the next 5
years.
The Company restructured its obligations to XL Vision, Inc. under the
terms of an Amended and Restated Intellectual Property Transfer Agreement to
finance this acquisition of technology assets from the Sellers. When the
promissory notes and contingent payments become due, the Company anticipates
making payments from its existing cash reserves derived from the manufacture
and sale of access control products.
A small portion of the assets acquired constitute equipment and other
physical property used in the production of access control products. These
assets will be further developed and enhanced by the Company in connection with
its efforts to develop and market access control products which utilize the
RF-ID based intellectual property assets.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Listed below are the exhibits filed as a part of this report.
<TABLE>
<S> <C>
2.1 -- Asset Purchase Agreement by and among ASGI, Inc., Nauta, Inc., AXCESS Inc.,
and Stephen L. Briggs, Wayne E. Steeves and Charles William Martin, Jr., dated
September 9, 1998.*
99.1 -- Press release dated September 9, 1998.*
99.2 -- Amended and Restated Intellectual Property Transfer Agreement*
</TABLE>
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* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, AXCESS
Inc. has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: September 23, 1998 AXCESS INC.
By: /s/ Danny G. Hair
---------------------------------
Danny G. Hair, Chief Financial
Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<S> <C>
2.1 Asset Purchase Agreement by and among ASGI, Inc., Nauta, Inc., AXCESS Inc.,
and Stephen L. Briggs, Wayne E. Steeves and Charles William Martin, Jr.,
dated September 9, 1998.*
99.1 Press release dated September 9, 1998.*
99.2 Amended and Restated Intellectual Property Transfer Agreement*
</TABLE>
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* Filed herewith.
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
ASGI, INC.,
NAUTA, INC.,
AXCESS INC.
AND
STEPHEN L. BRIGGS, WAYNE E. STEEVES AND CHARLES WILLIAM MARTIN, JR.
SEPTEMBER 9, 1998
<PAGE> 2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made this 9th day of
September, 1998, by and among AXCESS Inc., a Delaware corporation (the
"Purchaser"), ASGI, Inc. and Nauta, Inc., each a Delaware corporation
(collectively, the "Sellers") and Stephen L. Briggs, an individual and resident
of the State of Virginia, Wayne E. Steeves, an individual and resident of the
State of Virginia and Charles William Martin, Jr., an individual and resident
of the State of Georgia (collectively, the "Shareholders").
The following recitals are true and constitute the basis for this
Agreement.
A. The Sellers have developed and acquired certain technical
information, know how, data, product designs, materials,
formulas and like business information of a confidential and
proprietary nature, as well as intellectual property rights
including patent applications, patents, copyrights and/or
trade secret rights relating to certain radio frequency
identification RF-ID hardware (the "Hardware") and security
access control software in source code form (the "Software")
for the design, construction and marketing of RF-ID products;
(the Hardware, Software and all other intellectual property
rights referred to herein are hereinafter collectively
referred to as the "RF-ID Technology");
B. The Sellers are engaged in the business of designing and
selling RF-ID products worldwide (the "RF-ID Technology
Business");
C. The Sellers and the Purchaser recently entered into that
certain License Agreement and Escrow Agreement dated August
11, 1998, pursuant to which the Purchaser acquired certain
licenses to practice the RF-ID Technology; and
D. Subject to the terms and conditions of this Agreement, the
Sellers desire to sell and the Purchaser desires to purchase,
the RF-ID Technology Business from the Sellers.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I.
PURCHASE AND SALE OF ASSETS
1.1 THE CLOSING. Subject to the terms of this Agreement, the
closing pursuant to this Agreement (the "Closing") shall take place on the date
hereof by mail, facsimile transmission or other means of document delivery, or
at such other time or place as the parties shall agree.
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1.2 PURCHASE AND SALE OF ASSETS. On the terms and subject to the
conditions of this Agreement, the Sellers agree to sell, transfer, convey,
deliver and assign to the Purchaser, and the Purchaser agrees to purchase,
acquire and accept from the Sellers, on and as of the Closing, for the
consideration hereinafter provided, all of the Sellers' rights, property and
assets of every kind, character and description, whether tangible or
intangible, whether real, personal or mixed, whether accrued, contingent or
otherwise of the Sellers which are in the possession of Sellers and used by it
in the RF-ID Technology Business, wherever located and whether or not reflected
in its books and records, other than the Excluded Assets (as hereinafter
defined). The rights, property and assets to be transferred to the Purchaser
as set forth in the preceding sentence (the "RF-ID Technology Assets") shall
include, without limitation, the following to the extent owned by the Sellers
and used in the RF-ID Technology Business on the date hereof:
(a) Personal Property. All equipment, computer hardware,
fixtures, furnishings and other personal property, including, without
limitation, personal property listed on Schedule 1.2(a) hereto for use
in connection with the operation of the RF-ID Technology Business;
(b) Intellectual Property. To the extent they exist as
of the date of this Agreement, written copies of the formulas,
processes, diagrams, flow charts, schematics and source code which
detail in a step-by-step manner the precise instructions to enable
the Purchaser to duplicate the RF-ID Technology for use in connection
with the design, production and installation of RF-ID products on a
commercial basis, including all enhancements and/or modifications, as
well as the hardware and all necessary proprietary information related
to the RF-ID Technology and potential intellectual property, all as
more particularly described on Schedule 1.2(b) attached hereto. All
domestic and foreign patents and registrations, licenses, trademarks,
trade names, service marks, copyrights (and applications and
registrations for any of the foregoing). All inventions, invention
disclosures, domestic and foreign patents and registrations, licenses,
trademarks, trade names, service marks, copyrights (and applications
and registrations for any of the foregoing), confidential information
and other similar intangible assets, owned and used by the Sellers in
connection with the RF-ID Technology Business and the goodwill
associated with all of the foregoing, as well as the right to
register, perfect and enforce any rights embodied therein and to
collect damages for any past, infringement of such rights by third
parties;
(c) Contracts. (i) The customer contracts to provide
RF-ID products entered into in the ordinary course of business and set
forth on Schedule 1.2(c) hereto, (ii) customer orders for RF-ID
products entered into in the ordinary course of business and (iii) all
other contracts listed on Schedule 1.2(c) which relate to or effect
the RF-ID Technology and which Purchaser will be assuming at the
Closing (collectively, the "Assumed Contracts");
(d) Documents. Copies of records, computer software and
documents, books, supplier and customer lists in possession of the
Sellers (including, without limitation, the logic involved in the
programs, algorithms used, file layouts, record contents, coding
schemes, sample reports) relating to the RF-ID Technology Business
and/or the RF-ID Technology Assets;
(e) Accounts Receivable. All trade and other accounts
receivable owned by the Sellers as of the date hereof relating to the
RF-ID Technology Business, except for the account receivable
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due from Access Control Technologies, Inc. (hereinafter collectively
referred to as the "Receivables");
(f) Inventory. All inventories of any kind in the
possession of Sellers and used in the operation of the RF-ID
Technology Business as of the date hereof;
(g) Licenses and Permits. All of Sellers' rights in all
governmental licenses, permits and authorizations (and applications
for any of the foregoing) necessary for the operation of the RF-ID
Technology Business, if any, but only to the extent transferable; and
(h) Cash and Cash Equivalents. All of Sellers' cash and
cash equivalents related to the RF-ID Technology Business as of the
date hereof.
1.3 ASSETS EXCLUDED FROM SALE. Notwithstanding any other
provision of this Agreement to the contrary, the following property and assets
of the Sellers are excluded from the sale to the Purchaser (collectively, the
"Excluded Assets"):
(a) Insurance Policies. All casualty, liability or other
insurance policies owned or obtained on behalf of Sellers and all
claims or rights under any such insurance policies;
(b) Tax Refunds. Any federal, state or local income tax
refunds or claims related to the operation of Sellers prior to
Closing;
(c) Corporate Records. Articles of Incorporation, Bylaws
and original corporate minute book of Sellers (it being agreed that
copies of those minutes relating to the RF-ID Technology Business
shall be supplied to the Purchaser upon request of the Purchaser).
(d) Notes Receivable. All amounts reflected on the
Sellers' books and records as of the date hereof for the items "Note
Receivable - Affiliate" or "Due from Shareholders."
(e) Accounts Receivable. The account receivable referred
to in Article 1.2(e) of this Agreement due from Access Control
Technologies, Inc.
(f) Other Assets. Any assets of the Sellers not used,
directly or indirectly, in the conduct of the RF-ID Technology
Business.
1.4 PURCHASE PRICE. The Purchaser shall pay to the Sellers for
the RF-ID Technology Assets, 400,000 shares of the Purchaser's common stock
(the "AXSI Shares") at the Closing and up to an aggregate of $7,100,000 (the
"Purchase Price"), payable as follows:
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(a) $415,000(1) shall be payable by the Purchaser to the
Sellers at the Closing by wire transfer of immediately available funds
to an account designated by the Sellers;
(b) By the delivery of six (6) Promissory Notes in the
form and in the denominations set forth on Exhibits "A-1" through
"A-6" attached to this Agreement to be executed by the Purchaser
payable to the Sellers in the aggregate stated principal amount of
$685,000 (the "Promissory Notes"), which shall be due and payable in
equal monthly installments during the twelve (12) months following the
Closing and shall bear interest at the prime rate of interest; and
(c) Up to but not in excess of $6,000,000 by the payment
of five (5) contingent payments (the "Annual Contingent Payments") to
be made by the Purchaser to the Sellers based on the Net Operating
Profit of the Purchaser (as defined below). Seventy-Five percent
(75%) of each Annual Contingent Payment shall be due and payable on or
before the 90th day after the end of each of the twelve (12) months
ended December 31, 1999, 2000, 2001, 2002 and 2003 (the "Applicable
Fiscal Years") and twenty-five percent (25%) of each Annual Contingent
Payment (the "Holdback") shall be due and payable on the first
anniversary date of each Annual Contingent Payment (if applicable) if
the Net Operating Profit during that Fiscal Year is a positive number
and is in excess of the amount of the Holdback. For purposes of this
Article, the term "Net Operating Profit" shall mean gross profit
(revenue less cost of goods sold and operating expenses, excluding any
allocation of general corporate overhead expenses) of the Purchaser's
entire operations other than revenue and cost of goods sold from the
Purchaser's LMC and Sandia Imaging Systems divisions. The
determination of Net Operating Profit each year shall be determined by
the Purchaser and shall be in accordance with generally acceptable
accounting principles applied on a consistent basis.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING: 1999 2000 2001 2002 2003
------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
TARGET NET
OPERATING PROFIT $9,000,000 $9,000,000 $12,000,000 $23,000,000 $38,000,000
(REVENUE LESS COST
OF GOODS SOLD)
PAYOUT EACH $ 750,000 $ 750,000 $ 1,500,000 $ 1,500,000 $ 1,500,000
APPLICABLE FISCAL
YEAR @ 100% OF
TARGET
</TABLE>
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(1) $175,000 of the cash portion of the purchase price has already been
paid - $25,000 in exchange for a non-exclusive license to the RF-ID technology
for use in the entertainment and amusement industry and $150,000 for the
licenses granted under the terms of that certain License Agreement dated
August 11, 1998.
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The amount of each Annual Contingent Payment shall be an amount equal
to seventy-five percent (75%) of the product of: (i) a fraction, the
numerator of which shall be the actual amount of Net Operating Profit
and the denominator of which shall be the Target Net Operating Profit
for that same fiscal year set forth in the table above, multiplied by
(ii) the amount of the Payout for the Applicable Fiscal Year as set
forth in the table above as well as any Holdback from the prior year.
If the Net Operating Profit is greater than the Target Net Operating
Profit for any Applicable Fiscal Year, the Annual Contingent Payment
shall not exceed the payout for each Applicable Fiscal Year @ 100% of
Target indicated in the table above. Example: If the actual amount
of the Net Operating Profit for 1999 is $400,000 and the Target Net
Operating Profit for 1999 is $500,000, the amount of the Annual
Contingent Payment for 1999 would be $450,000 =
75%X($400,000/$500,000)X($750,000). If the actual amount of the Net
Operating Profit during 2000 is $400,000 and the Target Net Operating
Profit for 2000 is $600,000, the amount of the Annual Contingent
Payment for 2000 would be $525,000 =
75%X($400,000/$600,000)X($750,000) PLUS $150,000, the Holdback from
the previous Applicable Fiscal Year. The entire amount of the Annual
Contingent Payment for 2003 will be paid on or before the 90th day
after the end of the twelve month period ended December 31, 2003.
1.5 ALLOCATION OF PURCHASE PRICE. The allocation of the Purchase Price
shall be agreed to by the Purchaser and the Sellers and shall be as
set forth on a schedule to be prepared by the Sellers and agreed to by
the parties within thirty (30) days from the date hereof. The
Purchaser and the Sellers agree to use such allocation in reporting
the terms of the transactions contemplated by this Agreement to the
United States Internal Revenue Service and any other relevant taxing
authority and shall take all reasonable steps to minimize the taxes to
be incurred so long as each such step is in the best interest of each
party.
1.6 EXCLUDED LIABILITIES. Notwithstanding the Assumed Contracts referred
to in Article 1.2(c) above, the Purchaser shall not assume or agree to
perform, pay or discharge, and the Sellers will remain unconditionally
liable for, all obligations, liabilities and commitments (fixed or
contingent) of the Sellers and the RF-ID Technology Business other
than the Assumed Contracts including, without limitation, the
following, whether now in existence or hereafter arising after the
date hereof from actions taken or circumstances existing on or prior
to the date hereof: (i) any special severance or termination payment
to any of the Sellers' employees who are terminated by the Sellers;
(ii) any liability or claim with respect to accidents, occurrences,
acts or omissions arising prior to the Closing, (iii) all worker's
compensation claims and all litigation claims, income tax or other tax
liabilities; (iv) all liabilities incurred in connection with the
violation or asserted violation of any occupational safety, wage,
health, welfare, employee benefit or environmental laws or
regulations; (v) all products liability claims and (vi) all other
contracts and liabilities of any kind or nature of the Sellers or the
RF-ID Technology Business. Notwithstanding the foregoing, the
Purchaser shall pay the Sellers' rent at its Dulles, Virginia,
facility for three (3) months following the Closing. The Purchaser,
however, is not assuming any other obligation of the Sellers under the
terms of that lease or any other to which the Sellers are a party.
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ARTICLE II.
OTHER AGREEMENTS
2.1 NONCOMPETE, NONSOLICITATION AND CONFIDENTIALITY. For purposes of this
Article II, the following definitions shall apply:
(a) "Purchaser Activities" shall mean all activities of
the type currently conducted, offered, or provided by the Purchaser as
of the date hereof, including the RF-ID Technology Business to be
acquired by the Purchaser under the terms of this Agreement. For
purposes of reference, such activities as of the date of this
Agreement include designing and selling RF-ID products for use in the
security, manufacturing/logistics management and entertainment and
amusement industries, each of which is described on Schedule 2.1(a) of
this Agreement, as well as the LMC marking business and the printer
business of Sandia Imaging Systems.
