<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________________
TO ________________.
Commission File Number: 0-11933
AXCESS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 85-0294536
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS
Shares of common stock outstanding on November 1, 1999: 3,184,440. Shares of
non-voting common stock outstanding on November 1, 1999: 112,492.
Transitional Small Business Disclosure Format (Check One); Yes No X
---- ----
<PAGE> 2
AXCESS INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements:
Condensed Balance Sheets at September 30, 1999
And December 31, 1998 (Unaudited)..............................................................1
Condensed Statements of Operations for the Three And Nine
Months ended September 30, 1999 and 1998 (Unaudited)...........................................3
Condensed Statements of Cash Flows for the Nine Months
ended September 30, 1999 and 1998 (Unaudited)..................................................4
Notes to Condensed Financial Statements (Unaudited)............................................5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation......................................................................10
PART II. OTHER INFORMATION
Item 2. Changes in Securities.........................................................................16
Item 6. Exhibits and Reports on Form 8-K..............................................................17
SIGNATURES......................................................................................................21
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AXCESS INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .................... $ 81,124 $ 1,575,429
Note receivable from stockholder ............. -- 1,030,624
Accounts receivable - trade .................. 223,558 30,987
Inventory .................................... 1,007,346 256,216
Prepaid expenses and other ................... 755,678 160,087
------------- -------------
Total current assets .............. 2,067,706 3,053,343
Net assets of discontinued operations ........ 57,716 3,186,253
Property, plant and equipment, net ........... 620,531 574,499
Long term note receivable - stockholder ...... 3,902,375 --
Purchased technologies, net .................. 6,243,524 1,714,449
Deferred license fee and other assets ........ -- 542,804
------------- -------------
Total assets ......................... $ 12,891,852 $ 9,071,348
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Convertible notes payable to stockholders .... $ 1,053,508 $ 1,966,900
Notes payable ................................ 590,700 90,882
Dividends payable ............................ 522,411 481,339
Accounts payable ............................. 662,378 466,940
Other accrued liabilities .................... 823,013 1,985,002
------------- -------------
Total current liabilities ........... 3,652,010 4,991,063
Note payable - long term ....................... -- 535,205
Notes payable to stockholders .................. 6,931,868 1,470,000
------------- -------------
Total liabilities .................... $ 10,583,878 $ 6,996,268
------------- -------------
</TABLE>
(Continued)
See accompanying notes to unaudited condensed financial statements.
1
<PAGE> 4
AXCESS INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Stockholders' equity:
Convertible preferred stock:
7,000,000 shares authorized in 1999 and 1998
Series A: $26.00 stated value; 57,692
shares outstanding in 1999 and 1998 ............................... $ 1,500,000 $ 1,500,000
Series B: $28.40 stated value; 52,817
shares outstanding in 1999 and 1998 ............................... 1,500,000 1,500,000
Series C: $30.20 stated value; 35,427
shares outstanding in 1999 and 1998 ............................... 1,069,880 1,069,880
Series I: $10,000.00 stated value; 635
shares outstanding in 1999 and 623 in 1998 ........................ 6,350,000 6,230,000
Series J: $10,000.00 stated value; 1,747
shares outstanding in 1999 and 1,688 in 1998 ...................... 17,475,000 16,880,000
Series 1999: $10,000 stated value; 125 shares
outstanding in 1999 and none in 1998 .............................. 1,250,000 --
Common stock, $.01 par value, 12,000,000 shares
authorized; 3,179,368 shares issued and outstanding
in 1999 and 2,479,368 in 1998 ..................................... 31,794 28,794
Non-voting convertible common stock, $.01 par value,
112,500 shares authorized; 112,492 shares issued and
outstanding in 1999 and 1998, convertible into common
stock on a one share for one share basis .......................... 1,125 1,125
Additional paid-in capital ........................................ 60,344,858 58,515,848
Accumulated deficit ............................................... (87,214,683) (83,650,567)
------------- -------------
Total stockholders' equity ........................................ 2,307,974 2,075,080
------------- -------------
Total liabilities and stockholders' equity ........................ $ 12,891,852 $ 9,071,348
============= =============
</TABLE>
See accompanying notes to unaudited condensed financial statements.
2
<PAGE> 5
AXCESS INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales ............................................ $ 422,749 $ -- $ 545,953 $ --
Cost of sales .................................... 213,751 -- 279,501 --
------------ ------------ ------------ ------------
Gross profit ................................ 208,998 -- 266,452 --
------------ ------------ ------------ ------------
Expenses:
Research and development .................... 526,895 550,000 1,167,488 2,250,000
General and administrative .................. 725,486 881,133 2,151,637 2,111,631
Selling and marketing ....................... 723,994 -- 1,937,149 --
Depreciation and amortization ............... 219,443 278,638 489,626 1,045,576
------------ ------------ ------------ ------------
Total operating expenses ................. 2,195,818 1,709,771 5,745,900 5,407,207
------------ ------------ ------------ ------------
Loss from operations ..................... (1,986,820) (1,709,771) (5,479,448) (5,407,207)
------------ ------------ ------------ ------------
Other income (expense):
Interest income ............................. 81,621 25,775 149,571 74,614
Interest expense ............................ (235,119) (144,239) (394,480) (525,009)
Other ....................................... (1,167) 12,188 2,039,688 29,635
------------ ------------ ------------ ------------
Other income (expense), net ...... (154,665) (106,276) 1,794,779 (420,760)
------------ ------------ ------------ ------------
Loss from continuing operations .................. (2,141,485) (1,816,047) (3,684,669) (5,827,967)
Discontinued operations:
Loss from operations ............................. -- (1,899,663) -- (3,893,520)
Gain (loss) on disposal .......................... -- (750,000) 1,856,625 (750,000)
------------ ------------ ------------ ------------
Gain (loss) from discontinued operations ......... -- (2,649,663) 1,856,625 (4,643,520)
------------ ------------ ------------ ------------
Net loss ............................. (2,141,485) (4,465,710) (1,828,044) (10,471,487)
Preferred stock dividend requirement ............. 595,578 413,715 1,736,072 1,037,273
------------ ------------ ------------ ------------
Net loss attributable to
common stock ................... $ (2,737,063) $ (4,879,425) $ (3,564,116) $(11,508,760)
============ ============ ============ ============
Basic and diluted net loss per share
Continuing operations ........... $ (0.83) $ (0.85) $ (1.67) $ (2.67)
Discontinued operation .......... $ -- $ (1.00) $ 0.57 $ (1.80)
Net loss ....................... $ (0.83) $ (1.85) $ (1.10) $ (4.47)
Weighted average shares of common stock
outstanding ................................. 3,291,860 2,642,067 3,244,189 2,576,850
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited condensed financial statements.
3
<PAGE> 6
AXCESS INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Loss from continuing operations ....................................... $ (3,684,669) $ (5,827,967)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization ................................... 489,625 1,045,576
Amortization of financing discount and issuance
costs ......................................................... 43,868 100,073
Gain on sale of assets .......................................... (2,033,024) --
Non-cash compensation ........................................... -- 50,000
(Increase) decrease in:
Accounts receivable ......................................... (15,956) --
Inventory ................................................... (298,151) --
Prepaid expenses and other .................................. (161,612) (21,644)
Other assets ................................................ 10,061 11,263
Increase (decrease) in:
Accounts payable ............................................ 206 (1,528,574)
Accrued liabilities ......................................... (1,116,096) 365,158
------------- -------------
Net cash used in operating activities ............... (6,765,748) (5,806,115)
------------- -------------
Cash flows from investing activities:
RFID technology purchase .............................................. -- (1,089,249)
Capital expenditures .................................................. (93,743) (224,164)
Proceeds from sale of assets .......................................... 470,116 --
------------- -------------
Net cash provided (used) by investing activities .... 376,373 (1,313,413)
------------- -------------
Cash flows from financing activities:
Borrowings under financing agreements ................................. 3,627,282 1,470,000
Principal payments on financing agreements ............................ (418,546) (2,605,527)
Principal payments on notes receivable ................................ 623,249 --
Net proceeds from issuance of preferred and common stock .............. -- 9,253,012
------------- -------------
Net cash provided by financing activities ........... 3,831,985 8,117,485
------------- -------------
Net cash provided (used) by discontinued
operations ..................................... 1,063,085 (2,100,298)
------------- -------------
Net decrease in cash and cash equivalents ........... (1,494,305) (1,102,341)
Cash and cash equivalents, beginning of period ............................ 1,575,429 1,102,341
------------- -------------
Cash and cash equivalents, end of period .................................. $ 81,124 $ --
============= =============
Supplemental information:
Cash paid during the period for interest .............................. $ 27,459 $ 119,309
============= =============
</TABLE>
See accompanying notes to unaudited condensed financial statements.
4
<PAGE> 7
AXCESS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial reporting. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements and should be
read in conjunction with the audited financial statements and notes
thereto included in the company's Form 10-KSB for the year ended
December 31, 1998. Certain reclassifications have been made to the
prior period amounts in order to present the financial position and
results of operations on a consistent basis. In the opinion of
management, all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial position at
September 30, 1999, results of operations for the three and nine month
periods ended September 30, 1999 and 1998, and cash flows for the nine
months ended September 30, 1999 and 1998 have been made. The results of
operations for any given interim period are not necessarily indicative
of the results for the entire year.
The company has reclassified its September 30, 1998, condensed
financial statements to present the imaging business and Lasertechnics
Marking Corporation ("LMC") as discontinued operations ( Note 2).
(2) DISCONTINUED OPERATION
On October 21, 1998, the company's Board of Directors approved a plan
to exit the imaging business as part of the strategy to redeploy and
refocus the company's resources on its core RFID asset, vehicle and
personnel tracking business. The sale of the assets of the imaging
business was completed on December 15, 1998. The company reported a
sales price of $500,000 and recorded a loss of $1,095,920 on the
disposal in 1998. The remaining $57,716 of net assets of the
discontinued imaging business are valued at net realizable value as of
September 30, 1999. For the nine months ended September 30, 1999 and
1998, the company recorded the following operating results of the
imaging business. (There is no related income tax benefit or expense):
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Sales $ -- $ 1,911,018
Costs and expenses -- 3,443,887
------------------ ------------------
Loss from discontinued operation $ -- $ (1,532,869)
================== ==================
Loss per diluted common share $ -- $ (0.61)
</TABLE>
On April 30, 1999, the company completed the sale of its LMC subsidiary
to affiliates of Amphion Capital Management ("Amphion"). The company's
rights and interests in DataGlyph (TM) and the technology under
development with XL Vision, Inc. were also included in the sale. The
company received $0.5 million in cash, $2.0 million in debt
cancellation, a $4.0 million note receivable due March 2002 (or 2004
under certain conditions), a $0.5 million demand note receivable and a
warrant to purchase equity in the Amphion-controlled enterprise to
which Amphion transferred these
5
<PAGE> 8
AXCESS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
businesses and assets with an exercise price of $2.50 per share,
representing approximately 8% of that enterprise. If LMC is
subsequently sold prior to April 2001 by the Amphion-controlled
enterprise, the company has the option to exchange its warrant for
twenty percent of the excess profits (as defined in the acquisition
agreements) from any such sale. The company realized a gain of
$3,900,734 from the disposition of LMC and the technology assets in the
quarter ended June 30, 1999. Of the gain, $1,856,625 resulted from the
sale of LMC and was, therefore, reported as a gain from discontinued
operations. The remainder of the total gain, $2,044,109, was
attributable to the sale of the technology assets and was included in
the results of continuing operations. At September 30, 1999, there was
no balance remaining in net assets of discontinued operations
pertaining to LMC.
For the nine months ended September 30, 1999 and 1998, the company
recorded the following results of LMC, which have been reclassified to
"loss from discontinued operations" for all periods presented. (There
is no related income tax benefit or expense).
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Sales $ -- $ 3,790,467
Costs and expenses -- 4,251,455
------------------ ------------------
Loss from operations (460,988)
Gain on disposal 1,856,625 --
------------------ ------------------
Gain (loss) from discontinued operation $ 1,856,625 $ (460,988)
Gain (loss) per diluted common share $ 0.57 $ (0.18)
</TABLE>
(3) ACQUISITION OF PRISM VIDEO ASSETS
On July 28, 1999, the company acquired substantially all of the assets,
including the network video technology, of Prism Video, Inc. ("Prism"),
a privately-held corporation unaffiliated with the company. Prism is
engaged in the design, manufacture and marketing of video security
technology and video storage products.
6
<PAGE> 9
AXCESS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<S> <C>
The purchase price, which is subject to adjustment in accordance with
the terms of the purchase agreement, consisted of:
Non-interest bearing note payable, due December 31, 2002
discounted at 10%......................................................... $ 3,100,725
125 shares of Series 1999 preferred stock, $10,000 per share stated
value, convertible into 500,000 shares of common stock at a
conversion price of $2.50 per share....................................... 1,250,000
Warrant to purchase 500,000 shares of common stock at $2.50
per share................................................................. 1,035,000
Assumption of specific liabilities........................................ 227,005
------------
Total purchase price...................................................... $ 5,612,730
============
</TABLE>
The note payable has a face amount of $4,000,000 and is secured by the
company's $3,902,375 note receivable from Amphion Ventures, L.P. In
addition, the shares of common stock which Prism may acquire upon
conversion of preferred stock or by exercise of the warrant are subject
to a three-year lockup from the date of the closing, which may be
reduced to two years upon the occurrence of certain events. The warrant
is exercisable on or before July 28, 2004. Prism has agreed not to
convert the preferred stock or exercise the warrant until the company
obtains stockholder approval to issue the common stock. The company
intends to submit this proposal at its 2000 annual meeting of
stockholders.
The purchase price has been allocated to the assets and liabilities
acquired based on preliminary estimates of fair value as follows:
<TABLE>
<S> <C>
Accounts receivable...................................... $ 176,615
Inventory................................................ 452,979
Purchased technology..................................... 4,869,005
Other assets, net........................................ 114,131
------------
Total purchase price..................................... $ 5,612,730
============
</TABLE>
The purchased technology consists of proprietary digital video
compression technology used in security video and CCTV products as well
as the related U.S. and international patent rights. The purchase
technology is being amortized over an average life of 5 years.
(4) NOTE PAYABLE
In September 1998, the company acquired the RFID based intellectual
property assets of ASGI, Inc. and Nauta, Inc. In connection with this
transaction, the company executed a one-year promissory
7
<PAGE> 10
AXCESS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
note in the amount of $685,000 which bears interest at the prime rate.