(b) "Confidential Information" shall mean any data or
information (whether written or not), of the Purchaser, other than
Trade Secrets (as defined below), which is valuable to the Purchaser
and not generally known to competitors.
(c) "Noncompete Period" and the "Nonsolicitation Period"
shall mean three (3) years from the date hereof.
(d) "Territory" as used herein shall mean worldwide.
(e) "Trade Secrets" shall mean information related to
Purchaser Activities, including, but not limited to, technical or
nontechnical data, formulas, patterns, compilations, or programs,
including, without limitation, computer software and related source
codes, devices, methods, techniques, drawings, processes, financial
data, financial plans, product plans, lists of actual or potential
customers or suppliers, or other information similar to any of the
foregoing, which derives economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by
proper means by, other persons who can derive economic value from its
disclosure or use.
2.2 CONFIDENTIALITY. The Sellers, the Shareholders and the Purchaser
agree that each party shall hold in confidence the terms and conditions of this
Agreement and the transactions contemplated hereby as well as all information
and documents received by one party from the other party pursuant to this
Agreement; provided however, that parties' respective obligations under this
Article 2.2 shall not apply to (i) any information or document required to be
disclosed by law, (ii) any information or document already in the public domain
or (iii) any information or document that becomes public by means other than
the party of whom confidentiality is required by this Article 2.2.
2.3 TRADE SECRETS. The Sellers and the Shareholders shall hold in
confidence at all times after the date hereof all Trade Secrets, and shall not
disclose, publish or make use of Trade Secrets at any time after the date
hereof, without the prior written consent of the Purchaser, except (i) any
information or document required to be disclosed by law or (ii) information
that becomes public knowledge through means other than an act of the Sellers or
any Shareholder. Nothing in this Agreement shall diminish the rights of the
Sellers
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or the Purchaser regarding the protection of Trade Secrets and other
intellectual property pursuant to applicable law.
2.4 TRADE NAME AND CONFIDENTIAL INFORMATION. During the Noncompete Period:
(a) The Sellers and the Shareholders shall not, directly
or by assisting others, own, manage, operate, join, control or
participate in the ownership, management, operation or control of any
business conducted under any corporate or trade name of the Sellers or
any name similar thereto without the prior written consent of the
Purchaser, except that the Shareholders may continue to use the
corporate name "ASGI" and "Nauta, Inc." in connection with the
dissolution and winding-up of the Sellers' operations after the date
of this Agreement; and
(b) The Sellers and the Shareholders shall hold in
confidence all Confidential Information and shall not disclose,
publish or make use of Confidential Information without the prior
written consent of the Purchaser, except (i) any information or
document required to be disclosed by law or (ii) information that
becomes public knowledge through means other than an act of either the
Sellers or the Shareholders.
2.5 NON-COMPETITION.
(a) Coverage. The Sellers and the Shareholders each
hereby acknowledge that the Purchaser conducts Purchaser Activities
throughout the Territory, and acknowledges that to protect adequately
the interest of Purchaser in the practice of the RF-ID Technology
after the date of this Agreement, it is essential that any noncompete
covenant with respect thereto cover all Purchaser Activities and the
entire Territory.
(b) Covenant. During the applicable Noncompete Period,
the Sellers and the Shareholders shall not in any manner (other than
as an employee of or a consultant to the Purchaser or any affiliate of
Purchaser), directly or by assisting others, engage in, have an equity
or profit interest in, or render services (of an executive, marketing,
manufacturing, research and development, administrative, financial or
consulting nature) to any business that conducts any of the Purchaser
Activities in the Territory. Notwithstanding anything herein to the
contrary, nothing in this Agreement shall prevent or prohibit the
Sellers or a Shareholder from owning (i) not more than 5% of a class
of equity securities issued by any entity listed on any national
securities exchange or interdealer quotation system or (ii) shares of
stock of Access Control Technologies, Inc.
2.6 NONSOLICITATION OF EMPLOYEES AND CUSTOMERS. During the
Nonsolicitation Period, the Sellers and the Shareholders shall not in any
manner (other than as an employee of or a consultant to the Purchaser or any
affiliate of the Purchaser), directly or by assisting others:
(a) solicit or attempt to solicit, any business from any
customers of the Purchaser, including actively through prospective
customers, for purposes of providing products or services that are
competitive with the Purchaser Activities; or
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(b) recruit or hire away or attempt to recruit or hire
away, on his behalf or on behalf of any other person, firm or
corporation, any employee of the Purchaser, for purposes of providing
products or services that are competitive with the Purchaser
Activities.
For the purposes of this section, a person shall be considered an employee at
the time of solicitation or recruitment if they were an employee of the
Purchaser or one of its affiliates during the 45 day period prior to such
solicitation or recruitment.
2.7 ACKNOWLEDGMENT. The Sellers, the Shareholders and the Purchaser each
acknowledge and agree that the covenants set forth in Sections 2.3, 2.4, 2.5
and 2.6 are reasonable as to time, scope and territory given the Purchaser's
need to protect its Trade Secrets, Confidential Information and its substantial
investment in its customer base, particularly given (i) the complexity and
competitive nature of the Purchaser's business and (ii) that each Shareholder
has sufficient skills to find alternative, commensurate employment or
consulting work that would not violate Sections 2.3, 2.4, 2.5 or 2.6.
2.8 FURTHER ASSURANCES. Each party hereto from time to time hereafter at
any other party's request and without further consideration shall execute and
deliver to such other party such instruments of transfer, conveyance and
assignment in addition to those delivered pursuant to this Agreement as shall
be reasonably requested to transfer, convey and assign more effectively the
RF-ID Technology Assets to the Purchaser, the costs of which shall be paid by
the requesting party.
2.9 RESTRICTIONS ON TRANSFERABILITY OF AXSI SHARES. Subject to the terms
of Article 3.1.16(b), the Sellers hereby agree not to sell, transfer or
otherwise encumber any of the AXSI Shares until the first anniversary of the
Closing. After the first anniversary of the Closing, the Sellers shall, at
their option, be permitted to sell 100,000 shares of the AXSI Shares and an
additional 100,000 shares of AXSI Shares after each of the second through
fourth anniversary dates of the Closing. Notwithstanding the foregoing,
nothing herein shall prevent (i) the Sellers from distributing the AXSI Shares
to the Shareholders or (ii) the Shareholders from distributing the AXSI Shares
to family members to either satisfy existing obligations to such family members
or for estate planning purposes or (iii) the Sellers from distributing the AXSI
Shares to certain creditors approved in writing by the Purchaser. Upon the
written request of the Sellers or the Shareholders following the Closing, the
Purchaser shall use its reasonable best efforts to cause its transfer agent to
collect and distribute replacement stock certificates to each transferee
according to the written instructions of Sellers or any Shareholder so long as
the transfers contemplated by such instructions are permitted under applicable
law.
2.10 AVAILABILITY OF RULE 144. The Purchaser shall take all commercially
reasonable steps to file future reports with the Securities and Exchange
Commission on a timely basis and otherwise satisfy the prerequisites to permit
the Sellers to utilize Rule 144 with respect to the AXSI Shares when otherwise
permitted to sell in accordance with Article 2.9 of this Agreement.
2.11 DEFAULT ON CONTINGENT PAYMENTS. If Purchaser fails to make a
contingent payment when due and such failure shall have remained unremedied for
a period of ten (10) business days or more after the date on which Purchaser
receives a default notice from the Sellers or any Shareholder, then (i) the
Sellers shall receive a non-exclusive license to practice the RF-ID Technology,
(ii) the Employment Agreements and Noncompete, Nonsolicitation and
Confidentiality Agreements, except for the confidentiality provisions of such
agreements, shall be null and void and of no further force or effect, (iii) the
restrictions set forth in Article 2.9 of this Agreement shall no longer apply
and (iv) the Purchaser will grant the Sellers the right to
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purchase RF-ID Technology products from the Purchaser's suppliers. Nothing in
this Article 2.11 shall relieve Purchaser of its obligations to make the
contingent payments.
REPRESENTATIONS AND WARRANTIES
OF THE
SELLERS AND THE SHAREHOLDERS
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE SHAREHOLDERS.
The Sellers and the Shareholders, jointly and severally, hereby represent,
warrant, covenant and agree to and with the Purchaser as follows (the
"Representations and Warranties"):
3.1.1 INCORPORATION AND QUALIFICATION. The Sellers are duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Sellers have the corporate power to own and
lease its properties and to carry on their business as and where such
business is now conducted. Each Seller is duly licensed, qualified or
domesticated as a foreign corporation in the jurisdictions disclosed
on Schedule 3.1.1, which are all jurisdictions where the character of
the property owned by them or the nature of the business transacted by
them makes such license, qualification or domestication necessary,
except where the lack of qualification would not have a Material
Adverse Effect. For purposes of this Agreement, the term "Material
Adverse Effect" shall mean an act, omission or a circumstance of any
kind whatsoever that has a material and adverse effect on the
business, financial condition, operations, results of operations or
future prospects of the Sellers.
3.1.2 EXECUTION AND ENFORCEABILITY. The Sellers have full corporate
power and authority to enter into and perform this Agreement and each
other agreement, instrument, and document required to be executed by
the Sellers in connection herewith. The execution, delivery, and
performance of this Agreement and such other agreements, instruments,
and documents have been duly authorized by the board of directors of
the Sellers and the Shareholders. This Agreement has been duly and
validly executed and delivered by the Sellers and the Shareholders and
constitutes a valid and binding obligation of the Sellers and the
Shareholders enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally or general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
3.1.3 ABSENCE OF RESTRICTIONS AND CONFLICTS. Except as disclosed on
Schedule 3.1.3, the execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated by this
Agreement and the fulfillment of and compliance with the terms and
conditions of this Agreement do not, with or without the passing of
time or the giving of notice or both, violate or conflict with,
constitute a breach of or default under, result in the loss of any
benefit under, or permit the acceleration of any obligation under, (a)
any term or provision of the charter documents or bylaws of the
Sellers, (b) any judgment, decree or order of any court or
governmental authority or agency to which the Sellers or any
Shareholder is a party or by which any Shareholder or any of his
respective properties is bound, (c) any federal, state, county or
local statute, law, rule or regulation applicable to the Sellers or
the Shareholders, or (d) any instrument, contract or other agreement
to which the Sellers or any Shareholder is a party, or by which any of
them or any of their respective properties is bound, or result in the
creation of any lien, security interest, charge, or encumbrance upon
any of such properties.
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3.1.4 CONSENTS AND APPROVALS. To the knowledge of the Sellers and
the Shareholders, no filing with, and no permit, authorization,
consent or approval of any governmental authority or any other person
is necessary for the consummation by the Sellers or the Shareholders
of the transactions contemplated by this Agreement, including, without
limitation, any actions or notices that must be filed by any party to
this Agreement pursuant to the bulk sales laws of the State of
Virginia.
3.1.5 LEGAL PROCEEDINGS; COMPLIANCE WITH LAWS. Except as disclosed
on Schedule 3.1.5, there are no suits, actions, claims, proceedings or
investigations pending or, to the knowledge of the Sellers or the
Shareholders, threatened against, relating to or involving the
Shareholders or the Sellers before any court, arbitrator or
administrative or governmental body. No inquiry, action, or
proceeding has been asserted, instituted or, to the best knowledge of
the Sellers and the Shareholders, threatened to restrain or prohibit
the carrying out of the transactions contemplated by this Agreement or
to challenge the validity of such transactions or any part thereof or
seeking damages on account thereof. To the knowledge of the Sellers
and the Shareholders, there is no basis for any such valid claim or
action or any other claims or actions which would, or could reasonably
be expected to (individually or in the aggregate), have a Material
Adverse Effect on the business, operations, or financial condition of
the Sellers or result in a material liability of the Sellers. The
Sellers are not and have not been in violation of any applicable
local, state or federal law, ordinance, regulation, order or decree or
any other requirement of any governmental body, agency, authority or
court other than a violation which would reasonably not be expected to
have a Material Adverse Effect on the Sellers. The Sellers have all
licenses, permits or other authorizations of governmental authorities
necessary for the conduct of its business.
3.1.6 OWNERSHIP OF ASSETS AND RELATED MATTERS.
(a) Leases. Schedule 3.1.6(a) of this Agreement sets
forth a true, correct and complete list of all leases and agreements
granting the Sellers possession of or rights to personal property
which provide for lease payments by the Sellers relating to the RF-ID
Technology (the "Personal Property Leases"). The Sellers have
heretofore delivered to the Purchaser correct and complete copies of
all of the Personal Property Leases. All of the Personal Property
Leases are valid and enforceable in accordance with their respective
terms with respect to the Sellers and, to the knowledge of the Sellers
and the Shareholders, each other party thereto (except as enforcement
may be limited by principles of equity, including reasonableness, fair
dealing and limitations on self-help), and there are no existing
defaults (or events or conditions which, with or without notice or
lapse of time or both would constitute a default) of the Sellers or,
to the knowledge of the Sellers and the Shareholders, of any of the
other parties thereto with respect to any Personal Property Leases.
The Sellers have peaceful and undisturbed physical possession of all
equipment and other assets which are covered by the Personal Property
Leases.
(b) Assets. Except for the Personal Property Leases
listed on Schedule 3.1.6(b), attached as Schedule 3.1.6(b) of this
Agreement is a true, correct and complete list of the RF-ID Technology
Assets of the Sellers as of the date hereof. Except as disclosed in
Schedule 3.1.6(b) of this Agreement and except for personal property
leased pursuant to the Personal Property Leases, the Sellers has valid
title to, and physical possession of, the RF-ID Assets, real and
personal, moveable and immovable, tangible and intangible, which is
reflected on Schedule 3.1.6(b), free and
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clear of any and all claims, liens, pledges, security interests,
charges, claims, restrictions and encumbrances of any nature
whatsoever.
(c) No Third Party Options. Except as disclosed on
Schedule 3.1.6(c), there are no existing agreements, options,
commitments or rights with, of or to any person to acquire all or any
portion of the RF-ID Technology Assets, properties or rights of the
Sellers or any interest therein.
(d) Condition of Certain Assets. Except as otherwise
disclosed in Schedule 3.1.6(d) of this Agreement, the machinery,
equipment and other tangible property owned or leased by the Sellers
which makes up the RF-ID Technology Assets are in good operating
condition and good state of repair, subject to ordinary wear and tear.
(e) Third Party Leases. Except as otherwise disclosed in
Schedule 3.1.6(e) hereto, there are no leases, subleases, licenses,
concessions, options or other agreements, written or oral, under which
the Sellers have granted to any other party or parties the right of
use of any portion of the RF-ID Technology Assets.