As of September 30, 1999, the company was past due on its payment
obligations under the note, which constitutes a default under the terms
of the note. The balance of the note payable was $73,508 as of
September 30, 1999. The noteholders have the right to accelerate
payments on the note, but have neither done so nor indicated any intent
to do so. However, there can be no assurance that the noteholders will
not assert their rights under the note agreement.
On September 30, 1999, the company signed a 10% convertible note
maturing September 30, 2002, under which the company could borrow up to
$6,000,000 from Amphion. The note holder may convert all or any portion
of the indebtedness into Series 1999 Non-Voting Preferred Stock of the
company (Note 6). Initial note borrowings totaling $3,787,275 were used
to refinance a series of demand notes, including accrued interest owed
to Amphion. In consideration for the financing arrangement, the company
issued at closing a warrant to acquire 180,362 shares of the company's
Non-Voting Common Stock at a rate of $2.10 per share. The company may
be required to issue additional warrants covering up to an aggregate of
533,923 shares of Non-Voting Common Stock based on the outstanding
balance of the convertible notes on each of the first two anniversary
dates. The outstanding warrant was valued at $422,011 and recorded as
prepaid interest which will be amortized over 12 months.
(5) CONTINGENCIES
On February 28, 1996, an investor group filed suit against the company.
This lawsuit arose out of the company's refusal to recognize the
investor group's attempt to exercise an option to purchase 70,000
shares of common stock at $9.00 per share. The option had been granted
to the company's former President and CEO who attempted to transfer his
option to an investor group on the last day of the option term in
September 1995. On that same day, the investor group attempted to
exercise the option. The company refused to recognize the attempted
transfer of the option to the investor group on the primary grounds
that the option was granted personally to the company's former
President and CEO and the company believed that it was not transferable
to third parties. The lawsuit sought monetary damages that the investor
group alleged to be not less than $2,800,000. In March 1999, the
parties agreed to the principal terms under which the lawsuit would be
settled and dismissed, with prejudice. Under a settlement reached in
the third quarter of 1999, the company paid out $925,000 to the
investor group with an additional $700,000 payable in 2000. The company
had fully accrued the settlement costs as of June 30, 1999.
The company is involved in other various claims and legal actions
arising in the ordinary course of business. Estimated legal and
litigation costs are reflected in the accompanying financial
statements. In the opinion of management of the company, the ultimate
disposition of these matters will not have a material effect on the
accompanying condensed financial statements.
(6) PREFERRED STOCK
As part of the Prism purchase, the company issued 125 shares of Series
1999 Voting Preferred Stock. Each share has a $10,000 stated value and
is convertible to Common Stock at $2.50 per common share. Dividends
accrue at 8% per year and can be paid with additional shares at the
company's option.
8
<PAGE> 11
AXCESS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The company's Series 1999 Non-Voting Preferred Stock has a $10,000 per
share stated value and is convertible to Non-Voting Common Stock at
$2.10 per share. Dividends accrue at 8% per year and can be paid, at
the company's option, with additional shares of Series 1999 Non-Voting
Preferred Stock.
(7) RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, "Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133") was issued. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
"derivatives") and for hedging activities. It requires that all
derivatives be recognized as either assets or liabilities at fair
value. The accounting for gains and losses from changes in the fair
value of a derivative depends on the intended use of the derivative and
its resulting classification as one of three designated types of hedges
or as a non-hedging instrument. SFAS 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. The adoption of
this statement is not expected to have a material impact on the
company's financial statements and related disclosures.
9
<PAGE> 12
AXCESS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In September 1998, the company acquired its active Radio Frequency
Identification (RFID) technology. The company determined this technology to be
its primary and core strategic focus, based on market demand, market size,
product differentiation, competitive environment and other factors.
On October 21, 1998, the company's Board of Directors approved a plan
to exit the imaging business formerly operated by its Sandia subsidiary as part
of the company's strategy to redeploy and refocus the company's resources on its
core RFID asset, vehicle and personnel tracking business. The sale of the
imaging business was completed on December 15, 1998. The company reported a
sales price of $500,000 and recorded a loss of $1,095,920 on the disposal in
1998.
In March 1999, the company entered into a definitive agreement to sell
its Lasertechnics Marking Corporation ("LMC") subsidiary to affiliates of
Amphion Capital Management, a major stockholder of the company. The company's
rights and interests in DataGlyph(TM) and the technology under development with
XL Vision, Inc. were also included in the sale. On April 30, 1999, the company
completed the sale and received $0.5 million in cash, $2.0 million in debt
cancellation, a $4.0 million note receivable due March 2002 (or 2004 under
certain conditions), a $0.5 million demand note receivable and a warrant to
purchase equity in the Amphion-controlled enterprise to which Amphion
transferred these businesses and assets with an exercise price of $2.50 per
share, representing approximately 8% of that enterprise. If LMC is sold by the
Amphion-controlled enterprise prior to April 2001, the company has the option to
exchange its warrant for twenty percent of the excess profits (as defined in the
acquisition agreement) from any such sale. The gain from the disposition of LMC
and the technology assets totaled approximately $3.9 million and was recorded in
the quarter ended June 30, 1999.
On July 28, 1999, the company completed its acquisition of
substantially all of the assets of Prism Video, inc. The purchase price for the
assets included a note payable to Prism in the amount of $4,000,000, 125 shares
of a new series of 8% convertible preferred stock and a warrant to acquire
500,000 shares of the company's common stock. The company will satisfy its
obligations under the purchase note through an assignment to Prism of the
principal payments due the company under its $3,902,375 note receivable from
Amphion Ventures L.P., which was issued to the company as partial consideration
for the sale of its LMC subsidiary and certain unrelated technology assets. The
preferred stock has a stated value of $10,000 per share and is convertible into
500,000 shares of common stock at a conversion price of $2.50 per share. The
exercise price of the warrant is $2.50. Under the terms of the purchase
agreement, the common stock to be acquired by Prism upon conversion of the
preferred stock or exercise of the warrant is subject to a three-year lockup
from the date of closing, which may be reduced to two years upon the occurrent
of certain events. Further, Prism has agreed not to convert the preferred stock
or exercise the warrant until the company obtains stockholder approval to issue
the common stock issuable upon either the conversion or exercise thereof, as the
case may be.
The company's September 30, 1998 financial statements have been
reclassified to account for the imaging business and LMC as discontinued
operations.
10
<PAGE> 13
AXCESS INC.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
Sales and Gross Profit. Sales applicable to the company's discontinued
operations are not included in the company's sales for any period presented in
the company's results of operations.
Although the RFID technology acquired in September 1998 had been in
development and use for some time, significant modifications and enhancements
were necessary for its successful commercialization, manufacture and
distribution in volume. Consequently, the company reported no sales or gross
profit in the three months ended September 30, 1998. The July 28, 1999
acquisition of Prims Video's assets increased the company's offering of products
available for sale and provided the company with existing sales channels in the
security industry. Orders accepted during the period were realized as sales when
the systems were manufactured and shipped to the customer.
Sales for the three months ended September 30, 1999 were $422,749, on
which a gross profit of $208,998 was realized.
Operating Expenses. Operating expenses were $2,195,818 for the three
months ended September 30, 1999 and $1,709,771 for the three months ended
September 30, 1998. The increase was due to selling and marketing expenses for
the company's digital video and RFID technology. In September 1999, the company
reduced employee headcount by approximately twenty percent to eliminate
overlapping duties resulting from the Prism acquisition.
Corporate general and administrative expenses were $725,486 for the
three months ended September 30, 1999 and $881,133 for the three months ended
September 30, 1998. With the disposition of the company's imaging and marking
businesses, the general and administrative costs necessary to manage a single
business with only domestic locations has been reduced.
Research and development expenses for the three months ended September
30, 1999 of $526,895 were incurred in connection with the development of digital
video and RFID products. For the three months ended September 30, 1998, research
and development expenses were $550,000 and were incurred in connection with new
product development costs associated with the Technology Development Agreement
with XL Vision, Inc.
Selling and marketing expenses for the three months ended September 30,
1999, were $723,994. For the three months ended September 30, 1998, there were
no selling and marketing expenses related to continuing operations.
Other expenses, net was $154,665 for the three months ended September
30, 1999, compared to $106,276 for the three months ended September 30, 1998.
Interest income was $55,846 higher during the three months ended September 30,
1999, compared to the three months ended September 30, 1998, as a result of the
increased balance in notes receivable from a stockholder of the company. The
increase in notes receivable from stockholder occurred as a result of the April
30, 1999, sale of the company's LMC subsidiary and the technology assets under
development. Interest expense was $90,880 higher in the three months ended
September 30, 1999 compared to the three months ended September 30, 1998,
reflecting an increase in the outstanding balance of notes payable in 1999.
11
<PAGE> 14
AXCESS INC.
Loss from Continuing Operations was $2,141,485 for the three months
ended September 30, 1999, compared to a loss of $1,816,047 for the same period
in 1998.
Loss from Discontinued Operations was $2,649,663 for the three months
ended September 30, 1998. The loss in 1998 consisted of the loss from the
operations of LMC and the imaging business. See Note 2 in Notes to Condensed
Financial Statements.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
Sales and Gross Profit. Sales applicable to the company's discontinued
operations are not included in the company's sales for any period presented in
the company's results of operations.
Although the RFID technology acquired in September 1998 was under
development and use for some time, significant modifications and enhancements
were necessary for its successful commercialization, manufacture and
distribution in volume. Consequently, the company reported no sales or gross
profit in the nine months ended September 30, 1998. The July 28, 1999,
acquisition of assets from Prism Video increased the company's offerings of
products available for sale and provided the company with existing sales
channels in the security industry. Orders accepted during the period were
realized as sales when the systems were manufactured and shipped to the
customer.
Sales for the nine months ended September 30, 1999 were $545,953, on
which a gross profit of $266,452 was realized.
Operating Expenses. Operating expenses were $5,745,900 for the nine
months ended September 30, 1999, and $5,407,207 for the nine months ended
September 30, 1998. In September 1999, the company reduced employee headcount by
approximately twenty percent to eliminate overlapping duties resulting from the
Prism Video acquisition.
Corporate general and administrative expenses were $2,151,637 for the
nine months ended September 30, 1999, and $2,111,631 for the nine months ended
September 30, 1998.
Research and development expenses for the nine months ended September
30, 1999, of $1,167,488 were incurred in connection of the development of
digital video and RFID products. For the nine months ended September 30, 1998,
research and development expenses were $2,250,000 and were incurred in
connection with new product development costs associated with the Technology
Development Agreement with XL Vision, Inc.
Selling and marketing expenses for the nine months ended September 30,
1999, were $1,937,149. No selling and marketing expenses were incurred during
the nine months ended September 30, 1998, because the company's continuing
operations were not initiated until September 1998.
Other income (expense), net was $1,794,779 and $(420,760) for the nine
months ended September 30, 1999 and 1998. The gain of $2,044,109 on the sale of
the company's rights and interests in DataGlyph(TM) and the technology under
development with XL Vision, Inc. was recorded during the nine months ended
September 30, 1999. Interest income was $74,957 higher during the nine months
ended September 30, 1999, compared to the nine months ended September 30, 1998,
as a result of the increased balance in notes
12
<PAGE> 15
AXCESS INC.
receivable from a stockholder of the company. Interest expense was $130,529
lower in the nine months ended September 30, 1999 compared to the nine months
ended September 30, 1998, reflecting the reduction in the outstanding balance of
notes payable in 1999. The increase in notes receivable from stockholder and
reduction in notes payable during 1999 occurred as a result of the April 30,
1999 sale of the company's LMC subsidiary and the technology assets under
development.
Loss from Continuing Operations was $3,684,669 for the nine months
ended September 30, 1999, compared to a loss of $5,827,967 for the same period
in 1998. The $2,039,688 gain from the sale of the technology assets, as well as
the reduced operating expenses were the primary reasons for the reduced loss
reported for the nine months ended September 30, 1999, compared to the loss
reported for the nine months ended September 30, 1998.
Gain (Loss) from Discontinued Operations was $1,856,625 for the nine
months ended September 30, 1999, and $(4,643,520) for the nine months ended
September 30, 1998. The gain in 1999 reflects the disposal of LMC, while the
loss in 1998 consists of the loss from the operations of LMC and the imaging
business. See Note 2 in Notes to Condensed Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the company has utilized the proceeds from a number of
public and private sales of its equity securities, the exercise of options and
warrants and, more recently, convertible debt and short-term bridge loans from
stockholders to meet its working capital needs.
The company's ongoing business continues to generate operating losses
in 1999, as the company is continuing its development and enhancement activities
related to the RFID technology and had not yet shipped a significant volume of
RFID systems. The company's future working capital requirements will depend upon
many factors, including:
o The ability of the company to efficiently and effectively
integrate the video technology acquired from Prism with the
company's existing RFID technology to create and market new
products;
o The extent and timing of the company's existing video and RFID
product sales;
o The company's operating results; and
o The status of competitive products.
The company anticipates that its existing working capital resources,
together with those acquired from Prism, will be inadequate to satisfy its
funding requirements in 1999. The company is continuing discussions with a
number of existing and potential corporate, strategic and institutional
investors. The company's actual funding needs will depend on numerous factors,
including actual expenditures and revenues generated from its operations
compared to its business plan. The company's actual funding needs will also
depend on the successful development and commercialization of the existing RFID
systems and the ability of the company to utilize the technology acquired from
Prism to successfully enhance and extend its product line, and other
unanticipated expenditures, none of which can be predicted with certainty. There
can be no assurance that the company will acquire the additional funding it
needs to fully pursue its business objectives, or that the company will be able
to successfully capitalize on the video technology acquired from Prism. If
13
<PAGE> 16
AXCESS INC.
the company's losses continue, the company may have to obtain sufficient funds
to meet its cash requirements through strategic or other financial transactions
with compatible entities having the resources to support its programs, the sale
of securities or other financing arrangements, or it will be required to curtail
its programs or seek a merger partner. Any additional funding may be on terms
that are unfavorable to the company or disadvantageous to existing stockholders.
In addition, no assurance may be given that the company will be successful in
raising additional funds or entering into business alliances.
YEAR 2000 COMPLIANCE
The company's management recognizes the need to ensure that its
operations and relationships with vendors, customers and other third parties
will not be adversely impacted by the Year 2000 issue. The Year 2000 problem is
a result of computer programs being written using two digits rather than four to
define the applicable year. Based on its assessment, the company determined a
portion of its software and certain hardware will require modification or
replacement so that those systems will properly utilize dates beyond December
31, 1999. The company's assessment indicated that its significant information
technology systems would not be affected.
The company has also established a program to review its product line
of RFID systems and identify date-sensitive inventory and the level of Year 2000
compliance of its video and RFID systems. This program is to ensure that
customers receive systems that are Year 2000 compliant, or at a minimum, are
made aware of systems that are not compliant. The company also depends on the
systems of its suppliers, manufacturers and customers. Consequently, the company
is in the process of receiving adequate assurances from its suppliers,
manufacturers and customers that those systems and the components on which the
company relies are or will be Year 2000 compliant before the end of 1999.
To the extent possible, the company will develop and implement
contingency plans designed to allow continued operations in the event of failure
of the company's or third party systems to be Year 2000 compliant. These
contingency plans have substantially been completed, and are expected to be
completed and implemented by the end of 1999.
Management of the company believes it has an effective program in place
to resolve the Year 2000 issue in a timely manner. The company does not believe
the costs related to the Year 2000 program will be material to its financial
position or results of operation. Since the video and RFID based software and
hardware were recently developed and were developed with Year 2000 compliance
awareness, Year 2000 compliance is less significant to the company's business
than is the case for other businesses.
Management expects to complete its program without incurring any
significant incremental expenditures utilizing internal resources. However, the
company has not yet completed all necessary phases of the Year 2000 program.
Further, the failure of the company or third parties upon which the company
relies to identify Year 2000 issues and successfully and timely resolve them
could then have a material adverse impact on the operations of the company.
SHARES ELIGIBLE FOR FUTURE SALE; CONVERTIBLE SECURITIES AND WARRANTS
Future sales of the company's common stock in the public market by
existing stockholders, warrant holders and holders of convertible securities
subsequent to the date hereof could adversely affect the market price of the
common stock. At September 30, 1999, an aggregate of approximately 1,700,000
shares of common stock were outstanding and freely tradable without restriction
under the Securities Act of 1933, as
14
<PAGE> 17
AXCESS INC.
amended. In addition, up to 717,000 shares were eligible for resale in
accordance with the manner of sale and volume limitations of Rule 144
promulgated under the Securities Act.
Approximately 2,300,000 shares of common stock have been reserved for
issuance upon the exercise of outstanding convertible securities and warrants.
As of September 30, 1999, there were 57,692, 52,817, 35,427, 635, 1,727 and 125
shares of Series A, B, C, I, J and Series 1999 convertible preferred stock
outstanding, respectively. Each share of Series A, B and C convertible preferred
stock is convertible at any time, at the option of the holder, into one share of
common stock. The conversion price for the Series I and Series J shares is $4.00
per share. The conversion price for the Series 1999 shares is $2.10 per share.
There are also currently 1,264,793 warrants outstanding to acquire the
same number of shares of common stock, as well as $535,000 of indebtedness,
convertible into common stock at $5.00 per share and $3,787,275 of indebtedness,
convertible into Series 1999 Non-Voting Preferred Stock at $2.10 per share.
In addition, approximately 1,050,000 shares of common stock have been
reserved for issuance to key employees, officers, directors and consultants
pursuant to the company's benefit plans. As of September 30, 1999, there were
1,026,592 options outstanding.
OTHER
Inflation. Inflation has not had and is not expected to have a material
impact on the operations and financial condition of the company.
Caution Regarding Forward-Looking Statements. The company occasionally
makes forward-looking statements concerning its plans, goals, product and
service offerings, and anticipated financial performance. These forward-looking
statements may generally be identified by introductions such as "outlook" for an
upcoming period of time, or words and phrases such as "should", "expect",
"hope", "plans", "projected", "believes", "forward-looking" (or variants of
those words and phrases) or similar language indicating the expression of an
opinion or view concerning the future.
These forward-looking statements are subject to risks and uncertainties
based on a number of factors and actual results or events may differ materially
from those anticipated by such forward-looking statements. These factors
include, but are not limited to: the ability to raise capital; the growth rate
of the company's revenue and market share; the consummation of new, and the
non-termination of existing, relationships with customers and suppliers; the
company's ability to effectively manage its business functions while growing the
company's business in a rapidly changing environment; the ability of the company
to adapt and expand its services in such an environment; the effective and
efficient development of new products; the quality of the company's plans and
strategies; and the ability of the company to execute such plans and strategies.
Forward-looking statements concerning the company's expected revenue or
earnings levels are subject to many additional uncertainties applicable to
competitors generally and to general economic conditions over which the company
has no control. The company does not plan to generally publicly update prior
forward-looking statements for unanticipated events or otherwise and,
accordingly, prior forward-looking statements should not be considered to be
"fresh" simply because the company has not made additional comments on those
forward-looking statements.
15
<PAGE> 18
AXCESS INC.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
During the third quarter of 1999, the company issued unregistered
securities in connection with the transactions described below. The issuances of
the convertible note, preferred stock and warrants were exempt from the
registration requirements of the Securities Act of 1933, as amended by virtue of
Section 4(2) thereof as a transaction not involving a public offering and an
appropriate restrictive legend was affixed to the certificates.
The holders of the company's Series A, B, and C Preferred Stock are
entitled to receive quarterly dividends on each such share held by the annual
rate of 10% of the original issue price of each such share payable in arrears,
when, as and if declared by the company's board of directors, in cash or
additional shares of preferred stock. On September 30, 1999, the company issued
20.5 shares of Series J Preferred Stock to the holders thereof as payment in
full for the $205,000 of accrued, but unpaid dividends on the Series A, B and C
Preferred Stock as of such date. The holders of the company's Series A, B and C
Preferred Stock elected to receive shares of the company's Series J Preferred
Stock in lieu of the cash dividend.
In connection with the company's acquisition of substantially all of
the assets of Prism Video, Inc., the company issued 125 shares of its Series
1999 Convertible Preferred Stock to Prism Video, Inc., and a warrant to acquire
500,000 shares of the company's restricted common stock.
In connection with obtaining a commitment from Amphion to provide
additional financing to the company, the company issued a note convertible into
shares of the company's Series 1999 Non-Voting Preferred Stock and a warrant to
acquire 180,362 shares of the company's Non-Voting Common Stock.
16
<PAGE> 19
AXCESS INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
3.1 -- Certificate of Incorporation of the company.
Incorporated herein by reference to Exhibit 3.1 to the
company's Registration Statement on Form S-1 (Registration
No. 2- 80946).
3.2 -- By-laws of the company. Incorporated herein by reference
to Exhibit 3.2 to the company's Registration Statement on
Form S-1 (Registration No. 2-80946).
3.3 -- First Amendment to Certificate of Incorporation of the
company dated June 9, 1986. Incorporated herein by
reference to Exhibit 3.3 to the company's Annual Report on
Form 10-KSB for the year ended December 31, 1987.
3.4 -- Second Amendment to Certificate of Incorporation of the
company dated May 27, 1987. Incorporated herein by
reference to Exhibit 3.4 to the company's Annual Report on
Form 10-KSB for the year ended December 31, 1987.
3.5 -- Third Amendment to Certificate of Incorporation of the
company, dated November 11, 1994. Incorporated herein by
reference to Exhibit 4.4 to the company's Registration
Statement on Form S-3 (Registration No. 333-10665).
3.6 -- Fourth Amendment to Certificate of Incorporation of the
company, dated July 28, 1995. Incorporated herein by
reference to Exhibit 4.5 to the company's Registration
Statement on Form S-3 (Registration No. 333-10665).
3.7 -- Fifth Amendment to Certificate of Incorporation of the
company, dated June 25, 1996. Incorporated herein by
reference to Exhibit 4.6 to the company's Registration
Statement on Form S-3 (Registration No. 333-10665).
3.8 -- Sixth Amendment to Certificate of Incorporation of the
company dated March 31, 1998. Incorporated herein by
reference to Exhibit 99.1 to the company's Report on Form
8-K dated April 13, 1998.
3.9 -- Seventh Amendment to Certificate of Incorporation of the
company dated March 31, 1998. Incorporated herein by
reference to Exhibit 99.2 to the company's Report on Form
8-K dated April 13, 1998.
3.10 -- Eighth Amendment to Certificate of Incorporation of the
company dated April 9, 1998. Incorporated herein by
reference to Exhibit 99.3 to the company's Report on Form
8-K dated April 13, 1998.
4.1 -- Certificate of Designation of the company's Series A, B
and C Preferred Stock, dated December 27, 1995.
Incorporated herein by reference to Exhibit 4.7 to the
company's Registration Statement on Form S-3 (Registration
No. 333-10665).
17
<PAGE> 20
AXCESS INC.
4.2 --Certificate of Designation of the company's Series I
Preferred Stock. Incorporated herein by reference to
Exhibit 4.2 to the company's Annual Report on Form 10-KSB
for the year ended December 31, 1998.
4.3 --Certificate of Designation of the company's Series J
Preferred Stock. Incorporated herein by reference to
Exhibit 4.3 to the company's Annual Report on Form 10-KSB
for the year ended December 31, 1998.
4.4 --Certificate of Designation of the company's Series 1999
Preferred Stock dated July 28, 1999. Incorporated herein by
referenced to Exhibit 4.4 to the company's Report on Form
10-QSB for the period ended June 30, 1999.
4.5 --Certificate of Designation of the company's Series 1999
Non-Voting Preferred Stock.*
10.1 --1991 Incentive Stock Option Plan, dated August 14, 1991.
Incorporated herein by reference to Exhibit 10.10 to
Lasertechnics' Annual Report on Form 10-KSB for the year
ended December 31, 1991.
10.2 --Purchase of Common Stock and Convertible Note Agreement
between the company and J.P. Morgan Investment Corporation,
dated July 8, 1994. Incorporated herein by reference to
Exhibit 10.19 to the company's Annual Report on Form 10-KSB
for the year ended December 31, 1994.
10.3 --Note Purchase Agreement dated June 25, 1997, by and
among the company, J.P. Morgan Investment Corporation and
Wolfensohn Associates L.P. Incorporated by reference to
Exhibit 10.15 to the company's Quarterly Report on Form
10-QSB for the period ended September 30, 1997.
10.4 --Amendment to Notes and Note Purchase Agreement dated
December 31, 1998, by and among the company, Antiope
Partners L.L.C. and J.P. Morgan Investment Corporation.
Incorporated herein by reference to Exhibit 10.16 to the
company's Annual Report on Form 10-KSB, as amended, for the
year ended December 31, 1998.
10.5 --Preferred Stock Purchase Agreement dated October 21,
1998, by and between the company and Amphion Ventures L.P.
Incorporated herein by reference to Exhibit 10.8 to the
company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
10.6 --Form of Warrant to purchase shares of the company's
Common Stock issued to Antiope Partners L.L.C. and Amphion
Ventures L.P. Incorporated herein by reference to Exhibit
10.20 to the company's Annual Report on Form 10-KSB for the
year ended December 31, 1998.
10.7 --Note Payable Conversion Agreement dated December 31,
1998, by and between the company and Amphion Ventures L.P.
Incorporated herein by reference to Exhibit 10.12 to the
company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
18
<PAGE> 21
AXCESS INC.
10.8 --Note Payable Conversion Agreement dated December 31,
1998, by and between the company and Antiope Partners
L.L.C. Incorporated herein by reference to Exhibit 10.13 to
the company's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
10.9 --Note Payable Conversion Agreement dated December 31,
1998, by and between the company and J.P. Morgan Investment
Corporation. Incorporated herein by reference to Exhibit
10.14 to the company's Annual Report on Form 10-KSB for the
year ended December 31, 1998.
10.10 --Stock and Asset Purchase Agreement dated March 30, 1999,
by and between the company and Amphion Ventures L.P.
Incorporated herein by reference to Exhibit 10.15 to the
company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
10.11 --Asset Purchase Agreement dated July 15, 1999, by and
between the company and Prism Video, Inc. Incorporated
herein by referenced to Exhibit 2.1 to the company's Report
on Form 8-K dated July 28, 1999.
10.12 --Convertible Note Payable dated September 30, 1999,
executed by the company payable to Amphion Ventures L.P. in
the stated principal amount of up to $6,000,000.*
10.13 --Form of Dividend Conversion Agreement by and between the
company and Amphion Ventures L.P. and Jackson Hole
Management Co.*
10.14 --Registration Rights Agreement dated September 30, 1999,
by and between the company and Amphion Ventures L.P.*
27.1 --Financial Data Schedule.*
27.2 --Restated Financial Data Schedule.*
----------------
*Filed herewith.
19
<PAGE> 22
AXCESS INC.
B. REPORTS ON FORM 8-K
A report on Form 8-K was filed by the company on August 12, 1999,
reporting that the company had completed the acquisition of
substantially all of the assets of Prism Video, Inc., on July 28, 1999.
The assets acquired included all patents, trade secret rights,
software, hardware, product designs and all other technical information
necessary to design, manufacture and market security a video and CCTV
products using digital video compression technology and remote
telephone line video technology.
An amended report on Form 8-K was filed by the company on October 8,
1999, which included the financial statements of Prism Video, Inc., and
the pro forma financial information required by Item 7 of Form 8-K.
20
<PAGE> 23
AXCESS INC.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AXCESS, INC.
Date: November 12, 1999 By: /s/ James R. Craig
------------------------------------------
James R. Craig,
Chief Financial Officer and Secretary
(Principal Accounting and Financial Officer)
21
<PAGE> 24
AXCESS INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 -- Certificate of Incorporation of the company. Incorporated
herein by reference to Exhibit 3.1 to the company's
Registration Statement on Form S-1 (Registration No. 2-
80946).
3.2 -- By-laws of the company. Incorporated herein by reference to
Exhibit 3.2 to the company's Registration Statement on Form
S-1 (Registration No. 2-80946).
3.3 -- First Amendment to Certificate of Incorporation of the
company dated June 9, 1986. Incorporated herein by reference
to Exhibit 3.3 to the company's Annual Report on Form 10-KSB
for the year ended December 31, 1987.
3.4 -- Second Amendment to Certificate of Incorporation of the
company dated May 27, 1987. Incorporated herein by reference
to Exhibit 3.4 to the company's Annual Report on Form 10-KSB
for the year ended December 31, 1987.
3.5 -- Third Amendment to Certificate of Incorporation of the
company, dated November 11, 1994. Incorporated herein by
reference to Exhibit 4.4 to the company's Registration
Statement on Form S-3 (Registration No. 333-10665).