3.1.7 ABSENCE OF CERTAIN CHANGES. Except as set forth and fully
disclosed on Schedule 3.1.7 of this Agreement, since December 31,
1997, the business of the Sellers has been operated only in the usual
and ordinary course of business and there has not been: (a) any
Material Adverse Effect in the financial condition, business,
prospects, or results of operations of the Sellers; (b) any damage,
destruction or loss (whether or not covered by insurance) materially
and adversely affecting the properties, business or business prospects
of the Sellers; (c) any increase in the fixed compensation payable or
to become payable by the Sellers to any officer, key employee or
agent of the Sellers, or in any insurance, pension or other benefit
plan, payment or arrangement made to, for or with any such officers,
key employees or agents of the Sellers; (d) any loss of any customer
or supplier representing greater than 5% of the last 12 months'
sales; or (e) any material change in the operation of the business of
the Sellers or any material transactions entered into, except changes
and transactions occurring in the ordinary course of business and not
specifically required to be disclosed pursuant to Clauses (a) - (e) of
this Article 3.1.7. In addition, except as set forth and fully
disclosed in Schedule 3.1.7 of this Agreement, since December 31,
1997, the Sellers have not: (i) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute or
contingent) other than in the ordinary course of its business; (ii)
purchased, sold or transferred any asset except in the ordinary course
of business; or (iii) been the subject of or experienced any strike or
other work stoppage or concerted slow down or threat thereof, union
election or attempted bargaining of employees.
3.1.8 TAX RETURNS; TAXES.
(a) For purposes of this Agreement, "Tax" means any
federal, state, provincial, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duty, capital stock,
franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not; "Tax Return" means any
return, declaration, report, claim for refund, or information return
or statement relating
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to Taxes, including any schedule or attachment thereto and any
amendment thereof; and "Code" means the Internal Revenue Code of 1986,
as amended from time to time, and any regulations or published ruling
promulgated or issued thereunder.
(b) Except as disclosed on Schedule 3.1.8(b), the Sellers
have filed all Tax Returns that they were required to file and all
such Tax Returns were correct and complete in all respects. All Taxes
owed by the Sellers (whether or not shown on any Tax Return) which are
due and payable have been paid or accrued. Except as set forth on
Schedule 3.1.8(b) of this Agreement, the Sellers have not been the
beneficiary of any extension of time within which to file any Tax
Return. Except as set forth on Schedule 3.1.8(b) of this Agreement, no
taxing authority in a jurisdiction where the Sellers do not file Tax
Returns has claimed in writing that the Sellers are or may be subject
to taxation by that jurisdiction.
(c) Except as disclosed on Schedule 3.1.8(c), the Sellers
have withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(d) Except as set forth on Schedule 3.1.8(d), there is no
dispute or claim concerning any Tax liability of the Sellers on an
individual or consolidated basis either (i) claimed or raised by any
taxing authority in writing or (ii) as to which any Shareholder or any
employee responsible for Tax matters of the Sellers have knowledge.
Schedule 3.1.8(d) of this Agreement lists all Tax Returns filed with
respect to the Sellers for taxable years ended 1995 through 1997,
indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of an audit. The
Sellers have delivered or made available to Purchaser correct and
complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to
by the Sellers for taxable years ended 1995 through 1997.
(e) Except as set forth in Schedule 3.1.8(e) of this
Agreement, the Sellers have not waived any statutes of limitations
with respect to Taxes or agreed to any extension of time with respect
to the assessment of Taxes.
(f) The Sellers have not filed a consent under Section
341(f) of the Code.
3.1.9 INTELLECTUAL PROPERTY RIGHTS. Schedule 3.1.9 contains a true
and complete list of (a) all patents, patent applications, trademarks,
trademark registrations, trademark applications, service marks,
service mark registrations, service mark applications, trade names,
copyrights, copyright registrations, and copyright applications
("Intellectual Property") owned by the Sellers in connection with the
RF-ID Technology Business presently conducted or as presently proposed
to be conducted, (b) all licenses or other agreements giving the
Sellers rights in Intellectual Property of third parties in connection
with the Sellers' business as presently conducted or as presently
proposed to be conducted (except commercial software for use on
personal computers), and (c) all licenses or other agreements giving
to third parties rights in the Intellectual Property listed on
Schedule 3.1.9. Except as set forth on Schedule 3.1.9 of this
Agreement, the Sellers have good and marketable title, free and clear
of any liens or other encumbrances, to, or possesses adequate and
enforceable licenses or other rights to use, all Intellectual Property
and all computer software, software programs, inventions, drawings,
designs, customer lists, proprietary know-how or information or other
rights in connection
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with the RF-ID Technology Business as presently conducted or as
presently proposed to be conducted (hereinafter, collectively,
"Proprietary Rights"). Each item of Intellectual Property or
potential Intellectual Property owned by the Sellers and listed on
Schedule 3.1.9 has been, to the extent indicated in Schedule 3.1.9,
duly registered with, filed in, or issued by the United States Patent
and Trademark Office, the United States Copyright Office or such other
domestic or foreign government entity as indicated on Schedule 3.1.9,
and such registrations, filings and issuances remain in full force and
effect as of the date of this Agreement. To the knowledge of Sellers,
there is no actual or potential issue or questions as to the validity,
enforceability or other infirmity of the Intellectual Property owned
by Sellers. Except as set forth on Schedule 3.1.9, to the knowledge
of the Sellers and Shareholders, the operations of the RF-ID
Technology Business by the Sellers, including but not limited to use
of patents, trademarks, trade names, service marks and copyrighted
material and to products, processes, services, methods, substances,
parts or other materials currently made, sold or used by or
contemplated to be made, sold or used by the Sellers in connection
with the operation of the RF-ID Business, do not conflict with or
infringe upon any Proprietary Rights of any third party. Except as
set forth on Schedule 3.1.9, the Sellers have not granted to any third
parties exclusive licenses or options to obtain exclusive licenses
under any of the Intellectual Property owned by the Sellers listed on
Schedule 3.1.9. Except as set forth on Schedule 3.1.9, the Sellers
have given no indemnification in connection with any patent,
trademark, copyright or other Proprietary Right as to any product
made, used or sold by any third party. Except as set forth on
Schedule 3.1.9, there are no pending or, to the knowledge of the
Sellers and the Shareholders, threatened claims, proceedings or
actions against the Sellers or any of its licensors that could have a
Material Adverse Effect on the Sellers' Proprietary Rights or that
could limit the Sellers' right to use any patent, trademark, trade
name, service mark or copyrighted material or to make, have made, sell
or use any product, process, service, method, substance, part, or
other material in connection with its business. Except as set forth
on Schedule 3.1.9, there is no infringement by or claim of
infringement against any third party of any Proprietary Rights of the
Sellers which could be likely to have a Material Adverse Effect on the
Sellers' RF-ID Technology Business, operations, condition (financial
or otherwise), or assets.
3.1.10 YEAR 2000 COMPLIANCE. The Sellers have reviewed the RF-ID
Technology with a view to assessing whether it will, in the receipt,
transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data, be vulnerable to any
significant risk that computer hardware, software or any equipment
containing embedded microchips used in the RF-ID Technology Business
will not, in the case of dates or time periods occurring after
December 31, 1999, function at least as effectively as in the case of
dates or time periods occurring prior to January 1, 2000. The Sellers
have taken all action necessary to assure that there will be no
Material Adverse Effect to the RF-ID Technology by reason of the
advent of the year 2000. The Sellers represent and warrant that the
RF-ID Technology is and shall remain century compliant. "Century
Compliant" means that the RF-ID Technology is capable and will remain
capable of providing accurate results using data having date ranges
spanning the twentieth (20th) and twenty first (21st) centuries (the
Y2K Period). Without limiting the generality of the foregoing, the
Sellers represent and warrant that the RF-ID Technology can currently
and shall, during the Y2K Period, continue to (a) manage and
manipulate data involving all dates within the Y2K Period (including
the fact that the year 2000 is a leap year) without functional or data
abnormality related to such dates; (b) manage and manipulate data
involving all dates within the Y2K Period without inaccurate results
related to such dates; (c) have user interfaces and data fields
formatted to distinguish between dates within the Y2K Period;
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and (d) store all core application data in a format that includes
indications of the millennium, century, and decade as well as the
actual year. This representation and warranty of the Sellers shall
not be applicable in the event the RF-ID Technology is integrated with
any other system to the extent that noncompliance or inconsistency
with the Y2K operational representations made in this Article result
from functionality wholly resident without the system integrated with
the RF-ID Technology.
3.1.11 CONTRACTS AND COMMITMENTS.
(a) For purposes of this Agreement, "Contract" means any
contract, agreement, promissory note, debt instrument, lease, license,
commitment, arrangement, undertaking or understanding to which the
Sellers are a party or bound or to which it or its property is
subject, whether written or oral and including each and every
amendment, modification or supplement to any of them. Except for
Contracts listed on another Schedule to this Agreement, each Assumed
Contract is listed on Schedule 3.1.11(a) of this Agreement, other than
contracts, agreements, commitments, arrangements, undertakings or
understandings:
(i) for the purchase or rental of materials and supplies
by the Sellers entered into in the ordinary and usual
course of business which do not individually exceed
$5,000 (treating each purchase order as a separate
agreement) and which are reasonably expected to be
fully performed within six months of their respective
dates; or
(ii) for the purchase of services by the Sellers entered
into in the ordinary and usual course of business
which do not individually involve an amount in excess
of $5,000 and which are reasonably expected to be
fully performed within six months of their respective
dates.
(b) Except as set forth on Schedule 3.1.11(b), the
Sellers have not, directly or indirectly, purchased, leased from
others or otherwise acquired any property or obtained any services
from, or sold, leased to others or otherwise disposed of any property
or furnished any services to, or otherwise dealt with (except with
respect to remuneration for services rendered as a director, officer
or employee of the Sellers), in the ordinary course of business or
otherwise, (i) any shareholder of the Sellers or (ii) any person, firm
or corporation which, directly or indirectly, alone or together with
others, controls, is controlled by or is under common control with the
Sellers or Shareholder. Except as set forth on Schedule 3.1.11(b),
the Sellers do not owe any amount to, or have any contract with or
commitment to, its Shareholders, directors, officers, employees or
consultants (other than compensation for current services not yet due
and payable and reimbursement of expenses arising in the ordinary
course of business), and none of such persons owes any amount to the
Sellers.
(c) Except as set forth on Schedule 3.1.11(c), all of the
Contracts are valid and binding, and are in full force and effect and
are enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditor's rights generally.
Neither the Sellers nor the Shareholders have any knowledge of any
pending or threatened bankruptcy, insolvency or similar proceeding
with respect to any party to any Contract, and to the knowledge of the
Sellers and the Shareholders no event has occurred which (whether with
or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a default thereunder by the Sellers or
any other party thereto. The Sellers have duly
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complied with all material provisions of every Contract to which it is
a party and is not in default as to any such Contract. No condition or
state of facts exists that, with notice or the passage of time, or
both, would constitute a default by the Sellers under any Contract,
except for Contracts the default of which would not have a Material
Adverse Effect on the financial condition of the Sellers. The
Sellers have not waived any material right under any Contract. Except
as set forth on Schedule 3.1.11(c), the Sellers have not guaranteed
any obligations of any other person.
3.1.12 BROKERS' AND FINDERS' FEES. Except for Kabot and Associates,
neither the Sellers nor anyone acting on its behalf has done anything
to cause or incur any liability to any party for any brokers' or
finders' fees or the like in connection with this Agreement or any
transaction contemplated hereby.
3.1.13 NONDISCLOSED PAYMENTS. Neither the Sellers nor any of its
officers or directors, nor anyone acting on behalf of it, have made or
received any material payments not correctly categorized and fully
disclosed in the books and records of the Sellers in connection with
or in any way relating to or affecting the RF-ID Technology Business.
3.1.14 RELATED PARTY TRANSACTIONS. Schedule 3.1.14 of this Agreement
sets forth every business relationship (other than normal employment
relationships with employees other than officers, directors,
Shareholders, and Affiliates (as defined below) or members of their
families), between the Sellers on the one hand, and any of the Sellers
officers, directors, employees and Affiliates, Shareholders, or
members of their families (or any entity in which any of them has a
material financial interest, directly or indirectly), including a
complete and accurate description of the compensation, benefits,
expense reimbursement and other arrangements between the Sellers and
any such person or entity. Except as set forth in Schedule 3.1.14,
none of such parties (other than the Sellers) own any assets which are
used in the Sellers' business, or is engaged in any business which
competes with the Sellers' business. As used herein, an ''Affiliate"
shall mean any person or entity which controls the Sellers, which the
Sellers control, or which is under common control with the Sellers.
For purposes of the preceding sentence, the term "Control" means the
power, direct or indirect, to direct or cause the direction of the
management and policies of a person or entity by voting securities,
contract or otherwise.
3.1.15 CERTAIN CONSENTS. To the best of Sellers' knowledge, there
are no consents, waivers or approvals required to be executed and/or
obtained from third parties in connection with the execution, delivery
and performance of this Agreement and the transactions contemplated
hereby.
3.1.16 REPRESENTATIONS AND UNDERSTANDINGS OF THE SHAREHOLDERS AND THE
SELLERS. Each Shareholder and Seller represents and warrants the
following:
(a) Information Regarding the Purchaser. The Purchaser
has delivered to each Shareholder and Sellers a true and complete copy
of (i) Purchaser's Annual Report on Form 10-KSB for the year ended
December 31, 1997, (ii) Purchaser's definitive proxy statement
relating to its 1998 annual shareholders meeting and (iii) all other
filings (other than preliminary registration and proxy statements)
made by the Purchaser with the Securities and Exchange Commission
between December 1, 1997 and the date hereof (collectively, the "SEC
Documents"). In addition to the SEC Documents, the Purchaser has
provided each Shareholder and Sellers with opportunities to become
familiar with
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the business, financial condition, management, prospects and
operations of the Purchaser, including reasonable opportunities to ask
questions of, receive answers from and obtain information regarding
the Purchaser and its business which is material to each Shareholder's
and Sellers' investment decision.
(b) Shares Not Registered; Indefinite Holding. Each
Shareholder has been advised by the Purchaser, and understand, that:
(i) each Shareholder and Seller must bear the economic risk of an
investment in the AXSI Shares for an indefinite period of time because
the AXSI Shares have not been registered under the Securities Act of
1933, as amended (the "Securities Act") or any applicable state
securities laws; and (ii) the Purchaser is under no obligation to
register the AXSI Shares under such laws. As a result, the AXSI
Shares must be held by the Sellers and the Shareholders until they are
subsequently registered under applicable securities laws, or an
exemption from such registration is available for the transfer of the
AXSI Shares. Accordingly, except as permitted by Article 2.9 of this
Agreement, each Shareholder and Seller agree not to offer, sell,
pledge, hypothecate or otherwise transfer or dispose of any of the
AXSI Shares in the absence of an effective registration statement
under the Securities Act and applicable state securities laws covering
such disposition, or an opinion of counsel, satisfactory to the
Purchaser and its counsel, to the effect that such registration is not
required in respect of such transfer or disposition. Each Shareholder
and Seller represent that the AXSI Shares are being acquired solely
for each of the Shareholder's and Seller's own account for investment
and not with a view toward, or for resale in connection with, any
"distribution" (as that term is used in the Securities Act and the
Rules and Regulations thereunder) of all or any portion thereof.
Because the AXSI Shares have not been registered under applicable
securities laws, each Shareholder and Seller hereby acknowledges that
the AXSI Shares cannot be readily sold and, accordingly, the
Shareholders may not be able to sell or dispose of the AXSI Shares for
an indefinite period of time.