3.6 -- Fourth Amendment to Certificate of Incorporation of the
company, dated July 28, 1995. Incorporated herein by reference
to Exhibit 4.5 to the company's Registration Statement on Form
S-3 (Registration No. 333-10665).
3.7 -- Fifth Amendment to Certificate of Incorporation of the
company, dated June 25, 1996. Incorporated herein by reference
to Exhibit 4.6 to the company's Registration Statement on Form
S-3 (Registration No. 333-10665).
3.8 -- Sixth Amendment to Certificate of Incorporation of the
company dated March 31, 1998. Incorporated herein by reference
to Exhibit 99.1 to the company's Report on Form 8-K dated
April 13, 1998.
3.9 -- Seventh Amendment to Certificate of Incorporation of the
company dated March 31, 1998. Incorporated herein by reference
to Exhibit 99.2 to the company's Report on Form 8-K dated
April 13, 1998.
3.10 -- Eighth Amendment to Certificate of Incorporation of the
company dated April 9, 1998. Incorporated herein by reference
to Exhibit 99.3 to the company's Report on Form 8-K dated
April 13, 1998.
4.1 -- Certificate of Designation of the company's Series A, B and
C Preferred Stock, dated December 27, 1995. Incorporated
herein by reference to Exhibit 4.7 to the company's
Registration Statement on Form S-3 (Registration No.
333-10665).
</TABLE>
<PAGE> 25
AXCESS INC.
<TABLE>
<S> <C>
4.2 --Certificate of Designation of the company's Series I
Preferred Stock. Incorporated herein by reference to Exhibit
4.2 to the company's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
4.3 --Certificate of Designation of the company's Series J
Preferred Stock. Incorporated herein by reference to Exhibit
4.3 to the company's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
4.4 --Certificate of Designation of the company's Series 1999
Preferred Stock dated July 28, 1999. Incorporated herein by
referenced to Exhibit 4.4 to the company's Report on Form
10-QSB for the period ended June 30, 1999.
4.5 --Certificate of Designation of the company's Series 1999
Non-Voting Preferred Stock.*
10.1 --1991 Incentive Stock Option Plan, dated August 14, 1991.
Incorporated herein by reference to Exhibit 10.10 to
Lasertechnics' Annual Report on Form 10-KSB for the year ended
December 31, 1991.
10.2 --Purchase of Common Stock and Convertible Note Agreement
between the company and J.P. Morgan Investment Corporation,
dated July 8, 1994. Incorporated herein by reference to
Exhibit 10.19 to the company's Annual Report on Form 10-KSB
for the year ended December 31, 1994.
10.3 --Note Purchase Agreement dated June 25, 1997, by and
among the company, J.P. Morgan Investment Corporation and
Wolfensohn Associates L.P. Incorporated by reference to
Exhibit 10.15 to the company's Quarterly Report on Form 10-QSB
for the period ended September 30, 1997.
10.4 --Amendment to Notes and Note Purchase Agreement dated
December 31, 1998, by and among the company, Antiope Partners
L.L.C. and J.P. Morgan Investment Corporation. Incorporated
herein by reference to Exhibit 10.16 to the company's Annual
Report on Form 10-KSB, as amended, for the year ended December
31, 1998.
10.5 --Preferred Stock Purchase Agreement dated October 21, 1998,
by and between the company and Amphion Ventures L.P.
Incorporated herein by reference to Exhibit 10.8 to the
company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
10.6 --Form of Warrant to purchase shares of the company's Common
Stock issued to Antiope Partners L.L.C. and Amphion Ventures
L.P. Incorporated herein by reference to Exhibit 10.20 to the
company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
10.7 --Note Payable Conversion Agreement dated December 31, 1998,
by and between the company and Amphion Ventures L.P.
Incorporated herein by reference to Exhibit 10.12 to the
company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
10.8 --Note Payable Conversion Agreement dated December 31, 1998,
by and between the company and Antiope Partners L.L.C.
Incorporated herein by reference to Exhibit 10.13 to the
company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
</TABLE>
<PAGE> 26
AXCESS INC.
<TABLE>
<S> <C>
10.9 --Note Payable Conversion Agreement dated December 31, 1998,
by and between the company and J.P. Morgan Investment
Corporation. Incorporated herein by reference to Exhibit 10.14
to the company's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
10.10 --Stock and Asset Purchase Agreement dated March 30, 1999, by
and between the company and Amphion Ventures L.P. Incorporated
herein by reference to Exhibit 10.15 to the company's Annual
Report on Form 10-KSB for the year ended December 31, 1998.
10.11 --Asset Purchase Agreement dated July 15, 1999, by and between
the company and Prism Video, Inc. Incorporated herein by
referenced to Exhibit 2.1 to the company's Report on Form 8-K
dated July 28, 1999.
10.12 --Convertible Note Payable dated September 30, 1999, executed
by the company payable to Amphion Ventures L.P. in the stated
principal amount of up to $6,000,000.*
10.13 --Form of Dividend Conversion Agreement by and between the
company and Amphion Ventures L.P. and Jackson Hole Management
Co.*
10.14 --Registration Rights Agreement dated September 30, 1999, by
and between the company and Amphion Ventures L.P.*
27.1 --Financial Data Schedule.*
27.2 --Restated Financial Data Schedule.*
</TABLE>
* Filed herewith.
<PAGE> 1
EXHIBIT 4.5
CERTIFICATES OF DESIGNATIONS,
PREFERENCES, POWERS AND RIGHTS
OF
SERIES 1999 NON-VOTING PREFERRED STOCK
OF
AXCESS INC.
Pursuant to Section 151 of the
General Corporation Law
of the State of Delaware
AXCESS INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Company"), hereby certifies that,
pursuant to the authority contained in Article Fourth of its Certificate of
Incorporation, as amended, and in accordance with the provisions of Sections 103
and 151 of the General Corporation Law of the State of Delaware, its Board of
Directors has adopted the following resolution providing for the issuance of the
Series 1999 Non-Voting Preferred Stock:
RESOLVED, that a series of the class of authorized preferred stock of
the Company is hereby created and the Board of Directors hereby fixes the
designation and amount thereof, and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof as follows:
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall have
a par value of $0.01 per share and shall be designated as Series 1999 Non-Voting
Preferred Stock and the number of shares constituting the Series 1999 Non-Voting
Preferred Stock shall be TWO THOUSAND FIVE HUNDRED (2,500). The Series 1999
Non-Voting Preferred Stock shall have a stated value of Ten Thousand Dollars
($10,000) per share (the "Original Issue Price").
SECTION 2. RANK. The Series 1999 Non-Voting Preferred Stock shall rank:
(a) junior to any other class or series of capital stock of the Company
hereafter created specifically ranking by its terms senior to the Series 1999
Non-Voting Preferred Stock (collectively, the "Senior Securities"); (b) prior to
all of the Company's Common Stock and Non-Voting Common Stock, each $0.01 par
value per share (the "Common Stock"); (c) prior to any class or series of
capital stock of the Company hereafter created not specifically ranking by its
terms senior to or on parity with the Series 1999 Non-Voting Preferred Stock
(collectively, with the Common Stock, the "Junior Securities"); and (d) on a
parity with the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series I Preferred Stock, Series 1999 Preferred Stock of the
Company, and any class or series of capital stock of the Company hereafter
created specifically ranking by its terms on a parity with the Series 1999
Non-Voting Preferred Stock (the "Parity Securities"), in each case as to
distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (all such distributions being referred
to collectively as "Distributions").
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SECTION 3. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to Section 3(d), the holders of record of shares
of Series 1999 Non-Voting Preferred Stock (the "Holders"), in preference to the
holders of shares of capital stock ranking junior to the Series 1999 Non-Voting
Preferred Stock as to dividends, shall be entitled to receive dividends on each
share of Series 1999 Non-Voting Preferred Stock held of record at the annual
rate of 8% of the Original Issue Price, payable semi-annually, to the extent of
funds legally available therefor. Such dividends shall be cumulative, shall
accrue on each share on a daily basis (calculated on the basis of a 360-day
year, whether or not earned or declared, from the date of original issue of such
shares) and shall be payable in arrears, when, as and if declared by the Board
of Directors, on the last day of June and December in each year (each such date,
a "Dividend Payment Date"). Each such dividend will be paid to the Holders as
they appear on the stock register of the Company on the record date therefor as
shall be fixed by the Board of Directors, which record date shall not be more
than 25 days or less than 10 days preceding the payment date thereof.
(b) The Company may, at its option, make any dividend payment
to Holders of Series 1999 Non-Voting Preferred Stock in cash or in additional
shares (including fractional shares) of Series 1999 NonVoting Preferred Stock or
in any combination of cash and such shares. Each such dividend payment (or
portion thereof) to be paid in shares of Series 1999 Non-Voting Preferred Stock
shall be paid by the issuance and delivery to such Holders of that number of
additional shares (including any fractional shares, if applicable) of Series
1999 Non-Voting Preferred Stock as shall be equal to the quotient obtained by
dividing the aggregate dollar amount of such dividend payment (or portion
thereof) by the Original Issue Price per share. Dividends to be paid in
additional shares of Series 1999 Non-Voting Preferred Stock shall be deemed to
have been made when certificates representing such additional shares of Series
1999 Non-Voting Preferred Stock have been delivered to the record holders of the
Series 1999 Non-Voting Preferred Stock entitled to receive the same, in
accordance with the instructions of such holders designated in writing to the
Company at least two business days prior to any Dividend Payment Date. All
shares of Series 1999 Non-Voting Preferred Stock paid as such dividends (the
"Dividend Shares") shall be validly issued, fully paid and non-assessable, shall
be free and clear of preemptive rights and liens, claims and encumbrances of any
kind. Subject to the other provisions of this Certificate of Designation,
holders of shares of Series 1999 Non-Voting Preferred Stock shall not be
entitled to any dividend, whether payable in cash, additional shares of Series
1999 Non-Voting Preferred Stock, or other property, in excess of full cumulative
dividends as herein provided. No interest, or sum of money in lieu of interest,
shall be payable under this Certificate of Designation in respect of any
dividend payment or payments on the Series 1999 Non-Voting Preferred Stock which
may be in arrears.
(c) So long as any Series 1999 Non-Voting Preferred Stock
remains outstanding, the Company will not redeem, purchase or otherwise acquire
any Junior Securities; nor will the Company declare or pay any dividend or make
any distribution (in each case, whether in cash or securities or assets in kind)
upon any Junior Securities (other than stock dividends on Junior Securities,
payable in shares of, options, warrants or similar rights to acquire shares of,
the same class (and series, if applicable) of Junior Securities), or make any
sinking fund or other payment in respect of any of the foregoing if the Company
shall not have paid in full all accrued dividends on the Series 1999 Non-Voting
Preferred Stock in accordance with Section 3(a) hereof.
(d) Anything contained herein to the contrary notwithstanding,
if at any time that any shares of Series 1999 Non-Voting Preferred Stock are
outstanding, the closing bid price per share of the Common Stock on the Nasdaq
Stock Market (or, if the Common Stock is not then included in Nasdaq, but is
listed on any national securities exchange, on the principal national securities
exchange on which the Common Stock is then listed) remains above $20.00 per
share (as adjusted for any stock splits, reverse stock splits, stock dividends
or similar events after the date of this Certificate of Designation) for twenty
(20) consecutive trading days, then, commencing on such 20th trading day, the
cumulative dividend will not be
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<PAGE> 3
payable; provided, however, that if the closing bid price per share of the
Common Stock remains thereafter below $20.00 for twenty (20) consecutive trading
days (as so adjusted), then the dividend will resume as of such 20th day.
SECTION 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of the Company (each a "Liquidation Event"), either voluntary or involuntary,
the Holders of shares of Series 1999 Non-Voting Preferred Stock shall be
entitled to receive, immediately after any distributions to Senior Securities
required by the Company's Certificate of Incorporation or any certificate of
designation, and prior in preference to any distribution to Junior Securities,
and in parity with any distribution to Parity Securities, an amount for each
share of Series 1999 Non-Voting Preferred Stock then outstanding equal to the
Original Issue Price, plus any and all accrued unpaid dividends. If upon the
occurrence of such event, and after payment in full of the preferential amounts
with respect to the Senior Securities, the assets and funds available to be
distributed among the Holders of the Series 1999 Non-Voting Preferred Stock and
Parity Securities shall be insufficient to permit the payment to such Holders of
the full preferential amounts due to the Holders of the Series 1999 Non-Voting
Preferred Stock and the Parity Securities, respectively, then the entire assets
and funds of the Company legally available for distribution shall be distributed
among the Holders of the Series 1999 NonVoting Preferred Stock and the Parity
Securities, pro rata, based on the respective liquidation amounts to which each
such series of stock is entitled by the Company's Certificate of Incorporation
and any certificate(s) of designation relating thereto.
(b) Upon the completion of the distribution required by
Section 4(a), if assets remain in the Company, they shall be distributed to
holders of Junior Securities in accordance with the Company's Certificate of
Incorporation including any duly adopted certificate(s) of designation relating
thereto.
(c) At each Holder's option, a sale, conveyance or disposition
of all or substantially all of the assets of the Company or the effectuation by
the Company of a transaction or series of related transactions in which any
person or entity acquires more than fifty percent (50%) of the voting power of
the Company (a "Change of Control") shall be deemed to be a Liquidation Event as
defined in Section 4(a); provided further that (i) a consolidation, merger,
acquisition, or other business combination of the Company with or into any other
publicly traded company or companies shall not be treated as a Liquidation Event
as defined in Section 4(a), but instead shall be treated pursuant to Section
5(d)(ii) hereof, (ii) the acquisition by Amphion Ventures L.P., by itself or
along with one or more of its affiliates, of more than fifty percent (50%) of
the voting power of the Company shall not be deemed to be a Change of Control
and, accordingly, will not be treated as a Liquidation Event as defined in
Section 4(a) and (iii) a consolidation, merger, acquisition, or other business
combination of the Company with or into any other non-publicly traded company or
companies shall be treated as a Liquidation Event as defined in Section 4(a).
The Company shall not effect any transaction described in Section 4(c)(ii)
unless it first gives thirty (30) business days' prior notice of such
transaction (during which time the Holder shall be entitled to convert its
shares of Series 1999 Non-Voting Preferred Stock into non-voting Common Stock).
For purposes of this Section 4(c), the public offering, sale or distribution of
shares of stock (or assets) of the Company's Sandia Imaging Systems Corporation
subsidiary shall be deemed to be a Liquidation Event.
(d) In the event that, immediately prior to the closing of a
transaction described in Section 4(c) which would constitute a Liquidation
Event, the cash distributions required by Section 4(a) have not been made, the
Company shall either: (i) cause such closing to be postponed until such cash
distributions have been made, or (ii) cancel such transaction, in which event
the rights of the Holders of Series 1999 NonVoting Preferred Stock shall be the
same as existing immediately prior to such proposed transaction.
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<PAGE> 4
SECTION 5. CONVERSION. The record Holders of this Series 1999
Non-Voting Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert. On the terms and subject to the
conditions set forth in this Certificate of Designation, each record Holder of
Series 1999 Non-Voting Preferred Stock shall be entitled to convert the shares
of Series 1999 Non-Voting Preferred Stock held by such Holder, in whole at any
time and in part from time to time, into a number of fully-paid and
non-assessable shares of non-voting Common Stock of the Company equal to the
quotient of (i) the aggregate Original Issue Price of the shares of Series 1999
Non-Voting Preferred Stock being converted divided by (ii) the Conversion Price
as determined pursuant to this Section 5 (the "Conversion Price"). The
Conversion Price shall initially be THREE DOLLARS ($3.00) per share of Series
1999 Non-Voting Preferred Stock. The Conversion Price shall be subject to
adjustment from time to time as provided in Section 5(d). Notwithstanding the
foregoing or any other term or provision of this Certificate of Designation, the
Holder shall not be permitted, without the prior written consent of the Company,
to convert any shares of Series 1999 Non-Voting Preferred Stock to shares of
non-voting Common Stock until such time as the Company shall have received the
authorization of its stockholders to issue shares of the Company's non-voting
Common Stock to the Holder upon the conversion by the Holder of any share of
Series 1999 Non-Voting Preferred Stock. The Company hereby agrees to submit such
a proposal to its stockholders for approval at the Company's 2000 annual meeting
of stockholders and to use its best efforts to obtain such approval.
(b) Mechanics of Conversion. Subject to the terms of Section
5(a) above, the conversion of shares of Series 1999 Non-Voting Preferred Stock
may be effected by written notice to the Company, and shall be effective upon
receipt of such notice by the Company, or as otherwise provided in such notice,
and delivery to the Company of (i) one or more certificates representing the
shares of Series 1999 Non-Voting Preferred Stock being converted, (ii) a
certificate of guaranteed delivery of such certificates reasonably satisfactory
to the Company, or (iii) evidence of the loss, theft or destruction of such
certificates pursuant to Section 11 of this Certificate of Designation, together
with any indemnity or security reasonably requested by the Company pursuant to
such Section 11. Upon any conversion of shares of Series 1999 Non-Voting
Preferred Stock pursuant to this Section 5, the Holder shall be deemed to be the
record holder of the shares of non-voting Common Stock into which shares of
Series 1999 Non-Voting Preferred Stock have been converted and shall be entitled
to receive duly executed certificates, in proper form, representing such shares
of non-voting Common Stock as soon as practicable thereafter. Anything contained
herein to the contrary notwithstanding, if any conversion of shares of Series
1999 Non-Voting Preferred Stock would create a fractional share of non-voting
Common Stock or a right to acquire a fractional share of non-voting Common
Stock, such fractional share shall be disregarded and the number of shares of
non-voting Common Stock issuable upon such conversion, in the aggregate, shall
be rounded up to the nearest whole number of shares.
(c) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of non-voting Common Stock, solely for the purpose of effecting the
conversion of the Series 1999 Non-Voting Preferred Stock, such number of its
shares of non-voting Common Stock as shall from time to time be sufficient to
effect the conversion of all then outstanding Series 1999 Non-Voting Preferred
Stock. If at any time the number of authorized but unissued shares of non-voting
Common Stock (excluding for this purpose any authorized but unissued shares of
non-voting Common Stock that are properly reserved for some other purpose) shall
be insufficient to cause the conversion into non-voting Common Stock of all
shares of Series 1999 Non-Voting Preferred Stock then outstanding, the Company
will take such corporate action as may be reasonably necessary to increase its
authorized but unissued shares of non-voting Common Stock to such number of
shares as shall be sufficient for such purpose.
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(d) Adjustment to Conversion Price.
(i) Adjustment to Conversion Price Due to Stock Split,
Stock Dividend, Etc. If, at any time that any shares of Series 1999 Non-Voting
Preferred Stock remain outstanding, the number of outstanding shares of
non-voting Common Stock is increased by a stock split, stock dividend, or other
similar event, the Conversion Price shall be proportionately reduced, or if the
number of outstanding shares of non-voting Common Stock is decreased by a
reverse stock split, combination or reclassification of shares, or other similar
event, the Conversion Price shall be proportionately increased.
(ii) Adjustment Due to Merger, Consolidation, Etc. If, at
any time that any shares of Series 1999 Non-Voting Preferred Stock remain
outstanding, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of non-voting Common Stock of the Company shall be changed into the same
or a different number of shares of the same or another class or classes of stock
or securities of the Company or another entity, or there is a sale of all or
substantially all the Company's assets or there is a Change of Control not
deemed to be a Liquidation Event pursuant to Section 4(c), then the Holders
shall thereafter have the right to receive upon conversion of shares of Series
1999 Non-Voting Preferred Stock, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of non-voting Common Stock
immediately theretofore issuable upon conversion, such stock, securities and/or
other assets which the Holder would have been entitled to receive in such
transaction had such shares of Series 1999 Non-Voting Preferred Stock been
converted immediately prior to such transaction, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holders of the Series 1999 Non-Voting Preferred Stock to the end that the
provisions hereof (including, without limitation, provisions for the adjustment
of the Conversion Price and of the number of shares issuable upon conversion of
the Series 1999 Non-Voting Preferred Stock) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof. The Company shall not effect any
transaction described in this Section 5(d)(ii) unless (A) it first gives thirty
(30) business days' prior notice to Holders of such merger, consolidation,
exchange of shares, recapitalization, reorganization, or other similar event
(during which time the Holders shall be entitled to convert their shares of
Series 1999 Non-Voting Preferred Stock into non-voting Common Stock) and (B) the
resulting successor or acquiring entity (if not the Company) assumes by written
instrument the obligations of the Company under this Certificate of Designation
including this Section 5(d)(ii).
SECTION 6. VOTING. The Holders shall not be entitled to vote on any
matter submitted to a vote of the stockholders of the Company, or as to which
the holders of the voting Common Stock shall otherwise be entitled to vote. As
used in this Section 6, all references to votes and voting shall refer as well
to action and actions by written consent.
SECTION 7. OPTIONAL REDEMPTION BY COMPANY. The Series 1999 Non-Voting
Preferred Stock shall be subject to the optional redemption by the Company, in
whole at any time or in part from time to time, at a redemption price per share
equal to the Original Issue Price, plus any and all accrued unpaid dividends
thereon. The Company shall give at least ten (10) days' prior written notice of
any redemption pursuant to this Section 7 to each Holder of shares of Series
1999 Non-Voting Preferred Stock to be redeemed. The Company's optional right of
redemption is subject to each Holder's right to convert all or any part of the
shares to be redeemed into non-voting Common Stock pursuant to Section 5,
provided that the Holder gives written notice of such conversion to the Company
in accordance with Section 5 within ten (10) business days after the Company's
notice of redemption. The Holders of Series 1999 Non-Voting Preferred Stock
shall not be entitled to any mandatory redemption of their Series 1999
Non-Voting Preferred Stock without the consent of the Company.
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SECTION 8. MANDATORY CONVERSION BY COMPANY. Each share of Series 1999
Non-Voting Preferred Stock shall automatically convert into that number of
fully-paid and non-assessable shares of non-voting Common Stock of the Company
equal to the Original Issue Price plus all accrued, but unpaid dividends
thereon, divided by the Conversion Price (subject to adjustment from time to
time as provided in Section 5(d)), upon (a) the closing bid price per share of
the Common Stock on the Nasdaq SmallCap Market (or, if the Common Stock is not
then included in Nasdaq, but is listed on any national securities exchange, on
the principal national securities exchange on which the Common Stock is then
listed) having reached and remained above $7.50 per share for a period of twenty
(20) consecutive trading days and (b) the trading volume of the Common Stock on
Nasdaq or other securities exchange was at least 50,000 shares per day as
measured by Nasdaq or other securities exchange during each of such twenty (20)
consecutive trading days.
SECTION 9. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any
shares of Series 1999 Non-Voting Preferred Stock shall be converted pursuant to
either Section 5 or 8 hereof or redeemed pursuant to Section 7 hereof, the
shares so converted or redeemed shall be canceled, shall return to the status of
authorized but unissued Preferred Stock of no designated series, and shall not
thereafter be issuable by the Company as Series 1999 Non-Voting Preferred Stock.
SECTION 10. OTHER PREFERRED STOCK. Nothing contained herein shall be
construed to prevent the Board of Directors from authorizing the creation of, or
to prevent the Company from issuing shares of, one or more series of Preferred
Stock junior to or on parity with the Series 1999 Non-Voting Preferred Stock as
to dividend, liquidation rights or otherwise.
SECTION 11. LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of any certificates
representing shares of Series 1999 Non-Voting Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity or security reasonably satisfactory
to the Company, and upon surrender and cancellation of the certificate(s), if
mutilated, the Company shall execute and deliver to the record Holder thereof
new certificate(s) of like tenor and date. However, the Company shall not be
obligated to re-issue such lost or stolen certificates if the Holder
contemporaneously requests the Company to convert such shares of Series 1999
Non-Voting Preferred Stock into shares of non-voting Common Stock.
SECTION 12. FRACTIONAL SHARES. In the event a Holder of Series 1999
Non-Voting Preferred Stock shall be entitled to receive a fractional interest in
a share of Series 1999 Non-Voting Preferred Stock of less than one one-hundredth
of one share, except as otherwise provided herein, the Company shall either, in
the sole discretion of the Board of Directors, (a) round such fractional
interest up to the next one-hundredth of one whole share of Series 1999
Non-Voting Preferred Stock or (b) deliver cash in the amount of the fair market
value (as determined by the Board of Directors or in any manner prescribed by
the Board of Directors) of such fractional interest.
SECTION 13. PREEMPTIVE RIGHTS. The Holders of Series 1999 Non-Voting
Preferred Stock are not entitled to any preemptive or subscription rights in
respect of any securities of the Company.
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IN WITNESS WHEREOF, AXCESS Inc. has caused this certificate to be
signed by its Chairman of the Board and attested by its Secretary, as of the
30th day of September, 1999.
AXCESS INC.
By: /s/ James R. Craig
---------------------------------------------
James R. Craig, Chief Financial Officer
Attest:
/s/ Michael R. Dorey
- ----------------------------------------
Michael R. Dorey, Assistant Secretary
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<PAGE> 1
EXHIBIT 10.12
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR LAWS OR PURSUANT TO
AN EXEMPTION THEREFROM.
AXCESS INC.
10% Convertible Note due
September 30, 2002
$6,000,000.00 September 30, 1999
FOR VALUE RECEIVED, the undersigned, AXCESS Inc., a Delaware
corporation ("Maker"), hereby promises to pay to the order of Amphion Ventures,
L.P., a Delaware limited partnership ("Holder"), on September 30, 2002 (the
"Maturity Date"), the principal sum of up to SIX MILLION UNITED STATES DOLLARS
(U.S. $6,000,000.00), together with interest on the outstanding principal
balance hereunder from time to time, at the rate of ten percent (10.00%) per
annum (the "Interest Rate"), calculated on the basis of the number of days
elapsed over a 360-day year of twelve 30-day months.
Interest shall be payable semiannually in cash on April 1 and October 1
of each year until the Maturity Date, or if any such day is not a Business Day
(as defined below) on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on this Note will accrue from the most recent date on
which interest has been paid or, if no interest has been paid, from the date of
original issuance; provided, however, that the first Interest Payment Date shall
not occur until April 1, 2000. Following an Event of Default (as defined below),
Maker shall, to the extent lawful, pay interest on any overdue payment of
principal and interest, if any, from time to time on demand and at the rate of
two percent (2%) per annum in excess of the Interest Rate (without regard to any
applicable grace periods). As used herein, "Business Day" means any day other
than a Saturday, a Sunday or a day on which banking institutions in the City of
New York, or in the city in which the principal office of Maker's bank, are not
required to open.
Payments of principal and interest hereunder shall be made in lawful
money of the United States of America by check mailed to the registered address
or by wire transfer, in either case as designated by Holder for such purpose.
This Note shall represent and evidence the indebtedness of Maker to
Holder for advances made by Holder to Maker from time to time hereunder (the
"Advances"), including without limitation, the unpaid principal amount of, and
accrued but unpaid interest on, all Advances, as well as any additional amounts
that may be owed by Maker to Holder hereunder. Advances shall be made from time
to time in cash as Maker shall request up to and not to exceed $6,000,000.00.
Concurrently with the execution and delivery of this Note, Maker and Holder have
agreed to convert certain prior advances by Holder to Maker, including all
accrued, but unpaid interest thereon, in the aggregate principal amount of
$3,787,608.37 (the "Prior Advances") into Advances under this Note. Accordingly,
effective as of the date hereof, (a) all promissory notes representing the Prior
Advances shall be canceled and surrendered by Holder to Maker and (b) the
indebtedness of Maker to Holder represented by the Prior Advances shall, for all
purposes hereof, constitute an Advance by Holder to Maker under this Note in the
aggregate principal amount of the Prior Advances.
<PAGE> 2
In consideration for Holder making the Advances hereunder, Maker shall
issue to Holder a Warrant representing the right to purchase up to an aggregate
of 857,143 shares of the non-voting common stock, par value $0.01 per share, of
Maker (the "Non-Voting Common Stock") at an exercise price of $2.10 per share on
the terms set forth in that certain Warrant Agreement of even date herewith
issued by Maker to Holder (the "Warrant").