(c) Legends on Certificates. Each Shareholder and Seller
further understand that the certificates for the AXSI Shares shall
bear legends in substantially the following form:
These securities represented hereby have not been registered
under the Securities Act of 1933, or applicable state securities laws,
nor the securities laws of any other jurisdiction. They may not be
sold or transferred in the absence of an effective registration
statement under those securities laws or pursuant to an exemption
therefrom.
(d) "Private Offering" Exemption; Reliance on
Representations. The Sellers and the Shareholders understand that the
offer and sale of the AXSI Shares are not being registered under the
Securities Act or applicable state securities laws in reliance on the
so-called "private offering" exemption provided by Section 4(2) of the
Securities Act and/or Regulation D promulgated pursuant to the
Securities Act, and similar exemptions under applicable state
securities laws, and that the Purchaser is basing its reliance on that
exemption in part on the representations, warranties, statements and
agreements contained herein.
3.1.17 REPRESENTATIONS AND WARRANTIES TRUE. No representation or
warranty of the Sellers or any Shareholder contained in this
Agreement, the disclosure schedules or any other agreement,
instrument, certificate or other writing delivered by or on behalf of
any Shareholder or the Sellers pursuant to this Agreement or any other
agreement or in connection with the transactions
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<PAGE> 18
contemplated herein or therein contains any untrue statement of a
material fact or omits (or will omit) to state a material fact
necessary to make the statements contained herein and therein not
misleading. To the Sellers' and the Shareholders' knowledge, there is
no fact which adversely affects, or in the future may adversely
affect, the assets, properties affairs, results of operations,
condition (financial or otherwise), or prospects of the RF-ID
Technology Business which has not been or is not disclosed in the
Agreement, the disclosure schedules or in any other instruments,
certificates, agreements or writing furnished to the Purchaser by or
on behalf of the Shareholders or the Sellers pursuant to this
Agreement or otherwise in connection with this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE
PURCHASER
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents, warrants, covenants and agrees to and with the Sellers and the
Shareholders as follows:
4.1 ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business as a foreign corporation
in each jurisdiction where the conduct of its business so requires,
except where the failure to so qualify would not have a Material
Adverse Effect on the Sellers' business, financial condition or
results of operations taken as a whole.
4.2 CERTAIN PROCEEDINGS. There is no pending action, arbitration,
audit, hearing, investigation, litigation, or suit (whether civil,
criminal, administrative, investigative, or informal) commenced,
brought, conducted, or heard by or before, or otherwise involving, any
governmental body or arbitrator that has been commenced against
Purchaser and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated in this Agreement.
4.3 BROKERS AND FINDERS FEES. Neither Purchaser nor anyone acting
on its behalf has done anything to cause or incur any liability to any
party for any brokers' or finders' fees or the like in connection with
this Agreement or any transaction contemplated hereby.
4.4 EXECUTION AND ENFORCEABILITY. The Purchaser has full
corporate power and authority to enter into and perform this Agreement
and each other agreement, instrument, and document required to be
executed by the Purchaser in connection herewith. The execution,
delivery, and performance of this Agreement and such other agreements,
instruments, and documents have been duly authorized by the board of
directors of the Purchaser. This Agreement has been duly and validly
executed and delivered by the Purchaser and constitutes a valid and
binding obligation of the Purchaser enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency or other laws affecting creditors' rights generally or
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.5 ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution,
delivery and performance of this Agreement, the consummation of the
transactions contemplated by this Agreement and the
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fulfillment of and compliance with the terms and conditions of this
Agreement do not, with or without the passing of time or the giving of
notice or both, violate or conflict with, constitute a breach of or
default under, result in the loss of any benefit under, or permit the
acceleration of any obligation under, (a) any term or provision of the
charter documents or bylaws of the Purchaser, (b) any judgment, decree
or order of any court or governmental authority or agency to which the
Purchaser is a party or by which the Purchaser or any of his
respective properties is bound, (c) any federal, state, county or
local statute, law, rule or regulation applicable to the Purchaser, or
(d) any instrument, contract or other agreement to which the Purchaser
is a party, or by which it or any of its respective properties is
bound, or result in the creation of any lien, security interest,
charge, or encumbrance upon any of such properties.
4.6 AXSI SHARES. At the time of issuance and any exchanges or
transfers permitted by Article 2.9 of this Agreement, the AXSI Shares
to be delivered to the Sellers pursuant to this Agreement will be duly
authorized, validly issued, fully paid, nonassessable, free of any
liens or encumbrances, and not subject to any preemptive rights or
rights of first refusal created by statute or the Certificate of
Incorporation or Bylaws of Purchaser or any contract or arrangement.
The AXSI Shares will be issued in compliance with all applicable
federal and state securities laws. The Purchaser has all requisite
corporate authority to issue the AXSI Shares to the Sellers.
4.7 CERTAIN CONSENTS. To the best of the Purchaser's knowledge,
there are no consents, waivers or approvals required to be executed
and/or obtained from third parties in connection with the execution,
delivery and performance of this Agreement and the transactions
contemplated hereby.
4.8 NASDAQ LISTING. The Purchaser's common stock is currently
listed on the Nasdaq SmallCap Market and the Purchaser is currently in
compliance with the listing requirements of the Nasdaq SmallCap Market
which are applicable to the Purchaser.
4.9 CAPITAL RESOURCES. The Purchaser will continue to seek
working capital resources to satisfy its working capital requirements.
However, there can be no assurances and the Purchaser is not making
any representations or warranties, that the Purchaser will be
successful in securing any such funding on terms satisfactory to the
Company, or any terms.
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
5. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. All obligations of the
Purchaser hereunder to consummate the transactions contemplated herein at the
Closing are subject to the fulfillment and satisfaction of each of the
following conditions on or prior to the Closing by the Sellers and the
Shareholders, any or all of which may be waived in whole or in part by the
Purchaser, provided that no such waiver shall be effective unless it is set
forth in a writing executed by the Purchaser.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Sellers and the Shareholders contained in this
Agreement, any other agreement and in the Schedules to this Agreement
shall have been true and correct in all material respects as of the
date when made and shall be deemed to be made again at and as of the
date of the Closing and shall be true and correct in all material
respects at and as of such time.
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5.2 COMPLIANCE WITH AGREEMENTS AND CONDITIONS. The Sellers and
each of the Shareholders shall have performed and complied with in all
material respects all covenants, agreements and conditions required by
this Agreement to be performed or complied with by them prior to or on
the date of the Closing.
5.3 CERTIFICATE OF THE SELLERS' PRESIDENT. The President of the
Sellers shall have delivered to the Purchaser a certificate executed
by the President, dated the date of the Closing, certifying in such
detail as Purchaser may reasonably request as to (a) the fulfillment
and satisfaction of the conditions specified in this Section 5 and (b)
the absence of any Material Adverse Effect in the business, assets,
properties, liabilities, results of operations, condition (financial
or otherwise), cash flows or prospects of the Sellers prior to the
Closing.
5.4 RESOLUTIONS. The Purchaser shall have received duly adopted
resolutions of the Board of Directors and the Shareholders of the
Sellers, certified by the Secretary of each Seller, as of the date of
the Closing, authorizing and approving the execution hereof and all
other documents executed by it and the taking of any and all other
actions necessary to enable the Sellers to comply with the terms of
this Agreement.
5.5 GOVERNMENT CONSENTS. The Sellers, the Shareholders and the
Purchaser shall have received all authorizations, consents and
approvals of any government necessary for the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby, all such authorizations, consents and approvals shall be in
full force and effect, and all notices required to be given to any
government shall have been given and all applicable waiting periods
shall have expired.
5.6 OTHER CONSENTS. The Purchaser shall have received all
authorizations and consents which are to the Purchaser's reasonable
satisfaction and are necessary to convey the RF-ID Technology Assets
to the Purchaser.
5.7 NO INCONSISTENT REQUIREMENTS. No action shall have been
instituted by any government or other person (i) against a party
hereto to restrain or prohibit the consummation of the transactions
herein or (ii) which could reasonably be expected to have a Material
Adverse Effect on the business, assets, properties, liabilities,
affairs, results of operations, condition (financial or otherwise),
cash flows or prospects of the Sellers, in the aggregate.
5.8 DUE DILIGENCE. The Purchaser and its representatives shall
have completed their due diligence review of the Sellers' books,
records, governmental filings, agreements, plans and other matters
relating to the Sellers' business, properties, assets, liabilities and
affairs, and shall be reasonably satisfied with the results thereof.
5.9 ARTICLES OF INCORPORATION AND GOOD STANDING CERTIFICATES.
Purchaser shall have received a certified copy of the Sellers'
Certificates of Incorporation (including all amendments) from the
Delaware Secretary of State and a good standing and tax clearance
certificate from the State of Delaware and any other state the Sellers
is qualified to do business in as a foreign corporation.
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5.10 RELEASES. Purchaser shall have received releases from Kabot
and Associates and any other party currently indebted to Sellers if
requested by Purchaser, each in the form of Exhibit "B" attached to
this Agreement.
5.11 PATENT ASSIGNMENT. Purchaser shall have received a patent
assignment(s) from Sellers or the Shareholders, or both, in the form
of Exhibit "C" attached to this Agreement.
5.12 EMPLOYMENT AGREEMENT. The Shareholders shall have each
executed and delivered the Employment Agreement in the form of Exhibit
"D" attached to this Agreement.
5.13 NONCOMPETE, NONSOLICITATION AND CONFIDENTIALITY AGREEMENT.
The Shareholders shall each have executed and delivered the
Noncompete, Nonsolicitation and Confidentiality Agreement in
substantially the form attached hereto as Exhibit "E" attached to this
Agreement.
5.14 BILL OF SALE AND ASSIGNMENT. The Sellers shall have executed
and delivered the Bill of Sale and Assignment in substantially the
form attached hereto as Exhibit "F" attached to this Agreement.
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF THE SELLERS
6. CONDITIONS TO OBLIGATIONS OF THE SELLERS. All obligations of the
Sellers and the Shareholders hereunder to consummate the transactions
contemplated herein at the Closing are subject to the fulfillment and
satisfaction of each of the following conditions on or prior to the Closing by
the Purchaser, any or all of which may be waived in whole or in part by the
Sellers, provided that no such waiver shall be effective unless it is set forth
in a writing executed by the Sellers.
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained in this Agreement shall be true and
correct in all material respects as of the date when made and shall be
deemed to be made again at and as of the date of the Closing and shall
be true and correct in all material respects at and as of such time.
6.2 COMPLIANCE WITH AGREEMENTS AND CONDITIONS. Purchaser shall
have performed and complied with in all material respects all
covenants, agreements and conditions required by this Agreement to be
performed or complied with by Purchaser prior to or on the date of the
Closing.
6.3 CERTIFICATES OF PURCHASER. Purchaser shall have delivered to
the Sellers a certificate executed by one of their respective
officers, dated the date of the Closing, certifying in such detail as
the Sellers may reasonably request as to the fulfillment and
satisfaction of the conditions specified in Articles 6.1 and 6.2.
6.4 RESOLUTIONS. Purchaser shall have delivered to the Sellers
duly adopted resolutions of the Board of Directors of Purchaser,
certified by the Secretary or an Assistant Secretary of Purchaser as
of the date of the Closing, authorizing and approving the execution of
this Agreement and all other actions necessary to enable Purchaser to
consummate the transactions contemplated by this Agreement.
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6.5 ARTICLES OF INCORPORATION AND GOOD STANDING CERTIFICATES. The
Sellers shall have received a certified copy of the Purchaser's
Certificate of Incorporation (including all amendments) from the
Delaware Secretary of State and a good standing certificate from the
State of Delaware.
6.6 EMPLOYMENT AGREEMENT. Purchaser shall have executed and
delivered the Employment Agreement in substantially the form attached
hereto as Exhibit "D."
6.7 NONCOMPETE, NONSOLICITATION AND CONFIDENTIALITY AGREEMENT.
The Purchaser shall have executed and delivered the Noncompete,
Nonsolicitation and Confidentiality Agreement in substantially the
form attached hereto as Exhibit "E."
6.8 BILL OF SALE AND ASSIGNMENT. The Purchaser shall have
executed and delivered the Bill of Sale and Assignment in
substantially the form attached hereto as Exhibit "F" attached to this
Agreement.
ARTICLE VII.
INDEMNIFICATION
7.1 INDEMNIFICATION OBLIGATIONS. From and after the date hereof,
and subject to the limitations and conditions set out herein, the Shareholders
and the Sellers shall indemnify and hold harmless the Purchaser, its
subsidiaries and affiliates, and each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Purchaser
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and other
judgments (at equity or at law) and damages (including, without limitation,
amounts paid in settlement, costs of investigation and reasonable attorneys'
fees and expenses) by reason of, or arising out of:
(a) any breach or inaccuracy of any representation,
warranty, covenant, agreement or undertaking made by any Shareholder or the
Sellers in this Agreement or in any other agreement or certificate delivered by
any Shareholder or the Sellers to the Purchaser in connection with the matters
contemplated hereby or pursuant to the provisions hereof;
(b) all liabilities and obligations of, or claims,
demands or actions against, the Purchaser or the RF-ID Technology Assets of any
nature whatsoever, whether known or unknown, accrued, absolute, contingent or
otherwise, existing as of the date hereof, which are not disclosed in this
Agreement or the Schedules to this Agreement, including, without limitation:
(i) any tax liabilities (to the extent not so reflected or reserved against)
accrued in respect of, or measured by the Sellers' income for any period or
portion of a period prior to the date hereof or arising out of transactions
entered into or any state of facts existing prior to such date; and (ii) any
claims or liabilities arising out of any act or omission of the Sellers or any
of its agents or employees or any claims or liabilities with respect to
defective, or allegedly defective, goods or services; and
(c) all liabilities or obligations of, or any claims,
demands or actions against, the Purchaser or the RF-ID Technology Assets of any
nature whatsoever, whether known or unknown, accrued, absolute, contingent or
otherwise, arising out of the conduct of the Sellers' business (ASGI, Inc. and
Nauta, Inc.) after the date hereof. The claims, liabilities, obligations,
losses, costs, expenses, penalties, fines and
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damages of the Purchaser Indemnified Parties described in this Section as to
which the Purchaser Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Purchaser Losses."