This Note is also subject to the following terms and
provisions:
ARTICLE I DEFAULTS
Each of the following events shall constitute an event of default
hereunder (each an "Event of Default"):
(1) if Maker fails to pay any amount of principal or interest when due,
and such due but unpaid amount remains unpaid for three (3) Business Days after
Holder makes written demand therefor; or
(2) if Maker fails to pay any amount of interest when due under the
terms of this Note when the same shall become demand payable and such due but
unpaid amount remains unpaid for one hundred eighty (180) days; or
(3) if an event of default, as defined in any indenture or other
instrument evidencing or under which there is at any time outstanding any
indebtedness of Maker on the same terms or senior to the obligations of Maker to
Holder hereunder, and the effect of such an event of default is to cause, or to
permit, with the giving of notice or the lapse of time, or both, holder or
holders thereof to cause such indebtedness to become due prior to its stated
maturity; or
(4) Maker shall: (a) be adjudicated insolvent or bankrupt, or cease, be
unable, or admit in writing its inability, to pay its debts as they mature, or
make a general assignment for the benefit of, or enter into any composition or
arrangement with, creditors; (b) apply for, or consent (by admission of material
allegation of a petition or otherwise) to the appointment of, a receiver,
trustee, or liquidator of Maker or of a substantial part of its assets, or
authorize such application or consent, or proceedings seeking such appointment
shall be commenced without such authorization, consent, or application against
it and continue undismissed for a period of sixty (60) days; (c) authorize or
file a voluntary petition in bankruptcy or apply for or consent (by admission of
material allegations of a petition or otherwise) to the application of any
bankruptcy, reorganization, readjustment of debt, insolvency, dissolution,
liquidation, or other similar law of any jurisdiction, or authorize such
application or consent, or proceedings to such end shall be instituted against
Maker without such authorization, application, or consent and be approved as
properly instituted, remain undismissed for sixty (60) days, or result in
adjudication of bankruptcy or insolvency; (d) permit or suffer all or any
substantial part of its property to be sequestered or attached by court order
and such order remains undismissed for sixty (60) days; or (e) take corporate
action looking toward any of the actions in (a) through (d) above.
ARTICLE II REMEDIES ON DEFAULT
Upon the occurrence of an Event of Default, Holder may at any time
(unless all Events of Default shall theretofore have been remedied) at its
option, by written notice to Maker, declare this Note to be due and payable,
whereupon the same shall forthwith mature and become due and payable, together
with interest accrued thereon, without presentment, demand, protest, or notice,
all of which are hereby waived by Maker. If an Event of Default occurs with
respect to Maker's prompt payment of this Note when due or declared due,
2
<PAGE> 3
or in the performance of any term, covenant, or condition of any term of this
Note, and this Note is placed in the hands of an attorney for collection or
enforcement, or suit is brought on same, or the same is collected or enforced
through any judicial proceeding whatsoever, including an action in bankruptcy,
or if any action of foreclosure be had thereon, then Maker agrees and promises
to pay the reasonable attorney's fees and costs incurred by Holder in collection
or enforcement.
ARTICLE III CONVERSION
Prior to the time that all principal of and interest and premium, if
any, on this Note have been paid in full, Holder shall have the right at any
time to convert this Note into shares of Maker's Series 1999 NonVoting Preferred
Stock, par value $0.01 per share (the "Non-Voting Preferred Stock") on the
following terms and conditions:
(5) Conversion of Note. This Note shall be convertible at the office of
Maker or at the office of the transfer agent, if any, for the Non-Voting
Preferred Stock into fully paid and non-assessable shares of Non-Voting
Preferred Stock at the original issue price of $10,000 per share (the
"Conversion Price"). The number of shares of Non-Voting Preferred Stock to be
delivered upon conversion of this Note shall be determined by dividing the
unpaid principal balance hereof and the accrued interest hereon by the
Conversion Price. Notwithstanding the foregoing or any other term or provision
of this Note, Holder shall not be permitted, without the prior written consent
of Maker, to exercise its rights to convert all or a portion of this Note and
acquire shares of Non-Voting Preferred Stock hereunder until such time as Maker
shall have received the authorization of its stockholders to issue Non-Voting
Preferred Stock to Holder upon the conversion of all or any portion of this Note
by Holder. Maker hereby agrees to submit such a proposal to its stockholders for
approval at Maker's 2000 annual meeting of stockholders and to use its best
efforts to obtain such approval.
(6) Mechanics of Conversion. Before Holder of this Note shall be
entitled to convert the same into shares of Non-Voting Preferred Stock, Holder
shall surrender this Note, duly endorsed, at the office of Maker or the transfer
agent for the Non-Voting Preferred Stock, if any, and shall give written notice
to Maker that it elects to convert all or part of this Note and shall state in
writing therein the name or names in which it wishes the certificate or
certificates for Non-Voting Preferred Stock to be issued. Maker will, as soon as
practicable thereafter, issue and deliver to Holder certificates for the number
of full shares of Non-Voting Preferred Stock to which it shall be entitled as
aforesaid, together with cash in lieu of any fraction of a share as hereinafter
provided. If this Note is converted only in part, Maker will issue and deliver
to Holder a new certificate or certificates representing the unconverted portion
of this Note. This Note shall be deemed to have been converted as of the date of
the surrender of this Note for conversion as provided above, and the person or
persons entitled to receive the Non-Voting Preferred Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Non-Voting Preferred Stock on such date.
(7) No Fractional Shares. No fractional share of the Non-Voting
Preferred Stock shall be issued upon any conversion but, in lieu thereof, there
shall be paid to Holder when this Note is surrendered for conversion, who but
for the provisions of this Section 3.3 would be entitled to receive a fraction
of a share on such conversion, an amount in cash equal to the amount of the
remaining unpaid principal balance hereof and the accrued interest hereon which
cannot be so converted as a result of the provisions of this Section 3.3.
(8) Reservation of Shares. Maker will reserve and keep available a
sufficient number of shares of (a) Non-Voting Preferred Stock to satisfy the
requirements of this Note and (b) Non- Voting Common Stock to satisfy the
conversion requirements of the Non-Voting Preferred Stock. Maker will take all
such action as may be necessary to insure that all shares of Non-Voting
Preferred Stock issuable upon conversion
3
<PAGE> 4
hereof and all shares of Non-Voting Common Stock issuable upon conversion of
such shares of Non-Voting Preferred Stock will be duly and validly authorized
and issued and fully paid and nonassessable.
(9) No Charge for Conversion. The issuance of certificates for shares
of Non-Voting Preferred Stock upon the conversion hereof shall be made without
charge to Holder converting this Note for any issue or stamp tax in respect of
the issuance of such certificates, and such certificates shall be issued in the
name of, or in such names as may be directed by, Holder; provided, however, that
Maker shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate in a
name other than that of Holder, and Maker shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to Maker the amount of such tax or shall have
established to the satisfaction of Maker that such tax has been paid.
(10) Notice of Certain Corporate Actions. In case at any time
(A) Maker shall take any action which would require an
adjustment to the Conversion Price;
(B) Maker shall authorize the granting to the holders of any
class of its common stock of any dividends or distributions payable in
cash, stock or other property;
(C) there shall be any capital reorganization or
reclassification of any of the capital stock of Maker, or any
consolidation or merger to which Maker is a party and for which
approval of any stockholders of Maker is required, or any sale or
transfer of all or substantially all of the assets of Maker; or
(D) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of Maker;
then, in any one or more of such cases, Maker shall give written notice to
Holder, not less than twenty (20) days before any record date or other date set
for definitive action, of the date on which such reorganization,
reclassification, sale, consolidation, merger, dissolution, liquidation, or
winding-up shall take place, as the case may be. Such notice shall also set
forth such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the conversion price or the
kind and amount of the shares of Non-Voting Preferred Stock and other securities
and property deliverable upon conversion of this Note or upon conversion of the
Non-Voting Preferred Stock. Such notice shall also specify the date as of which
the holders of the Non-Voting Preferred Stock or other capital stock of record
shall be entitled to exchange their securities for securities or other property
deliverable upon such reorganization, reclassification, sale, consolidation,
merger, dissolution, liquidation, or winding up, as the case may be (or which
date, in the event of voluntary or involuntary dissolution, liquidation, or
winding up of Maker, the right to convert this Note shall terminate).
Without limiting the obligation of Maker to provide notice to Holder of
corporate actions hereunder, it is agreed that failure of Maker to give such
notice shall not invalidate such corporate action of Maker.
4
<PAGE> 5
ARTICLE IV PREPAYMENT
(11) Right to Prepay. Subject to the terms of this Article IV, this
Note may be prepaid, at any time at the option of Maker, by the payment to
Holder of the unpaid principal balance hereof, together with (a) interest on the
unpaid principal balance hereof and (b) an amount equal to ten percent (10%) of
the unpaid principal balance hereof accrued to the date fixed for prepayment;
provided, however, that the 10% prepayment penalty may, at the option of Maker,
be paid to Holder in cash or by the issuance of additional shares of Maker's
Non-Voting Preferred Stock. The number of shares of Non-Voting Preferred Stock
to be delivered shall be determined by dividing the amount of the prepayment
penalty by the then applicable Conversion Price.
(12) Notice of Prepayment. In case Maker shall exercise its right to
prepay this Note, it shall give notice thereof to Holder, not later than the
twentieth (20th) day before the date fixed for prepayment. The notice of
prepayment shall specify the date fixed for prepayment, the place where this
Note shall be delivered and the prepayment amount shall be paid, and the amount
to be paid.
(13) Cessation of Rights of Note Holder. After 5:00 P.M., New York City
time, on the date fixed for prepayment, all rights with respect to this Note,
including, without limitation, the conversion rights contained herein, shall
forthwith terminate, except only the right of Holder to receive the amounts set
forth in Section 4.1.
ARTICLE V OTHER PROVISIONS RELATING TO RIGHTS
OF HOLDER OF THIS NOTE
(14) Rights of Holder of Note; Registration Rights. Until the date of
conversion, this Note shall not entitle Holder to any of the rights of a
stockholder of Maker, including, without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of Maker.
(15) Lost, Stolen, Mutilated or Destroyed Note. If this Note shall be
mutilated, lost, stolen, or destroyed, Maker shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Note, or in
lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for
the principal amount of this Note so mutilated, lost, stolen, or destroyed but
only upon receipt of evidence of such loss, theft, or destruction of such Note,
and of the ownership thereof, and indemnity, if requested, all reasonably
satisfactory to Maker.
(16) Consent of Holder Required for Certain Matters. The consent of
Holder will be required for any amendment, alteration, or repeal, whether by
merger or consolidation or otherwise, of Maker's Certificate of Incorporation if
the amendment, alteration, or repeal materially and adversely affects the
powers, preferences, or special rights of the Non-Voting Preferred Stock;
provided, however, that any increase in the authorized preferred stock of Maker
or the creation and issuance of any other capital stock of Maker ranking on the
same terms or junior to the Non-Voting Preferred Stock shall not be deemed to
affect materially and adversely such powers, preferences or special rights.
ARTICLE VI REPRESENTATIONS OF HOLDER
6.1 Investment Representations. By accepting this Note, Holder
represents the following to Maker:
5
<PAGE> 6
(A) Maker has delivered to Holder a true and complete copy of
(i) Maker's Annual Report on Form 10-KSB for the year ended December 31, 1998,
(ii) Maker's definitive proxy statement relating to its 1999 annual stockholders
meeting and (iii) all other filings (other than preliminary registration and
proxy statements) made by Maker with the Securities and Exchange Commission
between December 31, 1998 and the date hereof (collectively, the "SEC
Documents"). Holder is familiar with the SEC Documents, the business, financial
condition, management, prospects and operations of Maker. During the course of
the negotiation of this Note, Holder has reviewed all information provided to it
by Maker and has had the opportunity to ask questions of and receive answers
from representatives of Maker concerning Maker, the securities offered and sold
hereby, and to obtain certain additional information requested by Holder;
(B) Holder understands that the offer and sale of this Note,
the Warrant, the Non-Voting Preferred Stock issuable upon the conversion hereof
or exercise of the Warrant are not being registered under the Securities Act of
1933 (the "1933 Act"), or under any applicable state securities law and that
this Note, the Warrant, the Non-Voting Preferred Stock issuable upon the
conversion hereof and the exercise of the Warrant are being offered and sold in
reliance on the so-called "private offering" exemption provided by Section 4(2)
of the 1933 Act and/or Regulation D promulgated pursuant to the 1933 Act, and
similar exemptions under applicable state securities laws, and that Maker is
basing its reliance on that exemption in part on the representations,
warranties, statements and agreements contained herein;
(C) Holder understands that this Note, the Warrant, the
Non-Voting Preferred Stock issuable upon the conversion hereof or the exercise
of the Warrant cannot be resold, transferred or assigned unless (i) subsequently
registered under the 1933 Act and applicable state securities laws or (ii)
exemptions from such registrations are available. Holder is aware of the
provisions of Rule 144 promulgated under the 1933 Act which permit limited
resale of shares purchased in a private transaction subject to the satisfaction
of certain conditions;
(D) Holder understands that no public market now exists for
the Note, the Non-Voting Preferred Stock or the Warrant and that it is uncertain
that a public market will ever exist for this Note, the Non-Voting Preferred
Stock or the Warrant; and
(E) Holder understands that the certificates for the
Non-Voting Preferred Stock issuable upon the conversion hereof and the Warrant
will bear the following legend:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE CORPORATION WILL NOT TRANSFER THIS CERTIFICATE UNLESS (i)
THERE IS AN EFFECTIVE REGISTRATION COVERING THE SHARES REPRESENTED BY
THIS CERTIFICATE UNDER THE SECURITIES ACT OF 1933 AND ALL APPLICABLE
STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING
THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL
APPLICABLE STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933.
ARTICLE VII OTHER MATTERS
7.1 Successor to Maker. The provisions of this Note shall be binding
upon and inure to the benefit of Maker and Holder and their respective permitted
successors and assigns. Maker may not assign
6
<PAGE> 7
or otherwise transfer this Note or delegate its duties hereunder without having
received the prior written consent of Holder.
7.2 Modification. This Note sets forth the entire understanding of
Maker and Holder with respect to the subject matter hereof, supersedes all
existing agreements between them concerning such subject matter, and may be
modified only by a written instrument duly executed by Maker and Holder.
7.3 Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be effective if sent by first
class mail, postage prepaid, or certified mail, return receipt requested, or
delivered by telecopy, overnight courier or hand delivery, against receipt, to
the following addresses:
If to Maker, then to it at:
AXCESS Inc.
3208 Commander Drive
Dallas, Texas 75006
Attention: Chief Financial Officer
Facsimile No.: (972) 407-6080
(or to such other address as Maker may have furnished in writing to
Holder for this purpose); and
If to Holder, then to it at such address as Holder may have furnished
in writing to Maker for this purpose.
7.4 Waiver. Any waiver by or Holder of a breach of any provision of
this Note shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Note.
The failure of Holder to insist upon strict adherence to any term of this Note
on one or more occasions shall not be considered a waiver or deprive Holder of
the right thereafter to insist upon strict adherence to that term or any other
term of this Note. Any waiver must be in writing.