7.2 INDEMNIFICATION PROCEDURES.
(a) Promptly after receipt by a Purchaser Indemnified
Party of notice by a third party of any complaint or the commencement of any
action or proceeding with respect to which indemnification is being sought
hereunder, such Purchaser Indemnified Party shall notify the Sellers and the
Shareholders of such complaint or the commencement of such action or
proceeding; provided, however, that the failure to so notify the Shareholders
and the Sellers shall relieve the Shareholders and the Sellers from liability
which the Shareholders and the Sellers may have hereunder with respect to such
claim if, but only if, and only to the extent that, such failure to notify the
Shareholders and the Sellers results in the forfeiture by or prejudice to the
Shareholders and the Sellers of rights and defenses otherwise available to the
Shareholders and the Sellers with respect to such claim. The Shareholders and
the Sellers shall each have the right, upon written notice to the Purchaser
Indemnified Party, to assume the defense of such action or proceeding,
including the employment of counsel reasonably satisfactory to the Purchaser
Indemnified Party and the payment of the fees and disbursements of such
counsel, unless the Purchaser Indemnified Party shall have been advised by
counsel that representation of the Purchaser Indemnified Party and the
Shareholders and the Sellers by the same counsel would be inappropriate due to
differing interests. In the event, however, that the Shareholders and the
Sellers decline or fail to assume the defense of the action or proceeding or to
employ counsel reasonably satisfactory to the Purchaser Indemnified Party, in
either case within ten (10) business days of receiving notice of a claim
against the Purchaser Indemnified Party, or in the event that counsel to the
Purchaser Indemnified Party shall have advised it that representation by the
Shareholders' and the Sellers' counsel is inappropriate then such Purchaser
Indemnified Party may employ counsel to represent or defend it in any such
action or proceeding and the Shareholders and the Sellers shall pay the
reasonable fees and disbursements of such counsel as incurred; provided,
however, that the Shareholders and the Sellers shall not be required to pay the
fees and disbursements of more than one counsel for all Purchaser Indemnified
Parties in any jurisdiction in any single action or proceeding. In any action
or proceeding with respect to which indemnification is being sought hereunder,
the Purchaser Indemnified Party or the Shareholders and the Sellers, whichever
is not assuming the defense of such action, shall have the right to participate
in such litigation and to retain its own counsel at such party's own expense.
The Shareholders and the Sellers or the Purchaser Indemnified Party, as the
case may be, shall at all times use reasonable efforts to keep the other party
reasonably apprised of the status of the defense of any action, the defense of
which it is maintaining, and such other party shall cooperate in good faith
with the Shareholders and the Sellers or the Purchaser Indemnified Party, as
the case may be, with respect to the defense of any such action.
Notwithstanding the terms of this Section 7.2, the Sellers or the Shareholders
may pursue any claim against a third party with respect to which
indemnification is being sought hereunder, if the Sellers or the Shareholders
first pays to the Purchaser the full amount of the claim for Purchaser Losses
asserted by the Purchaser.
(b) No Purchaser Indemnified Party may settle or
compromise any claim or consent to the entry of any judgment with respect to
which indemnification is being sought hereunder without the prior written
consent of Shareholder, unless such settlement, compromise or consent includes
an unconditional release of the Sellers and each Shareholder from all liability
arising out of such claim or unless the Sellers and each Shareholder has failed
to assume the defense of the action or proceeding. Neither the Sellers or any
Shareholder may, without the prior written consent of the Purchaser Indemnified
Party, settle or compromise any claim or consent to the entry of any judgment
with respect to which indemnification is being sought
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<PAGE> 24
hereunder unless such settlement, compromise or consent includes an
unconditional release of the Purchaser Indemnified Party from all liability
arising out of such claim and does not contain any equitable order, judgment or
term which in any manner affects, restrains or interferes with the business of
the Purchaser Indemnified Party or any of the Purchaser Indemnified Party's
respective affiliates.
7.3 PAYMENT. Subject only to the $20,000 threshold set forth in
Section 7.4 below, the Purchaser may proceed against the Purchase Price to
satisfy any claims for Purchaser Losses prior to the first anniversary of the
Closing, including any claims which are asserted before the first anniversary
of the Closing, but not resolved prior to that date; provided, however, that a
promissory note in an amount not to exceed $85,000, which Sellers intend to
assign to the Juliet E. Briggs Trust, the successor-in-interest by assignment
from Mortgage One Financial Centers, Inc. in satisfaction of certain
obligations of the Sellers to such party shall not be available to the
Purchaser to satisfy claims for Purchaser Losses. From and after the first
anniversary of the Closing, however, the Purchaser may only satisfy claims for
Purchaser Losses by reducing the balance of the contingent payments, unless
the` Sellers or the Shareholders object to such claims in the manner provided
in this Agreement. After the third anniversary of the Closing Date, Purchaser
may only proceed against the Shareholders and the Sellers for any claim for
Purchaser Losses relating to the representations and warranties set forth in
Sections 3.1.8, 3.1.9, 3.1.10 and 3.1.11 of this Agreement if the balance of
the contingent payments which are due the Sellers are insufficient to satisfy
Purchaser Losses for those claims. If the Sellers or any Shareholder objects
to any claim made by the Purchaser under this Agreement, the matter shall be
resolved by arbitration in accordance with the terms of this Agreement, as the
case may be.
7.4 LIMITATION OF INDEMNIFICATION. The indemnification by the
Shareholders and the Sellers and their respective liabilities under this
Agreement shall be limited as follows: (i) the Purchaser shall not be entitled
to any payment from the Shareholders or the Sellers under the indemnification
set forth in this Agreement unless and until the total claims for the Purchaser
under the indemnification equal or exceed TWENTY THOUSAND DOLLARS ($20,000), at
which point the Purchaser shall be entitled to claim for indemnification
dollar-for-dollar for all such damages in excess of $20,000; and (ii) after the
first anniversary date of the Closing Date, only the amount of any future
contingent payments shall be available to satisfy claims for Purchaser Losses
unless any such claim is asserted by Purchaser relating to a breach of the
representations and warranties set forth in Sections 3.1.8, 3.1.9, 3.1.10 and
3.1.11 of this Agreement.
7.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants, agreements and indemnifications made by
each of the parties contained in this Agreement or in any writing delivered
pursuant to the provisions of this Agreement shall survive the investigation
heretofore or hereafter made by the Purchaser and the consummation of the
transactions contemplated herein and shall continue in full force and effect
for the period (the "Survival Period") beginning on the Closing Date and
continuing and including the first business day after the expiration of three
(3) years from and after the Closing date; provided that, representations and
warranties contained in Sections 3.1.8, 3.1.9, 3.1.10 and 3.1.11 shall survive
for the period of the applicable statute of limitations. The survival period
shall be extended automatically to include any time period necessary to resolve
a claim for indemnification which was made before expiration of the Survival
Period but not resolved prior to its expiration; provided, however, that any
such extension shall apply only as to claims asserted and not so resolved
within the Survival Period. Without limiting the generality of the foregoing,
the Sellers and the Shareholders each specifically acknowledge that the
representations, warranties, covenants and agreements set forth herein are not
affected in any way by Purchaser's review of any of the Sellers' minute books,
stock books or corporate records of any sort, by any
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<PAGE> 25
prior discussions among Purchaser, the Sellers and the Shareholders or by any
investigation heretofore or hereafter made by, or on behalf of, Purchaser.
ARTICLE VIII.
MISCELLANEOUS
8.1 NOTICES. All notices, communications and deliveries hereunder
shall be made in writing signed by the party making the same, shall specify the
Article hereunder pursuant to which it is given or being made, and shall be
delivered personally or by registered or certified mail or by any express mail
or courier delivery service (with postage and other fees prepaid) as follows:
To Purchaser: AXCESS Inc.
3208 Commander Drive
Carrollton, Texas 75006
Telecopy: 972.407.0814
Attention: Harry S. Budow
Telecopy: 972.407.0814
with a copy to:
Sayles & Lidji, A Professional
Corporation
4400 Renaissance Tower
1201 Elm Street
Dallas, TX 75270
Attention: Brian M. Lidji
Telecopy: 214.939.8787
To the Sellers and the Shareholders:
ASGI, Inc.
44880 Falcon Place, Suite 107
Dulles, VA 20166
Telecopy: 703.733.0466
with a copy to:
Jay Westermeier
1920 N. Street Northwest
Washington, D.C.
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing. Such notice shall be
effective upon the date of delivery or the intended recipient's refusal to
accept delivery, if sent by personal delivery, registered, certified or express
mail or courier delivery.
8.2 ATTACHMENTS. All Annex(es), Schedules and Exhibits attached
hereto are hereby incorporated into this Agreement and are hereby made a part
hereof as if set out in full in this Agreement.
8.3 ASSIGNMENT; SUCCESSORS IN INTEREST. No assignment or transfer
by any party of its respective rights and obligations hereunder shall be made
except with the prior written consent of the other parties hereto. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and in the
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case of Purchaser, its successors and assigns and, in the case of the Sellers
and the Shareholders, their respective heirs, beneficiaries and permitted
assigns (as may be applicable), and any reference hereto shall also be a
reference to a permitted successor or assign.
8.4 NUMBER; GENDER. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
8.5 CAPTIONS. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise
specified to the contrary, all references to Articles and Sections are
references to Articles and Sections of this Agreement and all references to
Exhibits are references to Exhibits to this Agreement.
8.6 CONTROLLING LAW; INTEGRATION: AMENDMENT. This Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of Texas without reference to Texas choice of law rules and the
parties hereto hereby agree. This Agreement (and the related written agreements
to be entered into in connection with this Agreement) supersedes all
negotiations, agreements and understandings among the parties with respect to
the subject matter hereof and constitutes the entire agreement among the
parties hereto. This Agreement may not be amended, modified or supplemented
except by written agreement of the Sellers, Purchaser and Shareholders.
8.7 COUNTERPARTS. This Agreement may be executed in counterparts,
including the signature pages, each of which shall be deemed an original and
all of which together shall constitute one and the same agreement.
8.8 ENFORCEMENT OF CERTAIN RIGHTS. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give
any person, firm or corporation other than the parties hereto, their successors
or permitted assigns and the Indemnified Parties, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, or result in
such person, firm or corporation being deemed a third party beneficiary of this
Agreement.
8.9 WAIVER. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. A waiver by one party of the
performance of any covenant, agreement, obligation, condition, representation
or warranty shall not be construed as a waiver of any other covenant,
agreement, obligation, condition, representation or warranty. A waiver by any
party of the performance of any act shall not constitute a waiver of the
performance of any other act or an identical act required to be performed at a
later time.
8.10 ARBITRATION; LEGAL PROCEEDINGS.
(a) Except as provided in Article 2, the parties shall
attempt in good faith to resolve any dispute arising out of or
relating to this Agreement, the breach, termination or validity hereof
or the transactions contemplated herein promptly by negotiation
between the Shareholders and a representative of Purchaser and Sellers
who has authority to settle the controversy. Either the Shareholder,
Sellers or Purchaser may give the other written notice that a dispute
exists (a "Notice of Dispute"). The Notice of Dispute shall include a
statement of such party's position and, in the case
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<PAGE> 27
of Purchaser and Sellers, the name and title of the representative who
will represent the Purchaser and the Sellers. Within ten (10) days of
the delivery of the Notice of Dispute, the Shareholders and the
executive representing Purchaser and the Sellers shall meet at a
mutually acceptable time and place, and thereafter as long as they
reasonably deem necessary, to attempt to resolve the dispute. All
documents and other information or data on which each party relies
concerning the dispute shall be furnished or made available on
reasonable terms to the other party at or before the first meeting of
the parties as provided by this paragraph.
(b) Except as provided in Article 2, any controversy or
claim arising out of or relating to this Agreement, the breach,
termination or validity hereof, or the transactions contemplated
herein, if not settled by negotiation as provided in paragraph (a) of
this Article 8.10, shall be settled by arbitration in accordance with
the Commercial Arbitration Rules ("CAR") of the American Arbitration
Association ("AAA"), by three arbitrators from the AAA panel of
arbitrators. Either party may initiate arbitration twenty (20) days
following the delivery of a Notice of Dispute if the dispute has not
then been settled by negotiation, or sooner if the other party fails
to participate in negotiation in accordance with paragraph (a) above.
The three arbitrators shall be appointed as provided by the CAR,
Selection of Arbitrators by the parties. The arbitration procedure
shall be governed by the United States Arbitration Act, 9 U.S.C.
Section 1-16, and the award rendered by the arbitrator shall be final
and binding on the parties and may be entered in any court having
jurisdiction thereof, subject to the court's authority to modify or
review the award as provided in the Act.
(c) It is the intent of the parties that any arbitration
shall be concluded as quickly as reasonably practicable. Unless the
parties otherwise agree, once commenced, the hearing on the disputed
matters shall be held four days a week until concluded, with each
hearing date to begin at 9:00 a.m. and to conclude at 5:00 p.m. The
arbitrators shall use all reasonable efforts to issue the final award
or awards within a period of five business days after closure of the
proceedings. Failure of the arbitrators to meet the time limits of
this Section 8.10(c) shall not be a basis for challenging the award.
(d) Each party shall bear its own costs and pay one-half
of the fees and expenses of the arbitrators.
8.11 RELIANCE ON COUNSEL AND OTHER ADVISORS. Each party has
consulted such legal, financial, technical or other experts as it deems
necessary or desirable before entering into this Agreement. Each party
represents and warrants that it has read, knows, understands and agrees with
the terms and conditions of this Agreement.
8.12 INJUNCTIVE RELIEF. The parties to this Agreement hereby agree
that any remedy at law for any breach of the provisions contained in this
Agreement shall be inadequate and that any party, to the extent permitted by
applicable law, shall be entitled to injunction relief in addition to any other
remedy such party might have under this Agreement.
8.13 SEVERABILITY. If a judicial or arbitral determination is made
that any of the provisions of this Agreement constitutes an unreasonable or
otherwise unenforceable restriction against the Sellers or the Shareholders,
the provisions of this Agreement shall be rendered void only to the extent that
such judicial or arbitral determination finds such provisions to be
unreasonable or otherwise unenforceable with respect
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to Shareholders or the Sellers. In this regard, the parties hereby agree that
any judicial or arbitral authority construing Article 2 of this Agreement shall
be empowered to sever any portion of the Territory, any prohibited business
activity or any time period from the coverage of this Agreement and to apply
the provisions of Article 2 of this Agreement to the remaining portion of the
Territory, the remaining business activities and the remaining time period not
so severed by such judicial or arbitral authority. The time period during
which the prohibitions set forth in Sections 2.4, 2.5, 2.6 and 2.7 of this
Agreement shall apply shall be tolled and suspended with respect to the Sellers
and the Shareholders for a period equal to the aggregate quantity of time
during which the Sellers and the Shareholders violate such prohibitions in any
respect.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement.
AXCESS INC. ASGI, INC.
By: /s/ By: /s/
--------------------------------- -------------------------------------
Harry S. Budow, President and CEO Stephen L. Briggs, President and CEO
NAUTA, INC.
By: /s/
-------------------------------------
Stephen L. Briggs, President and CEO
/s/
-------------------------------------
Stephen L. Briggs, Shareholder
/s/
----------------------------------------
Wayne E. Steeves, Shareholder
/s/
----------------------------------------
Charles William Martin, Jr., Shareholder
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<PAGE> 1
EXHIBIT 99.1
AXCESS INC. ACQUIRES RFID TECHNOLOGY--
SECURES AND PROTECTS PEOPLE AND PROPERTY
DALLAS, TX September 10, 1998 -- AXCESS Inc. (Nasdaq: AXSI) (formerly
Lasertechnics, Inc.) Announced today it acquired the intellectual property
assets of ASGI, Inc. in Dulles, VA, to market and manufacture RFID-based (Radio
Frequency Identification) access control and asset management solutions.
This proprietary technology and the related products were obtained as
part of the company's previously announced strategic plan to bring to market
access control products utilizing the most preeminent emerging technologies in
the rapid-growth security industry. According to Frost & Sullivan research,
1997 total worldwide revenue from the sale of RFID related products was just
under $500 million and is projected to grow to over $3 billion by 2004.
AXCESS Inc. will formally launch its new RFID products at the ASIS
(American Society of Industrial Security) trade show in mid-September. The
company expects to take dealer orders at this show and begin shipments in the
fourth quarter. "This puts the company a full quarter ahead of our business
plan," stated Richard C.E. Morgan, AXCESS Inc. chairman of the board.
Benefits to the company include: ownership and control of this unique
RFID technology and its patents pending; the revenue potential from new
contracts, licensing opportunities and working the existing backlog; and ASGI's
established distributor relationships, strategic partnerships, installed
customer base and the seasoned expertise of their staff -- more than 50 years
experience in RF/security product and systems design and development.
"This move is brilliant on two fronts," stated AXCESS Inc. board
member Gregory W. Haskell, president and coo of XL Vision, Inc., a Safeguard
Scientifics partnership company. "It capitalizes on the trend to RFID as the
most promising technology in the security industry. Secondly, the deal was
struck within the company's existing funding envelope eliminating the need to
raise additional capital or dilute the stock beyond that which had already been
contemplated.
RFID TECHNOLOGY AND THE SOLUTIONS
"Over 60 percent of employers' shrinkage problems come from employee
theft," said Harry S. Budow, president and ceo of AXCESS Inc. "Companies now
realize they have to protect the contents as well as the perimeter. Laptops
are walking out the door in every company."
A system is made up of small active tags, antenna (readers) and a
server (PC). The reader identifies the tag (distance can vary from inches up
to 100 feet) and communicates the information to a server with software for
processing specific applications. In a typical solution assets to be tracked
would be tagged.
As the assets move about the facility, the system logs the activity.
Further each employee badge would contain a tag. The system would then record
who left with what, when. An instant inventory can
<PAGE> 2
be obtained at any time providing manufacturing and logistics companies with
sophisticated inventory management as a value-added to security. The
hands-free AXCESS Inc. RFID solution has unique capabilities such as
Tag-to-Tag(TM) communication which expands the range of field, Functional
Linkage(TM) which associates a person with an asset, and the ability to read
multiple tags in a field allowing speed of access and on-demand inventory
management. The product is easily integrated into existing security systems.
Besides access control and asset management, some typical applications are time
and attendance and vehicle management.
COMBINATION BIOMETRIC READERS
AXCESS Inc. will introduce and demonstrate a combination reader at the
September ASIS trade show. The combi-reader, designed in partnership with XL
Vision, Inc., will read a fingerprint template inexpensively stored on an ID
card and match it to the finger placed on the reader.
"When biometrics are added to the solution, the business is assured
that access to vital assets and data such as development labs and trade secrets
is limited in a truly secure manner," Mr. Budow continued. "Last year
intellectual property fraud losses at US companies exceeded $300 billion."
A biometric uniquely identifies a person via physiological
characteristics such as fingerprint, voice, iris scana, etc. Multi-levels of
security can be installed to limit access to facilities or data. For example,
perimeter doors may trace entry of those with a card containing an RFID tag but
computer room access requires biometric match with a card (or tag) containing
the fingerprint template. Combi-readers can be integrated into virtually any
type of security system and are planned for mass production in the second
quarter, 1999.
The company sells through indirect channels (i.e., dealers,
distributors, integrators and original equipment manufacturers) to the general
business community and government.
AXCESS Inc., founded in 1982 as Lasertechnics, Inc., consists of two
operating groups: (1) AXCESS, headquartered in Dallas, TX with offices in
Australia and Europe, which markets RFID and biometric technology solutions for
access control and asset management systems through indirect channels; produces
fraud-resistent wallet-size ID cards and assembles and sells dye-sublimation
secure card printers and (2) Lasertechnics Marking Corporation of Albuquerque,
NM (wholly-owned) which provides laser marking systems and related technologies
for a diverse range of industrial and commercial markets.
For additional information, please see our website at www.axsi.com.
# # #
9/10/98
<PAGE> 1
EXHIBIT 99.2
AMENDED AND RESTATED INTELLECTUAL PROPERTY TRANSFER AGREEMENT
This AMENDED AND RESTATED INTELLECTUAL PROPERTY TRANSFER AGREEMENT (the
"Agreement") is made as of the ____th day of September, 1998 (the "Execution
Date") by and between AXCESS INC. f/k/a Lasertechnics, Inc., a Delaware
corporation having its principal place of business at 3208 Commander Drive,
Carrollton, Texas 75006 ("AXSI"), and XL Vision, Inc., a Delaware corporation,
having its principal place of business at 10305 102nd Terrace, Sebastian,
Florida 32958 ("XLV").
The following recitals are true and constitute the basis for this Agreement:
A. AXSI and XLV entered into that certain Intellectual Property Transfer
Agreement dated as of January 7, 1998 (the Intellectual Property Transfer
Agreement, as amended, supplemented, modified or restated being hereinafter
referred to as the "Transfer Agreement"); and
B. AXSI and XLV desire to amend and restate certain terms and conditions
of the Transfer Agreement and to reduce such changes to writing.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION I. GENERAL DEFINITIONS.
Terms in this Agreement (other than the headings) that are capitalized have the
meanings established for such terms in the succeeding Paragraphs of this
Section I.
A. "Execution Date" shall have the meaning set forth above.
B. "Intellectual Property" shall mean and include the following
interests and rights: (a) all patents and patent rights including, without
limitation, all utility models, applications, continuations, divisions,
provisionals, continuations-in-part, reissues, and any reexamined patents; (b)
all patentable subject matter including, without limitation, any and all
inventions, information, proprietary processes and formulae, designs,
schematics, parts list, manufacturing diagrams, devices, source code, object
code, algorithms, architecture, structure, display screens, layouts, processes,
development tools, and the like that may contain subject matter that is
eligible to be protected through patent protection, whether or not fixed in a
tangible medium and whether or not reduced to practice; (c) all Trademarks; (d)
all copyrights and copyright applications including, without limitation, all
original works of authorship fixed in a tangible medium, whether registered or
unregistered; (e) all trade secrets; (f) all know-how; (g) all confidential
information including, without limitation, all data, information, compilations,
disclosures, documentation, source code commentary and media constituting,
describing or relating to the above, and the like; and (h) all other world-wide
intellectual property rights, whether currently vested, perfected, registered,
or available only through the common law.
<PAGE> 2
C. "Trademarks" shall mean all rights in registered, unregistered,
intent-to-use, and/or common law trademarks, service marks, trade names, icons,
logos, slogans, trade dress, and any other indicia of source or sponsorship of
goods and services, including all associated and appurtenant goodwill
throughout the world.
D. "Products" shall mean and include the systems specified in Exhibit C
developed and commercialized based on the XLV Technology as defined herein.
E. "Shares" shall mean unregistered shares of the Common Stock, $.01 par
value per share, of AXSI, the certificates for which shall bear the following
restrictive legend:
These securities have not been registered under the Securities Act of 1933 or
any state securities law. They may not be sold or offered for sale or pledged
or otherwise transferred, in the absence of an effective registration statement
as to the securities under that state and any applicable state law, or an
opinion of counsel satisfactory to the company that such registration is not
required.
SECTION II. EXCLUSIVE OPTION.
A. If AXSI either (i) fills an order for a commercial sale of Product(s)
by delivering such Product(s) (not a demonstration unit) to an AXSI customer or
(ii) determines in its sole discretion that there is sufficient market demand
for the Product(s), then AXSI shall have the right to receive, at AXSI's
option, and XLV shall grant to AXSI upon AXSI exercising such option, an
exclusive, fully transferable, worldwide, irrevocable, royalty-free, perpetual
license to make, have made, use, import, sell, and offer to sell, in all fields
of use except the field of use specified in Exhibit D, the Intellectual
Property rights to the XLV Technology (the "Exclusive License Option").
B. AXSI may exercise the Exclusive License Option by notifying XLV in
writing of its desire to obtain the above exclusive license within the time
frame specified in Section II.A above.
C. Upon the exercising of the Exclusive License Option by AXSI, and in
consideration of the above exclusive license, AXSI shall cause to be issued to
XLV Three Hundred Thousand (300,000) Shares.
D. Any Shares issued to XLV under this Section II shall be delivered to
XLV within forty-five (45) days the exercise of the Exclusive License Option by
AXSI.
SECTION III. ASSIGNMENT OF XLV TECHNOLOGY AND XLV LICENSE OPTION.
A. Assignment Option.
<PAGE> 3
1. On May 15, 1999, or upon such date as: (i) AXSI accelerates technology
enhancement funding in accordance with Section V.B.3 of this Agreement and AXSI
pays to XLV all sums required under Section V of this Agreement; and (ii) XLV
delivers all components of the XLV Technology necessary for AXSI to produce
Products on a commercialized basis, whichever date occurs first, and extending
for a period of ninety (90) days thereafter, provided AXSI has exercised the
Exclusive License Option, AXSI shall have the right to receive an assignment of
the XLV Technology (as hereinafter defined) from XLV, such right to be
exercised at AXSI's option (the "Assignment Option"). AXSI may exercise the
Assignment Option by providing XLV with written notice of AXSI's desire to
exercise the Assignment Option within the time frame specified above.
B. Exercise of Assignment Option
Upon AXSI exercising AXSI's Assignment Option in accordance with Section II.A.1
of this Agreement, XLV agrees to the following:
1. XLV hereby agrees to assign, grant, convey, and transfer all
world-wide rights, title, and interest in all of its Intellectual Property
relating or associated in any way to the digital card imager specified in
Exhibit A and the dithering technology described in Exhibit B (collectively,
the "XLV Technology"), including all associated goodwill and world-wide rights
to sue, recover damages, and seek injunctive relief for past infringement or
misappropriation, to AXSI, its successors, assigns and legal representatives.
2. XLV hereby agrees to execute all documents necessary to perfect and
record AXSI's interest in the XLV Technology.
3. XLV hereby agrees to cooperate fully with AXSI in the acquisition,
prosecution and enforcement of all Intellectual Property rights in the XLV
Technology and all improvements to the XLV Technology. Specifically, by way of
example and not limitation, XLV agrees to fully review and execute
declarations, oaths or any patent applications associated with the XLV
Technology, to execute any assignment documents to be recorded in the patent
office of the United States or other countries, to aid in the arguments during
examination and prosecution of any patent applications covering the XLV
Technology, and to cooperate as a consultant and/or witness in any proceedings
to enforce patent or other Intellectual Property rights associated with the XLV
Technology.
4. XLV hereby agrees to assign to AXSI all improvements to the XLV
Technology developed in whole or in part by XLV within ninety (90) days of the
assignment of the XLV Technology. XLV agrees not to disclose or market any
such improvements to any party other than AXSI for ninety (90) days following
the assignment of the XLV Technology.
5. XLV hereby agrees that it shall receive no further compensation beyond
what is specified in this Agreement for the obligations to cooperate and to
assign further rights detailed in this Section.
<PAGE> 4
C. Warranties, Representations, and Covenants of XLV Regarding the
Assignment of XLV Technology. Upon AXSI exercising AXSI's Assignment Option in
accordance with Section II.A.1 of this Agreement, XLV makes the following
ongoing warranties, representations, and covenants to AXSI regarding the
assignment of the XLV Technology:
1. XLV represents, warrants and agrees that: (a) it has all requisite
legal power and authority to execute and deliver the assignments and to perform
its obligations detailed herein; (b) the assignments specified in this Section
II shall be duly executed and delivered by a duly authorized officer of XLV;
(c) the execution and delivery of the assignments specified in this Section II
and the performance of its obligations hereunder shall be duly authorized by
all necessary corporate action of XLV; and (d) that there shall be no
outstanding agreements, assignments, or encumbrances inconsistent with any
provisions of the assignments specified in this Section II.
2. XLV agrees that the assignments, obligations and other terms specified
in this Section II shall constitute legal, valid and binding obligations and
shall be enforceable against XLV in accordance with their terms.
3. XLV represents and warrants that it owns full right, title, and
interest in and to the XLV Technology to be transferred herein, free and clear
of all liens, claims, charges, or encumbrances, and no person or entity other
than XLV has any interest in the XLV Technology, including, without limitation,
any license, security interest, royalty interest, contingent interest or
otherwise. XLV further represents and warrants to AXSI that it has full power
to convey all rights in the XLV Technology.
4. XLV represents that the XLV Technology represents and includes
valuable trade secrets owned by XLV and XLV knows of no instance of disclosure
or other circumstance that would prevent AXSI from asserting and enforcing the
ownership rights in the XLV Technology transferred under this Section II.
5. XLV represents that it knows of no reason why the XLV Technology may
not be patented in the United States or other countries.
6. XLV represents and warrants that neither XLV's present and former
employees and consultants, nor any other present or former employer or
contractor of any kind of XLV's present and former employees and consultants,
has any rights in or claim to any portion of the XLV Technology.
7. XLV represents that no other party has any rights in or claims to any
portion of the XLV Technology.
8. XLV represents that it knows of no United States or foreign
Intellectual Property rights which would be infringed by the use of the XLV
Technology by AXSI in the United States or elsewhere.
<PAGE> 5
9. XLV represents and warrants that it has no obligation to compensate
any person or entity for the development, use, sale, or exploitation of the XLV
Technology to be transferred herein, and XLV has not granted to any other
person or entity any license, option or other rights to develop, use, sell, or
exploit in any manner the XLV Technology transferred herein, whether or not
requiring the payment of royalties or other consideration.
10. XLV agrees that AXSI shall have the sole discretion and right in
determining whether to institute, maintain, or settle any suit for
infringement(s) or misappropriation of any of the Intellectual Property rights
associated with the XLV Technology to be transferred herein with all costs,
attorneys fees, and expenses to be paid by AXSI. AXSI further shall have the
sole right to collect and keep any and all damages recovered from such
infringement or misappropriation, whether past, present, or future.
11. XLV agrees to notify AXSI in writing of any claims, assertions,
allegations, suggestions, and the like that XLV or AXSI infringes any right of
a third party through the use of the XLV Technology to be transferred to AXSI
under this Section II.
D. Warranties, Representations and Covenants of AXSI Regarding the
Assignment of XLV Technology. Upon AXSI exercising AXSI's Assignment Option in
accordance with Section II.A.1 of this Agreement, AXSI makes the following
ongoing warranties, representations, and covenants to XLV regarding the
assignment of the XLV Technology:
1. AXSI warrants and represents that AXSI shall have all requisite legal
power and authority to execute and receive the assignments specified in this
Section II and to perform its obligations hereunder.