7.5 Separability. If any provision of this Note is invalid, illegal, or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
7.6 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
rules governing the conflict of laws.
7
<PAGE> 8
IN WITNESS WHEREOF, Maker has caused this Note to be executed on its
behalf by its officer thereunto duly authorized as of the date set forth above.
AXCESS INC.
By: /s/ James R. Craig
-----------------------------------------------------
James R. Craig, Chief Financial Officer and Secretary
8
<PAGE> 1
EXHIBIT 10.13
[Amphion Ventures L.P. Letterhead]
AXCESS Inc. September 30, 1999
3208 Commander Drive
Dallas, Texas 75006
Re: Series A, B and C Preferred Stock Dividends
Ladies and Gentlemen:
Amphion Ventures L.P. ("Amphion"), hereby notifies and directs AXCESS
Inc. (the "Company") to pay all accrued, but unpaid dividends which are
outstanding as of the date of this letter for the six month period from April 1,
1999, to September 30, 1999 (approximately $190,000) on the shares of Series A,
B and C Convertible Preferred Stock of the Company held by Amphion as of the
date of this letter (collectively the "Accrued Dividends") in kind by issuing to
Amphion additional shares of Series A, B or C Preferred Stock, respectively, of
the Company. Further, Amphion hereby directs the Company to exchange the
additional shares of Series A, B and C Convertible Preferred Stock of the
Company for 19 shares of the Series J NonVoting Preferred Stock (the "Series J
Preferred Stock") of the Company.
1. Payment of Accrued Dividends; Issuance of Shares. Amphion hereby
directs the Company to issue 19 shares of Series J Preferred Stock in exchange
for the shares of Series A, B and C Convertible Preferred Stock, respectively,
issued to Amphion as payment in full for the Accrued Dividends (the "Shares").
On and as of the date of this letter, the Accrued Dividends shall automatically
be converted and discharged in full and Amphion shall be the due and valid
holder of record of the Shares.
2. Conversion of Non-Voting Common Stock to Voting Common Stock.
Amphion hereby agrees that it shall not, without the prior written consent of
the Company, convert any shares of the non-voting common stock of the Company
issuable to Amphion upon its conversion of any shares of Series J Preferred
Stock to voting common stock of the Company.
3. Securities Act Legend; Registration Rights.
3.1 The Shares will not be registered under the Securities Act of
1933, as amended (the "Securities Act"). Certificates representing the Shares
shall bear a restrictive legend substantially to the effect of the following:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS, OR 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. ADDITIONAL
RESTRICTIONS REGARDING THE TERMS UNDER WHICH THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY BE CONVERTED INTO VOTING OR NON-VOTING COMMON
STOCK OF THE
<PAGE> 2
AXCESS Inc.
September 30, 1999
Page 2
COMPANY, AS THE CASE MAY BE, ARE SET FORTH IN THAT CERTAIN NOTE PAYABLE
CONVERSION AGREEMENT EFFECTIVE AS OF DECEMBER 31, 1998.
4. Representations and Warranties by the Company. The Company hereby
represents and warrants to Amphion as follows:
4.1 The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has the
corporate power and authority to execute and deliver this agreement, to issue
the Shares on the basis described herein and otherwise to perform its
obligations under this agreement.
4.2 The execution and delivery by the Company of this Agreement, the
issuance of the Shares, and the performance by the Company of its obligations
hereunder, have been duly authorized by all requisite corporate action on the
part of the Company and will not (a) violate any provision of law, statute, rule
or regulation or any order of any court or other agency of government, (b)
conflict with or violate the Certificate of Incorporation or By-Laws of the
Company, in each case as amended, or (c) violate, conflict with or constitute
(with due notice or lapse of time or both) a default under any indenture,
mortgage, lease, license, agreement or other contract or instrument or result in
the creation or imposition of any lien, charge or encumbrance of any nature upon
the properties or assets of the Company or any of its subsidiaries, in each case
if such violation, conflict, default, lien, charge or encumbrance would have a
material adverse effect on the Company.
4.3 This agreement has been duly executed and delivered by the
Company and constitutes the valid and legally binding obligation of the Company,
enforceable in accordance with its terms, except to the extent the
enforceability hereof may be limited by applicable bankruptcy, moratorium or
similar laws affecting the rights of creditors generally.
4.4 Based in part upon the representations and warranties of Amphion
contained in this agreement, no registration or filing with, or consent or
approval of, or other action by, any federal, state or other governmental
department, commission, board, bureau, agency or instrumentality or any third
party is or will be necessary for the execution and delivery of this agreement
by the Company and the issuance of the Shares hereunder, other than the filing
of a notice of sale on Form D with the Securities and Exchange Commission in
accordance with the rules and regulations thereof under the Securities Act.
4.5 The Shares are duly authorized, validly issued, fully paid and
non-assessable shares of Series J Preferred Stock and are not subject to any
preemptive rights.
4.6 The Company shall cause to be delivered to Amphion a true copy
of the Series J Certificate of Designation, which was approved and adopted by
the Board of Directors of the Company.
5. Representations and Warranties of Amphion. Amphion hereby represents
and warrants to the Company as follows:
5.1 Amphion is acquiring the Shares for its own account, for
investment and not with a view to the distribution thereof within the meaning of
the Securities Act.
<PAGE> 3
AXCESS Inc.
September 30, 1999
Page 3
5.2 Amphion understands that the Shares have not been registered
under the Securities Act, by reason of their issuance by the Company in
transactions exempt from the registration requirements of the Securities Act,
and that the Shares must be held by Amphion indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration.
5.3 Amphion further understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to it) promulgated under
the Securities Act depends on the satisfaction of various conditions, and that,
if applicable, Rule 144 may afford the basis for sales only in limited amounts,
after compliance with the holding periods and other provisions thereof.
5.4 Amphion understands that its investment hereunder involves
substantial risks and represents and warrants that it has made such independent
examinations and investigations of the Company as it has deemed necessary in
making its investment decision, and Amphion further represents and warrants that
it has had sufficient access to the officers, directors, books and records of
the Company as it has deemed necessary to conduct such examination and
investigation and make such investment decision.
5.5 Amphion is able to bear the economic risk of the investment
contemplated by this agreement and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the investment contemplated by this agreement.
6. Miscellaneous.
6.1 This agreement constitutes our entire agreement with respect to
the subject matter hereof. This agreement may not be modified or amended or any
provision hereof waived except by an instrument in writing signed by the Company
and Amphion.
6.2 This agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. The
rights of Amphion hereunder shall be assignable to any holder of the Shares.
Except as provided in the immediately preceding sentence, this agreement and the
rights of Amphion hereunder shall not be assignable, and any purported
assignment hereof or thereof shall be void.
6.3 This Agreement may be executed in any number of counterparts and
on separate counterparts, each of which shall be an original instrument, but all
of which together shall constitute a single agreement. One or more signature
pages from any counterpart of this Agreement may be attached to any other
counterpart of this Agreement without in any way changing the effect thereof.
This Agreement shall be effective when executed and delivered by the Company and
Amphion.
6.4 All notices, requests, demands, consents, waivers, or other
communications made hereunder to any party or holder of Shares shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by nationally-recognized overnight courier, facsimile or by first class
registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below:
if to the Company, to the Company at its address
first set forth above,:
<PAGE> 4
AXCESS Inc.
September 30, 1999
Page 4
with a copy to:
Sayles & Lidji, P.C.
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Attention: Michael R. Dorey, Esq.; and
if to Amphion, to Amphion at its address
first set forth above,
or to such other address as the party to whom such communication is to be given
may have furnished to the other party in writing in accordance herewith. All
such notices, requests, demands, consents, waivers or other communications shall
be deemed to have been delivered (a) in the case of personal delivery, on the
date of delivery, (b) if sent by facsimile, on the date sender receives a
confirmation confirming receipt, (c) if sent by overnight courier, on the next
business day following the date sent and (iv) in the case of mailing, on the
third business day following such mailing.
6.5 All representations, warranties and agreements contained herein
shall survive the execution and delivery of this Agreement and the sale of the
Shares hereunder.
6.6 This agreement, and all rights, obligations and liabilities
hereunder, shall be construed according to the laws of the State of New York
applicable to contracts made and to be performed wholly therein. Any judicial
proceeding brought against the Company to enforce, or otherwise in connection
with, this agreement may be brought in any court of competent jurisdiction in
the City of New York, and, by execution and delivery of this agreement, the
Company (i) accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and irrevocably
agrees to be bound by any final judgment rendered thereby in connection with
this agreement and (ii) irrevocably waives any objection it may now or hereafter
have as to the venue of any such proceeding brought in such a court or that such
a court is an inconvenient forum.
If the foregoing correctly sets forth your understanding of our
agreement, please so indicate by signing and returning to the Company the
enclosed counterpart of this Agreement.
Very truly yours,
Amphion Ventures L.P.
By: Amphion Partners L.L.C.,
its General Partner
By:
------------------------------------------
Richard C.E. Morgan, Managing Member
<PAGE> 5
AXCESS Inc.
September 30, 1999
Page 5
The undersigned agrees with and accepts the foregoing terms and provisions as of
the date first above written
AXCESS INC.
By:
---------------------------------------------------------------
James R. Craig, Chief Financial Officer and Secretary
<PAGE> 1
EXHIBIT 10.14
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") dated as of
September 30, 1999, by and between AXCESS Inc., a Delaware corporation (the
"Company"), and Amphion Ventures L.P., a Delaware limited partnership (the
"Stockholder").
The following recitals are true and constitute the basis for this
Agreement:
A. The Stockholder is a party to a Convertible Note dated as of
even date herewith pursuant to which the Stockholder is
advancing up to $6,000,000 to the Company (the "Convertible
Note") and a series of Warrants to acquire up to a maximum of
857,143 shares of the Company's voting common stock; and
B. The Company has agreed to provide the Stockholder with certain
registration rights as set forth herein.
NOW, THEREFORE, in consideration of the premises, obligations, and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and subject to and on
the terms and conditions set forth herein, the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
"Registrable Securities" means the Restricted Stock, subject
to adjustment pursuant to the terms of Section 5 hereof. As to any particular
Registrable Securities, once issued, such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold as permitted by, and in compliance
with, Rule 144 (or successor provision) promulgated under the Securities Act,
(c) they shall have been otherwise sold or transferred, new certificates for
them not bearing a legend restricting further transfer shall have been delivered
by the Company and subsequent public distribution of them shall not require
registration of them under the Securities Act or any similar state law then in
force, or (d) such securities shall have been sold as permitted by, and in
compliance with, the Securities Act.
"Registration Expenses" means all expenses incident to the
registration and disposition of the Registrable Securities pursuant to Section 2
hereof, including, without limitation, all registration, filing and national
securities exchange fees, all listing fees, all fees and expenses of complying
with state securities or blue sky laws (including, without limitation, fees and
disbursements of counsel for the underwriters or the Stockholder in connection
with blue sky qualification of the Registrable Securities and determination of
their eligibility for investment under the laws of the various jurisdictions),
all word processing, duplicating and printing expenses, all messenger and
delivery expenses, the fees and disbursements of counsel for the
<PAGE> 2
Company and of its independent public accountants, including the expenses of
"cold comfort" letters or any special audits required by or incident to such
registration, all fees and disbursements of underwriters (other than
underwriting discounts and commissions, if any), including any "qualified
independent underwriter", all transfer taxes, and the fees and expenses of
counsel to the Stockholder; provided, however, that Registration Expenses shall
exclude, and the Stockholder shall pay, underwriting discounts and commissions,
if any, in respect of the Registrable Securities being registered.
"Restricted Stock" means the shares of non-voting common stock
of the Company to be acquired by the Stockholder upon either (a) the exercise of
any portion of the Warrant or (b) upon the conversion of any of the non-voting
preferred stock issuable to the Stockholder upon the conversion of any portion
of the Note into non-voting Common Stock.
"Securities Act" means the Securities Act of 1933, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
SECTION 2. Restrictive Legend. In addition to any restrictive legend
required by any other agreement, each certificate representing Restricted Stock,
and each certificate issued upon exchange or transfer of Restricted Stock, other
than in a public sale or as otherwise permitted by the last paragraph of Section
3 hereof, shall be stamped or otherwise imprinted with a legend substantially in
the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THAT ACT
OR THE COMPANY IS IN RECEIPT OF AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
SECTION 3. Notice of Proposed Transfer. Prior to any proposed transfer
of any Restricted Stock (other than under the circumstances described in
Sections 4.1 or 4.2 hereof), the holder thereof shall give written notice to the
Company of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by the Company
shall be accompanied by an opinion of counsel reasonably satisfactory to the
Company to the effect that the proposed transfer of the Restricted Stock may be
effected without registration under the Securities Act, whereupon the holder of
such Restricted Stock shall be entitled to transfer such Restricted Stock in
accordance with the terms of its notice; provided; however, that no such opinion
or other documentation shall be required if such notice shall cover a
distribution by any holder of Restricted Stock that is a partnership to its
partners. Each certificate for Restricted Stock transferred as above provided
shall bear the legend set forth in Section 2, unless (a) such transfer is in
accordance with the provisions of Rule 144 (or any other rule permitting public
sale without registration under the Securities Act) or (b) the opinion of
counsel referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act.
The foregoing restrictions on transferability of Restricted Stock shall
terminate as to any particular shares of Restricted Stock when such shares shall
have been effectively registered under the Securities Act and sold or otherwise
disposed of in accordance with the intended method of disposition by the seller
or sellers thereof set forth in the registration statement concerning such
shares. Whenever a holder of Restricted Stock is able to demonstrate to the
Company (and its counsel) that the provisions of Rule 144(k) under the
Securities Act are available to such holder without limitation, such holder of
Restricted Stock shall be entitled
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to receive from the Company, without expense, a new certificate not bearing the
restrictive legend set forth in Section 2.
SECTION 4. Registration Under Securities Act.
4.1. Registration on Demand.
(a) Demand. Subject to Section 4.1(b) hereof, at any time after
the date hereof, the Stockholder shall have the right to require the Company to
effect the registration under the Securities Act of all of the Registrable
Securities held by the Stockholder, by delivering a written request therefor to
the Company. Upon receipt of such notice from the Stockholder, the Company shall
use its best efforts to effect the registration under the Securities Act of the
Registrable Securities to the extent required to permit the disposition of the
Registrable Securities to be registered. The Company shall, if requested by the
Stockholder, as expeditiously as possible, use its best efforts to obtain
acceleration of the effective date of the registration statement relating to
such registration.