2. AXSI agrees that AXSI will present to XLV information related to
dithered 2D imaging product offerings to other parties acquiring the same
dithered 2D imaging products from AXSI that XLV has purchased. AXSI agrees to
provide sufficient information to allow XLV to evaluate the terms and
conditions of such later offerings. XLV shall have the option to acquire
dithered 2D imaging products under such later terms and conditions if XLV
determines that such later terms and conditions are more advantageous than the
terms and conditions offered directly to XLV by AXSI. AXSI is not obligated to
provide the identity of the other parties or any details of the relationship
with such parties not relevant to the offerings to XLV. XLV's option shall be
limited to the acceptance or rejection of all terms and conditions associated
with another party and XLV shall not have the option to accept only some of the
terms and conditions and not others.
E. Assignment Fee
1. Upon AXSI exercising AXSI's Assignment Option, and in consideration of
the above assignment, AXSI agrees to pay XLV a technology assignment fee
payable in full by delivery of Three Hundred Thousand (300,000) Shares. The
Shares paid to XLV under this Section II.D.1., shall be delivered to XLV upon
the completion of the assignment of the XLV Technology.
<PAGE> 6
SECTION IV. LICENSE OF INTELLECTUAL PROPERTY RIGHTS.
A. License Grant. Upon AXSI exercising AXSI's Assignment Option in
accordance with Section II, AXSI agrees to the following:
1. AXSI hereby agrees to grant to XLV, and XLV agrees to accept from AXSI
an exclusive, fully transferable, worldwide, irrevocable, royalty-free, fully
paid-up and perpetual license to make, have made, use, import, sell, and offer
to sell, the Intellectual Property rights to the XLV Technology within the
field of use specified in Exhibit D attached hereto. XLV shall have and
maintain the right to modify and make derivative works of the XLV Technology
for improvements solely applicable within the field of use specified in Exhibit
D and the right to grant sublicenses to its rights limited to within such field
of use. Subject to Section II.B.4, the derivative works of XLV for such
improvements shall be the sole and exclusive property of XLV.
2. For all improvements to the XLV Technology applicable in any manner
outside the field of use specified in Exhibit D, XLV agrees to assign to AXSI
all improvements to the XLV Technology in accordance with Section II.B.1 of
this Agreement.
SECTION V. OPTION PURCHASE AND TECHNOLOGY ENHANCEMENT.
A. Technology Enhancement Services.
1. XLV agrees to continue to provide personnel services and project
management for the enhancement and commercialization of the Products specified
in Exhibit C in accordance with the product development schedule as detailed
below and shown in Exhibit C attached hereto. Any personnel supplied by XLV
shall be deemed to be independent contractors and shall not be deemed to be
employees of AXSI for any purpose.
2. XLV and AXSI acknowledge and agree that staffing for the enhancement
of the Products of employees and/or independent contractors has been completed
(the "Staffing Date").
<PAGE> 7
3. XLV and AXSI agree that upon the first (1st) day of each calendar
month after the Execution Date, AXSI management and XLV project management
personnel shall meet to discuss the development of the Products. XLV shall
supply to AXSI at such meetings the latest Expense Report and any and all
relevant information relating to the enhancement of the Products, including,
but not limited to, all current Product specifications and documentation,
Product development schedules and marketing studies. Any modifications
requested by AXSI to the Product development schedule or Product specifications
described above must be approved in writing by XLV so as not to materially
alter the terms of this Agreement. Such approval shall not be unreasonably
withheld.
4. XLV and AXSI agree that AXSI shall have the right to cease payments
under Section V.B any time after the Staffing Date, without further liability,
in accordance with reasonable business judgment decisions or for failure of the
development to meet critical milestone dates as detailed in Exhibit C. Upon
the cessation of payments under this Section V.A.5 or failure of AXSI to make
payments under Section V.B when due, any Exclusive License Option or Assignment
Option right not previously exercised by AXSI as of the date of payment
cessation shall be terminated, and each of AXSI's and XLV's obligations and
rights under this Agreement, except for liability for pre-termination breaches
of this Agreement, shall be terminated following the notice and cure time
periods provided for under Section IX.R of this Agreement including, but not
limited to, the obligation of XLV to provide personnel services and project
management for the enhancement and commercialization of the Products pursuant
to this Section.
5. AXSI shall notify XLV in writing of its decision to cease payments
pursuant to Section V.A.5 of this Agreement.
B. Option Purchase Rights and Technology Enhancement Funding. In
consideration for the option rights to purchase technology and the technology
enhancements set forth in this Agreement, and provided that AXSI has not
terminated this Agreement for any reason prior to the due date of any
particular payment pursuant to this Section, AXSI, either directly or through a
corporate intermediary, has paid XLV $2,050,000 as of the date of this
Agreement and shall pay to XLV the additional sums specified below:
1. On the 15th day of August, 1998, AXSI shall pay to XLV the sum of
Thirty Six Thousand Nine Hundred Dollars ($36,900.00) related to the original
glyph scanners and software, and Sixty Three Thousand One Hundred Dollars
($63,100.00) in consideration for the option rights set forth in this
Agreement;
2. On the 15th day of September, 1998, and on the 15th day of each month
from September 15, 1998, to December 15, 1998, AXSI shall pay to XLV the sum of
One Hundred Thousand Dollars ($100,000.00);
3. On the 15th day of March, 1999, AXSI shall pay to XLV the sum of One
Hundred Thousand Dollars ($100,000.00);
4. On the 15th day of May, 1999, AXSI shall pay to XLV the sum of One
Hundred Fifty Thousand Dollars ($150,000.00);
5. AXSI may, at AXSI's option, accelerate the technology funding schedule
detailed in this Section V.B. and pay the sums indicated prior to the dates
specified herein; and
<PAGE> 8
6. All sums paid to XLV by AXSI under this Section V.B shall be
nonrefundable. Further, prior to the date of this Agreement, XLV designed the
original glyph scanners and software for AXSI and incurred certain expenses in
connection therewith (the "Design Expenses"). All sums paid to XLV by AXSI
under this Section V.B include all of the Design Expenses and, accordingly, XLV
hereby releases AXSI from all such amounts previously owed for design work
formed by XLV prior to the date of this Agreement.
C. Ownership of Technology.
1. All technology and any Intellectual Property rights associated
therewith conceived or developed by XLV or AXSI in performance of the work or
obligations contemplated under this Agreement relating in whole or in part to
the enhancement and commercialization of the Products (the "Product
Technology"), including but not limited to the Products, or the process of
manufacture thereof, shall be owned solely and exclusively by XLV subject to
the Exclusive License Option and the Assignment Option.
2. XLV shall execute and deliver any documents reasonably requested by
AXSI to transfer such Product Technology to AXSI under the Exclusive License
Option or the Assignment Option in accordance with their respective terms as
described herein.
3. Provided AXSI exercises the Assignment Option, AXSI shall control the
filing of applications for patents, trademarks, copyrights and other
Intellectual Property rights for such Product Technology whether or not it
shall be deemed to have been jointly or solely developed and whether or not one
party is believed to have contributed more to the development than the other.
4. Provided AXSI exercises the Assignment Option, XLV agrees to cooperate
fully in the acquisition, prosecution and enforcement of all Intellectual
Property rights relating in whole or in part to the Product Technology.
Specifically, by way of example and not limitation, XLV agrees to fully review
and execute any patent applications associated with the Product Technology, to
execute any declarations, oaths or assignment documents to be recorded in the
patent office of the United States or other countries, to aid in the arguments
during examination and prosecution of any patent applications covering the
Product Technology, and to cooperate as a consultant and/or witness in any
proceedings to enforce patent or other intellectual property rights associated
with the Product Technology.
SECTION VI. WARRANTIES, REPRESENTATIONS AND COVENANTS REGARDING PRODUCT
ENHANCEMENT AND SERVICES.
A. XLV warrants and represents that XLV consulting and management
personnel will use all reasonable efforts to develop and market the Products.
B. XLV warrants and represents that, provided AXSI has exercised the
Assignment Option, XLV shall not disclose to any third party any proprietary,
confidential, technical and/or business information, know-how, data, operating
practices, developments or inventions relating to the enhancement and
commercialization of the Products.
<PAGE> 9
C. Provided AXSI has exercised the Exclusive License Option, XLV shall
indemnify and hold AXSI harmless against any and all claims by third parties
that may be brought or instituted against AXSI prior to July 1, 2004, that any
use of the XLV Technology contemplated under this Agreement infringes upon any
Intellectual Property rights of any third party. AXSI shall give XLV prompt
notice of any claim and shall offer XLV the opportunity to control the defense
of such claim; provided, however, AXSI shall have the opportunity to control
the defense of such claim if: (1) XLV fails to defend a claim that XLV is not
obligated to indemnify AXSI against such claim; (2) the claiming third party
seeks non-monetary damages against AXSI; or (3) AXSI obtains a legal opinion
that AXSI has defenses different from or additional to defenses available to
XLV. XLV shall have the right to: (i) obtain for AXSI a perpetual,
royalty-free license to use, improve, and commercialize the XLV Technology; or
(ii) refund to AXSI all payments in cash or stock made to XLV under this
Agreement and to terminate this Agreement. XLV shall not be obligated to
indemnify AXSI against claims of infringement to the extent such claim is based
upon AXSI modifications to the XLV Technology or upon AXSI using the XLV
Technology with any other hardware or software. All obligations of XLV to
indemnify AXSI under this Section V.E.3. shall be limited to the total value
of money received by XLV from AXSI under this Agreement. XLV agrees to
cooperate fully and use its best efforts to assist AXSI in the defense of any
such claim brought or instituted against AXSI and shall provide to AXSI
assistance and information as may reasonably be required to fully defend
against such claim including, but not limited to, providing access to fact and
expert witnesses and producing requested documents. XLV agrees that XLV shall
not take any action or any position adverse to the interest of AXSI in the
defense of such claim.
D. XLV agrees that upon the successful completion of a demonstration unit
of the Products, AXSI shall have the right, at AXSI's expense and on behalf of
XLV, to seek the prosecution and acquisition of all Intellectual Property
rights related to the enhancement of the Products. XLV agrees to cooperate
fully with AXSI in the prosecution and acquisition of such Intellectual
Property rights.
E. XLV and AXSI understand and agree that the parties' joint agreement to
cooperate in the enhancement of the Products is not an agreement of partnership
and none is intended hereby. In no event is one party the agent for the other
for any purpose other than as specifically required by this Agreement.
F. Provided AXSI has exercised the Exclusive License Option, AXSI agrees
that AXSI will present to XLV information related to dithered 2D imaging
product offerings to other parties acquiring the same dithered 2D imaging
products from AXSI that XLV has purchased. AXSI agrees to provide sufficient
information to allow XLV to evaluate the terms and conditions of such later
offerings. XLV shall have the option to acquire dithered 2D imaging products
under such later terms and conditions if XLV determines that such later terms
and conditions are more advantageous than the terms and conditions offered
directly to XLV by AXSI. AXSI is not obligated to provide the identity of the
other parties or any details of the relationship with such parties not relevant
to the offerings to XLV. XLV's option shall be limited to the acceptance or
rejection of all terms and conditions associated with another party and XLV
shall not have the option to accept only some of the terms and conditions and
not others.
<PAGE> 10
SECTION VII. LOCK-UP AGREEMENT.
A. XLV hereby irrevocably agrees that it will not sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose of any Shares issued pursuant to the Exclusive
License Option or the Assignment Option for a period of one (1) year after the
exercise of the applicable option without the prior written consent of AXSI;
provided, however, that XLV may pledge such Shares as long as the beneficiary
of such pledge agrees in writing to be bound by the terms of this lock-up
provision.
SECTION VIII. REGISTRATION RIGHTS.
A. Demand Registration. XLV shall have the right on any two (2)
occasions between the second and fourth anniversary of the date on which the
issuance of the Shares was approved by the AXSI stockholders (July 21, 1998) to
make a written request of AXSI for registration with the Securities and
Exchange Commission ("SEC") (a "Demand Registration"), under and in accordance
with the provisions of the Securities Act, for the offer and sale by XLV of the
Shares issued pursuant to this Agreement (the "Registrable Securities"). Upon
receipt of the written request by XLV of a Demand Registration, AXSI shall
prepare and file with the SEC, within sixty (60) days following the receipt of
such request, a registration statement on Form S-3 (or another appropriate
form) (the "Demand Registration Statement") for the offer and sale by XLV of
the Registrable Securities and use reasonable efforts to have each such Demand
Registration Statement declared effective by the SEC as promptly as reasonably
practicable after the filing thereof with the SEC. AXSI shall use its
reasonable efforts to keep such Demand Registration Statement and the
prospectus used in connection therewith effective and in compliance with
applicable law for a period of at least twelve (12) months (the "Effectiveness
Period"). All expenses incident to AXSI's performance or compliance with this
Section VII.A shall be paid by AXSI; provided, however, XLV shall be
responsible for and shall pay any underwriting, brokerage or selling agent's
fees, discounts or commissions, and shall be responsible for and pay all legal
fees and expenses of counsel to XLV or counsel to any underwriter or selling
agent. In connection with any underwritten offering to which AXSI shall have
consented, AXSI shall provide, or cause to be provided, such representations,
warranties, covenants, opinions, "cold comfort" letters, indemnifications,
opportunities for due diligence and other matters, and shall take all such
other reasonable actions, as are customary in underwritten public offerings of
securities. Failure of AXSI to cause the Demand Registration Statement to be
declared effective within one hundred fifty (150) days of filing shall result
in a sum payable to XLV by AXSI (the "Registration Penalty"). The Registration
Penalty shall be equal to the sum of Fifty Thousand Dollars ($50,000.00) for
failing to cause the Demand Registration Statement to be declared effective
within one hundred fifty (150) days after filing and an additional Fifty
Thousand Dollars ($50,000.00) for each ninety (90) day period thereafter until
such time as the Demand Registration Statement is declared effective. Failure
of the Demand Registration Statement to be declared effective for reasons that
can be demonstrated by AXSI to be beyond the control of AXSI shall not result
in a Registration Penalty.
<PAGE> 11
B. Piggyback Registration Rights. If at any time between the second and
fourth anniversary of the date on which the issuance of the Shares was approved
by the AXSI shareholders (July 21, 1998), AXSI proposes to file with the SEC a
registration statement (a "Piggyback Registration Statement") under the
Securities Act with respect to any offering of any Shares, other than (i) a
registration statement with respect to any employee stock options or similar
securities, securities issued or to be issued pursuant to any employee benefit
plan, or any interests in any employee benefit plan, (ii) a registration
statement in connection with the consummation of an acquisition or business
combination transaction, or (iii) a registration statement filed in connection
with an exchange offer or an offering of securities to AXSI's existing security
holders, AXSI shall in each case give written notice (a "Piggyback Registration
Notice") of such proposed filing of such Piggyback Registration Statement to
XLV as soon as practicable, but in no event less than 20 days before the
anticipated filing date, and shall, subject to the provisions of this Section
VII.B, use its commercially reasonable efforts to include in such Piggyback
Registration Statement the Registrable Securities with respect to which AXSI
has received from XLV a written request for inclusion therein within 15 days
after the Piggyback Registration Notice is given to XLV. Notwithstanding the
foregoing, AXSI will not be required to include any Registrable Securities in
any registration statement if such registration statement is declared effective
on or following the fourth anniversary of the approval of the issuance of the
Shares by the AXSI shareholders (July 21, 1998). In the case of an
underwritten registration, if the managing underwriters advise AXSI in writing
that in their opinion the inclusion in such registration statement of all the
Registrable Securities proposed to be included (together with any Shares
proposed to be included in such registration statement by other holders of
Shares who also have exercised piggyback registration rights with respect to
such registration) would interfere with the successful marketing of the
securities proposed to be registered, then XLV shall be entitled to include
such number of shares as, in the opinion of the managing underwriter, would not
so interfere and such shares shall be allocated among XLV and any other holders
of Shares who have also had exercised piggyback registration rights with
respect to such registration pro rata in proportion to their respective
holdings of Shares (or as they may otherwise agree). The delivery of a
Piggyback Registration Notice by AXSI shall in no way obligate AXSI to file a
Piggyback Registration Statement under this Section VII.B and notwithstanding
any such filing, AXSI may, in its sole discretion, determine not to offer the
securities to which the registration statement relates or to otherwise withdraw
such registration statement. XLV may not participate in any registration
hereunder unless XLV (x) in the case of an underwritten registration, agrees to
sell such Registrable Securities on the basis provided in any underwriting
arrangements approved by AXSI, (y) provides all such information as is
reasonably required to effect such registration and completes and executes all
undertakings, questionnaires, powers of attorney, indemnities, underwriting
agreements (in the case of an underwritten registration) and other documents
reasonably required under the terms of such underwriting arrangements (in the
case of an underwritten registration) or applicable laws and (z) in the case of
an underwritten registration, complies with all other reasonable requests of
the managing underwriter (including but not limited to requests for the
delivery of customary legal opinions by counsel to XLV) and complies with all
other reasonable requests related to such registration.
<PAGE> 12
1. If the registration statement filed by AXSI in which the Registrable
Securities are permitted to be included pursuant to this Section VII.B provides
for the offering of Shares on a delayed or continuous basis (a "Shelf
Registration Statement" and, together with a Demand Registration Statement and
a Piggyback Registration Statement, a "Registration Statement"), then any
Registrable Securities included in such Shelf Registration Statement likewise,
subject to the provisions of this Agreement, will be permitted to be offered on
such delayed or continuous basis between the second and fourth anniversary of
the date on which the issuance of the Shares was approved by the AXSI
shareholders (July 21, 1998).
C. Notwithstanding anything to the contrary in Sections VII.A and VII.B,
AXSI may, by delivering written notice to XLV, prohibit offers and sales of
Registrable Securities pursuant to either the Demand Registration Statement or
the Shelf Registration Statement at any time if (A)(i) AXSI is in the
possession of material non-public information relating to AXSI, (ii) AXSI
determines that such prohibition is necessary in order to avoid a requirement
to disclose such material non-public information to the public and (iii) AXSI
determines in good faith that public disclosure of such material non-public
information would not be in the best interests of AXSI and its stockholders or
(B)(i) AXSI has made a public announcement relating to an acquisition or
business combination transaction including AXSI and/or one or more of its
subsidiaries that are material to AXSI and its subsidiaries taken as a whole
and (ii) AXSI determines in good faith that (x) offers and sales of Registrable
Securities pursuant to either the Demand Registration Statement or the Shelf
Registration Statement prior to the consummation of such transaction (or such
earlier date as AXSI shall determine) is not in the best interests of AXSI and
its stockholders or (y) it would be impracticable at the time to obtain any
financial statements relating to such acquisition or business combination
transaction that would be required to be set forth in such registration
statement; provided, however, that upon (i) the public disclosure by AXSI of
the material non-public information described in clause (A) of this paragraph
or (ii) the consummation, abandonment or termination of, or the availability of
the required financial statements with respect to, a transaction described in
clause (B) of this paragraph, the suspension of the use of such registration
statement pursuant to this Section VIII.B shall cease and AXSI shall promptly
notify XLV that dispositions of Registrable Securities may be resumed.
Suspension of offers and sales of Registrable Securities pursuant to this
Section VIII.C shall not occur more than once in any twelve (12) months period,
and such suspension shall not exceed ninety (90) days at any one time unless
agreed to by AXSI and XLV in advance, such agreement not to be unreasonably
withheld when further suspension would provide some benefit to shareholders.
<PAGE> 13
D. AXSI may require XLV to furnish to AXSI such information regarding the
distribution of Registrable Securities as is required by law to be disclosed in
the Registration Statement, and AXSI may delay the filing of the Registration
Statement (or in the case of a Piggyback Registration Statement, exclude such
Registrable Securities) if XLV fails to furnish such information within a
reasonable time after receiving such request. XLV agrees to notify AXSI as
promptly as practicable of any inaccuracy or change in information previously
furnished by XLV to AXSI or of the occurrence of any event as a result of which
the prospectus included in the Registration Statement contains or would contain
an untrue statement of a material fact regarding XLV or XLV's intended method
of distribution of Registrable Securities, or omits to state any material fact
regarding XLV or XLV's intended method of distribution of Registrable
Securities, necessary to make the statements therein, in light of the
circumstances then existing, not misleading and promptly furnish to AXSI any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to XLV or the distribution of the Registrable Securities, an untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances then existing, not
misleading.
E. AXSI will indemnify and hold harmless XLV from and against any and all
loss, damage, liability, cost and expense to which XLV may become subject under
the Securities Act or otherwise, insofar as such losses, damages, liabilities,
costs or expenses arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such Registration
Statement, any prospectus contained therein or any amendment or supplement
thereto, 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, in light of the circumstances in which they were
made, not misleading; provided, however, that AXSI will not be liable in any
such case to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission provided by XLV.
F. XLV will indemnify and hold harmless AXSI, each of its directors, each
of its officers who have signed the Registration Statement, and each person, if
any, who controls AXSI from and against any and all loss, damage, liability,
cost and expense to which any such person may become subject under the
Securities Act or otherwise, insofar as such losses, damages, liabilities,
costs or expenses are arising out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such Registration
Statement, any prospectus contained therein or any amendment or supplement
thereto, 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, in light of the circumstances in which they were
made, not misleading; in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was provided by XLV.
IX. BOARD REPRESENTATION.
A. So long as XLV and permitted assigns own in the aggregate at least
Four Hundred Thousand (400,000) Shares delivered pursuant to this Agreement,
AXSI warrants and represents that AXSI will use its reasonable best efforts to
cause one (1) person designated by XLV to be nominated to serve as a member of
the board of directors of AXSI.
24. GENERAL PROVISIONS.
A. General Warranties, Representations and Covenants.
<PAGE> 14
1. AXSI warrants and represents that: (a) this Agreement has been duly
executed and received by a duly authorized officer of AXSI; and (b) the
performance of its obligations hereunder, will be, duly authorized by all
necessary corporate action of AXSI.
2. Each of XLV and AXSI represents and warrants that the obligations and
other terms specified in this Agreement shall constitute legal, valid and
binding obligations and shall be enforceable against it in accordance with
their terms.
3. XLV warrants and represents that this Agreement has been duly executed
and received by a duly authorized officer of XLV and has been duly authorized
by all necessary corporate action of XLV.
4. AXSI warrants and represents that upon delivery of the Shares pursuant
to the terms of this Agreement, such Shares will be duly authorized, validly
issued, fully paid and nonassessable, and will not have been issued in
violation of any preemptive rights of any stockholder. The Shares to be issued
to XLV pursuant to this Agreement will be issued free and clear of any lien,
option or preemptive or other right or claim.
5. AXSI warrants and represents that AXSI has made available to XLV a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by AXSI with the SEC since December 31, 1996
and prior to or on the date of this Agreement (the "SEC Documents"), which are
all the documents (other than preliminary material) that AXSI was required to
file with the SEC between December 31, 1996 and the date of this Agreement.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such SEC Documents, and none of the SEC Documents 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 as of the date filed.
The financial statements of AXSI included in the SEC Documents complied as to
form in all material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
the unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the
SEC) and fairly present in accordance with applicable requirements of GAAP
(subject, in the case of the unaudited statements, to normal, recurring
adjustments, none of which are material) the consolidated financial position of
AXSI and its consolidated subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash flows of AXSI and
its consolidated subsidiaries for the periods presented therein.
<PAGE> 15
6. AXSI represents that except as set forth in the SEC Documents, as of
the date hereof, there are no liabilities of AXSI of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
that are reasonably likely to have a material adverse effect on the financial
condition or results of operations of AXSI, other than: (i) liabilities
provided for on the balance sheet of AXSI dated as of September 30, 1997
(including the notes thereto) contained in AXSI's Quarterly Report on Form 10-Q
for the period ended September 30, 1997; (ii) additional borrowings of
$2,991,000 under a Note Purchase Agreement among AXSI and Wolfensohn
Associates II L.P.; (iii) the acceleration of all payments due under a
$2,100,000 Secured Promissory Note, dated December 26, 1996, to the benefit of
Xerox Corporation; (iv) liabilities incurred in the ordinary course of business
subsequent to September 30, 1997; and (v) liabilities under this Agreement.
B. Notices.
1. All payments, correspondence, notices, and legal process delivered or
deliverable pursuant to this Agreement shall be in writing and deemed
delivered: (i) upon personal or telecopy (with receipt confirmed) delivery;
(ii) three (3) days after being sent by reliable overnight delivery; or (iii)
ten (10) days after being sent by certified mail, postage prepaid, return
receipt requested, to the addresses set forth below:
If to XLV: Gregory W. Haskell
President and COO
XL Vision, Inc.
10305 102nd Terrace
Sebastian, Florida 32958
If to AXSI: Harry S. Budow
President and CEO
AXCESS INC.
3208 Commander Drive
Carrollton, Texas 75006
with a copy to: Michael R. Dorey
Sayles & Lidji
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
2. Either party hereto may change the address to which notice is to be
sent via written notice to the other party in accordance with the provisions of
this section.
C. Entire Agreement. This Agreement contains the entire understanding
between the parties hereto concerning the subject matter hereof, and supersedes
and replaces all prior negotiations and agreements, if any, both written and
oral.
D. Authority. The individuals executing this Agreement for and on behalf
of XLV and AXSI represent that they are fully authorized and empowered to do so
for and on behalf of their respective principals.
E. Successors and Assigns. This Agreement is intended to benefit and
shall be binding on XLV and AXSI and their respective successors and permitted
assigns.
<PAGE> 16
F. Amendments. No modification, amendment, waiver, termination or
discharge of this Agreement, or any of the terms or provisions hereof, shall be
binding upon either of the parties unless confirmed by a written instrument
signed by both parties.
G. No Waiver. No waiver by either party of any term or provision of this
Agreement or of any default hereunder shall affect such party's rights
thereafter to enforce such term or provision or to exercise any right or remedy
in the event of any other default, whether or not similar.
H. Severability. If any provision of this Agreement shall be held void,
voidable, invalid or inoperative, no other provision of this Agreement shall be
affected as a result thereof, and accordingly, the remaining provisions of this
Agreement shall remain in full force and effect as though such void, voidable,
invalid or inoperative provision had not been contained herein.
I. Confidentiality. XLV and AXSI agree to maintain all terms and
conditions of this Agreement in strictest confidence, except as otherwise
required by law, including the public disclosure requirements of AXSI under
federal securities law and applicable exchange or Nasdaq rules and listing
agreements. The parties agree that, except as required by law, including the
public disclosure requirements of AXSI under federal securities law and
applicable exchange or Nasdaq rules and listing agreements, neither AXSI nor
XLV shall issue any publicly available reports, statements or releases
pertaining to this Agreement without the prior consent of the other party,
which consent shall not unreasonably be withheld or delayed.
J. Cumulative Rights and Remedies. Except as otherwise provided in this
Agreement, all rights and remedies herein or otherwise shall be cumulative, and
none of them shall limit any other rights or remedies.
K. Choice of Law. The validity, performance, and all matters relating
to the effect of this Agreement and any amendments hereto shall be governed by
the laws of the State of Texas without regard to choice of law provisions,
statutes, regulations or principles of this or any other jurisdiction.
L. Non-Agency Relationship. It is understood and agreed that no agency
relationship is involved or created with respect to this Agreement.
M. Survival. All representations, warranties and covenants contained in
this Agreement shall continue in full force and effect and shall survive
notwithstanding the full payment of all amounts due hereunder or the
termination of this Agreement in any matter whatsoever.
N. Headings. The headings contained herein are for the convenience of
the parties only and shall not be interpreted to limit or affect in any way the
meaning of the language contained in this Agreement.
<PAGE> 17
O. Limitations of Liability. NOTWITHSTANDING ANY OTHER PROVISIONS OF
THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL XLV OR AXSI, ANY OF ITS OR
THEIR AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS
OR SUBCONTRACTORS BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF XLV OR AXSI OR ANY OF THEIR RESPECTIVE AFFILIATES,
EVEN IF XLV OR AXSI OR SUCH AFFILIATE HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES, OR FOR PUNITIVE DAMAGES, LOSS OF ANTICIPATED PROFITS, SAVINGS OR
BUSINESS, LOSS OF COMMERCIAL REPUTATION OR OTHER ECONOMIC LOSS, OR FOR DAMAGES
THAT COULD HAVE BEEN AVOIDED, USING REASONABLE DILIGENCE BY XLV OR AXSI OR SUCH
AFFILIATE.
P. Defaults and Remedies.
1. AXSI and XLV agree and understand that the occurrence or existence of
any one or more of the following events will constitute a default by AXSI:
(i). Material breach by AXSI of any material representation or warranty;
or
(ii). Material breach by AXSI of any material covenant after a thirty (30)
day notice and grace period to cure such breach.
2. AXSI and XLV agree and understand that the occurrence or existence of
any one or more of the following events will constitute a default by XLV:
(i). Material breach by XLV of any material representation or warranty; or
(ii). Material breach by XLV of any material covenant after a thirty (30)
day notice and grace period to cure such breach.
3. AXSI and XLV agree that in the event of Default by AXSI, XLV shall
have the following remedies:
(i). XLV may terminate the Agreement in addition to remedies at law or
equity subject to any License Option or Exclusive License Option exercised and
continuing in effect. The Exclusive License Option or Assignment Option if not
previously exercised shall terminate.
4. AXSI and XLV agree that in the event of Default by XLV, AXSI shall
have the following remedies:
(i). AXSI may terminate the Agreement and cease payments pursuant to
Section V.A.5 in addition to remedies at law or equity.
Q. Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by the
following techniques in the order provided:
1. Face-to-face good faith negotiations between the respective
Presidents of XLV and AXSI;
<PAGE> 18
2. Mediation; and
3. Binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
IN WITNESS WHEREOF, the parties hereto have caused their respective duly
authorized representatives to execute this Agreement as of the date first above
written:
AXCESS INC.
("AXSI")
By: /s/
---------------------------------------------
Harry S. Budow, Chief Executive Officer
and President
XL VISION, INC.
("XLV")
By: /s/
---------------------------------------------
Gregory W. (Bill) Haskell, Chief Operating
Officer and President