(b) Limitations on Demand Registration. The Stockholder shall
be entitled to require the Company to effect, and the Company shall be required
to effect, one registration pursuant to this Section 4.1.
(c) Effective Registration Statement. A registration requested
pursuant to this Section 4.1 shall not be deemed to have been effected
(including for purposes of paragraph (b) of this Section 4.1) (i) unless a
registration statement with respect thereto has become effective and has been
kept continuously effective for a period of at least one year (or such shorter
period which shall terminate when all the Registrable Securities covered by such
registration statement have been sold pursuant thereto), or (ii) if, after it
has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to the Stockholder and has not
thereafter become effective.
4.2 Incidental Registration. If the Company at any time (other than
pursuant to Section 4.1 hereof) proposes to register any of its Common Stock
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Form S-8 or S-4 or another form not available for
registering Restricted Stock for sale to the public), and if the holders of the
Restricted Stock shall not have exercised their demand registration rights under
Section 4.1 above as of the date of such proposed registration, it will give
written notice at such time to all holders of Restricted Stock then outstanding
of its intention to do so. Upon the written request of any such holder, given
within 30 days after receipt of any such notice by the Company, to register any
of its Restricted Stock (which request shall state the intended method of
disposition thereof), the Company will use its best efforts to cause the
Restricted Stock as to which registration shall have been so requested, to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to permit the sale or
other disposition by the holders (in accordance with their written request) of
such Restricted Stock so registered; provided that nothing herein shall prevent
the Company from abandoning or delaying such registration at any time. In the
event that any registration pursuant to this Section 4.2 shall be, in whole or
in part, an underwritten public offering of Common Stock, any request by a
holder pursuant to this Section 4.2 to register Restricted Stock shall specify
that such Restricted Stock is to be included in the underwriting on the same
terms and conditions as the shares of Common Stock otherwise being sold through
underwriters under such registration. The number of shares of Restricted Stock
to be included in such an underwriting may be reduced (in each case based upon
the number of shares of Restricted Stock, so requested to be registered) if and
to the extent that the managing
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underwriter shall be of the opinion that such inclusion would adversely affect
the marketing of the securities to be sold by the Company being sold in such
offering.
4.3 Registration Statement Form. Registrations under this Section
4.1 or Section 4.2 shall be on such appropriate registration form of the
Commission as shall be selected by the Company and as shall be reasonably
acceptable to the Stockholder. The Company agrees to include in any such
registration statement all information which, in the opinion of counsel to the
Stockholder, to the Company and to any underwriter is required or advisable to
be included.
4.4 Expenses. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 4.1 or
Section 4.2.
4.5 Postponement. If in the good faith judgment of the Board of
Directors of the Company, the filing of any registration statement required to
be prepared and filed by it pursuant to Section 4.1 or Section 4.2 would be
detrimental to the Company, the Company shall be entitled once in any one-year
period to postpone for a reasonable period of time (but not exceeding 90 days)
(the "Postponement Period") the filing of any registration statement required to
be prepared and filed by it pursuant to Section 4.1 or Section 4.2. The Board of
Directors of the Company must furnish the Stockholder a certificate signed by an
executive officer of the Company stating that the Board of Directors of the
Company has made such a determination, containing a general statement of the
reasons for such postponement and an approximation of the anticipated delay. If
the Company shall so postpone the filing of a registration statement, the
Stockholder shall have the right to withdraw the request for registration by
giving written notice to the Company at any time and, in the event of such
withdrawal, such request shall not be counted for purposes of the requests for
registration to which the Stockholder is entitled pursuant to Section 4.1 or
Section 4.2.
4.6. Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Section 4.1 or Section 4.2,
the Company will as expeditiously as possible:
(a) prepare and (as soon as practicable, and in any event
within sixty (60) days in the case of Form S-l and thirty (30) days in the case
of a registration requested on Form S-2 or S-3 after the end of the period
within which requests for registration may be given to the Company) file with
the Commission the requisite registration statement to effect such registration
(and shall include all financial statements required by the Commission to be
filed therewith) and thereafter use its best efforts to cause such registration
statement to become effective; provided, however, that before filing such
registration statement (including all exhibits) or any amendment or supplement
thereto or comparable statements under securities or blue sky laws of any
jurisdiction, the Company shall furnish such documents to the Stockholder, any
underwriter and their respective counsel, which documents will be subject to the
review and comments of the Stockholder, each underwriter and their respective
counsel;
(b) notify the Stockholder of the Commission's requests for
amending or supplementing the registration statement and the prospectus, and
prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement for such period as
shall be required for the disposition of all of such Registrable Securities in
accordance with the intended method of distribution thereof; provided that,
except with respect to any such registration statement filed pursuant to Rule
415 under the Securities Act, such period need not exceed 180 days;
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<PAGE> 5
(c) furnish, without charge, to the Stockholder and each
underwriter such number of conformed copies of such registration statement and
of each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities Act, and such other
documents, as such holders and such underwriters may reasonably request;
(d) use its best efforts (i) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such securities or blue sky laws of such states of the United
States of America where an exemption is not available and as the Stockholder
shall reasonably request, (ii) to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and (iii)
to take any other action which may be reasonably necessary or advisable to
enable such holders to consummate the disposition in such jurisdictions of the
securities to be sold by such holders, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not be required to qualify but
for the requirements of this subdivision or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by such
other federal or state governmental agencies or authorities as may be necessary
in the opinion of counsel to the Company and counsel to the Stockholder to
consummate the disposition of such Registrable Securities;
(f) furnish to the Stockholder and any underwriter a signed
counterpart of (i) an opinion of counsel for the Company, and (ii) a "comfort"
letter signed by the independent public accountants who have certified the
Company's financial statements included or incorporated by reference in such
registration statement, in each case, addressed to the Stockholder and
underwriters, covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
the accountants' comfort letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities (and dated the dates such opinions
and comfort letters are customarily dated);
(g) promptly notify the Stockholder participating in the
offering of the securities covered by such registration statement and any
underwriter (i) when such registration statement, any pre-effective amendment,
the prospectus or any prospectus supplement related thereto or post-effective
amendment to such registration statement has been filed, and, with respect to
such registration statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any of the
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose; (v) of the
existence of any fact of which the Company becomes aware which results in such
registration statement, the prospectus related thereto or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make any statement therein in light of the circumstances under
which they were made not misleading; and, in the case of the notification
relating to an event described in clause (v) hereof, at the request of the
Stockholder and any underwriter, the Company shall promptly prepare and furnish
to the Stockholder and any underwriter a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
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<PAGE> 6
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made; and (vi) at any time when the representations and warranties of
the Company contemplated by Section 4 hereof cease to be true and correct;
(h) (i) use its best efforts to cause all Registrable
Securities covered by such registration statement to be listed on the principal
securities exchange on which similar securities issued by the Company are then
listed (if any), if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) if no similar securities are then so
listed, use its best efforts to (x) cause all such Registrable Securities to be
listed on a national securities exchange or (y) failing that, secure designation
of all such Registrable Securities as a National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq") "national market system
security" within the meaning of Rule 11Aa2-1 of the Commission or (z) failing
that, to secure Nasdaq authorization for such shares and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such shares with the National Association of
Securities Dealers, Inc.;
(i) deliver promptly to counsel to the Stockholder and any
underwriter copies of all correspondence between the Commission and the Company,
its counsel or auditors and all memoranda relating to discussions with the
Commission or its staff with respect to such registration statement; and
(j) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement.
The Company may require the Stockholder to furnish the Company such information
regarding the Stockholder and the distribution of the Registrable Securities as
the Company may from time to time reasonably request in writing.
The Stockholder agrees that upon receipt of any notice from the
Company of the happening of (a) any event of the kind described in paragraph
(g)(iii) of Section 4.6, such holder will, to the extent appropriate,
discontinue its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until the stop
order shall have been lifted or rescinded; (b) any event of the kind described
in paragraph (g)(iv) of Section 4.6, such holder will, to the extent
appropriate, discontinue its disposition of Registrable Securities pursuant to
the registration statement relating to such Registrable Securities in the
jurisdiction with respect to which the suspension of the qualification of any of
the Registrable Securities for sale has occurred, until the suspension shall
have been lifted or rescinded; and (c) any event of the kind described in
paragraph (g)(v) of Section 4.6, such holder will, to the extent appropriate,
discontinue its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities, until its
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph (g)(v) of Section 4.6 and, if so directed by the Company, will deliver
to the Company (at the Company's expense) all copies, other than permanent file
copies, then in its possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. If the disposition by
any holder of Registrable Securities of its securities is discontinued pursuant
to the foregoing sentence, the Company shall extend the period of effectiveness
of the registration statement by the number of days during the period from and
including the date of the giving of notice to and including the date when either
(i) the stop order or suspension of qualification shall have been lifted or
rescinded or (ii) the holder of Registrable Securities shall have received
copies of the supplemented or amended prospectus contemplated by paragraph (g)
of this Section 4.6, as the case may be; and, if the Company shall not so extend
such period, the Stockholder's request pursuant to which such registration
statement was filed shall not be counted for purposes of the requests for
registration to which the Stockholder is entitled pursuant to Section 4.1
hereof.
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4.7. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Stockholder and
underwriters, if any, and their respective counsel, accountants and other
representatives and agents the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and, to the extent practicable, each amendment thereof or supplement
thereto, and give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and
employees and the independent public accountants who have certified its
financial statements, and supply all other information reasonably requested by
each of them as shall be necessary or appropriate, in the opinion of such
holder(s)' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
4.8. Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless, the Stockholder, its
directors, officers, fiduciaries, employees, stockholders, general and limited
partners (and the directors, officers, employees and stockholders thereof),
agents and affiliates and each other Person who participates as an underwriter
or qualified independent underwriter, if any, in the offering or sale of such
securities and each other Person, if any, who controls such Stockholder or any
such underwriter or qualified independent underwriter, if any, within the
meaning of the Securities Act, against any and all losses, claims, damages or
liabilities, joint or several, actions or proceedings (whether commenced or
threatened) in respect thereof ("Claims") and expenses (including reasonable
fees of counsel and any amounts paid in any settlement effected with the
Company's consent, which consent shall not be unreasonably withheld or delayed)
to which such indemnified party may become subject under the Securities Act or
otherwise, insofar as such Claims or expenses arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, together
with the documents incorporated by reference therein, (ii) any 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, or (iii) any violation by the Company of
any federal, state or common law rule or regulation applicable to the Company
and relating to action required of or inaction by the Company in connection with
any such registration, and the Company shall reimburse any such indemnified
party for any legal or any other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such Claim
as such expenses are incurred; provided that the Company shall not be liable to
any such indemnified party in any such case to the extent that any such Claim or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by or on behalf of
such indemnified party, specifically stating that it is for use therein. Such
indemnity and reimbursement of expenses shall remain in full force and effect
regardless of any investigation made by or on behalf of such indemnified party
and shall survive the transfer of such securities by each seller.
(b) Indemnification by the Stockholder. As a condition to
including Registrable Securities of the Stockholder in any registration
statement, the Stockholder shall, severally and not jointly, indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
4.8(a) to the extent permitted by law the Company, and each director of the
Company, each officer of the Company and each other person, if any, who controls
the Company within the meaning of the Securities Act and all other prospective
sellers and their directors, officers, general and limited partners and
respective controlling
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persons with respect to any untrue statement or alleged untrue statement of any
material fact in or omission or alleged omission of any material fact from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, but only
to the extent such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company or its representatives by or on behalf of the
Stockholder specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement or document incorporated by reference into
any of the foregoing; provided, however, that the liability of the Stockholder
under this Section 4.8(b) shall be limited to the amount of net proceeds
received by the Stockholder in the offering giving rise to such liability. The
obligations of the Stockholder to indemnify as provided in this Section 4.8(b)
are several and not joint and shall be in proportion to the relative value of
their respective Registrable Securities covered by such registration statement.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer of such securities by the
Stockholder.
(c) Notices of Claims, etc. Any person entitled to
indemnification under this Agreement shall notify promptly the indemnifying
party in writing of the commencement of any action or proceeding with respect to
which a claim for indemnification may be made pursuant to this Section 4.8, but
the failure of any indemnified party to provide such notice shall not relieve
the indemnifying party of its obligations under the preceding paragraphs of this
Section 4.8, except to the extent the indemnifying party is materially
prejudiced thereby and shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than under this
Section 4.8. In case any action or proceeding is brought against an indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, unless in
the reasonable opinion of outside counsel to the indemnified party a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, to assume the defense thereof jointly with any other indemnifying
party similarly notified, to the extent that it chooses, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party that it so chooses,
the indemnifying party shall not be liable to such indemnified party for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that (i) if the indemnifying party fails to
take reasonable steps necessary to defend diligently the action or proceeding
within twenty (20) days after receiving notice from such indemnified party that
the indemnified party believes it has failed to do so; or (ii) if such
indemnified party who is a defendant in any action or proceeding which is also
brought against the indemnifying party reasonably shall have concluded that
there may be one or more legal defenses available to such indemnified party
which are not available to the indemnifying party; or (iii) if representation of
both parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, then, in any such case, the indemnified party
shall have the right to assume or continue its own defense as set forth above
(but with no more than one firm of counsel for all indemnified parties in each
jurisdiction, except to the extent any indemnified party or parties reasonably
shall have concluded that there may be legal defenses available to such party or
parties which are not available to the other indemnified parties or to the
extent representation of all indemnified parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct) and
the indemnifying party shall be liable for any expenses therefor. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (A) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (B)
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does not include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of any indemnified party.
(d) Contribution. If for any reason the foregoing indemnity is
unavailable or is insufficient to hold harmless an indemnified party under
Section 4.8(a) or (b), then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any Claim in
such proportion as is appropriate to reflect the relative benefits received by
the indemnifying party on the one hand and the indemnified party on the other
from such offering of securities. If, however, the allocation provided in the
immediately preceding sentence is not permitted by applicable law, or if the
indemnified party failed to give the notice required by Section 4.8(c) above and
the indemnifying party is materially prejudiced thereby, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the indemnifying party, on the one hand, and the
indemnified party, on the other hand, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 4.8(d) were to be determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the preceding sentences of this Section 4.8(d). The amount paid
or payable in respect of any Claim shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such Claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding anything in this Section 4.8(d) to
the contrary, no indemnifying party (other than the Company) shall be required
pursuant to this Section 4.8(d) to contribute any amount in excess of the net
proceeds received by such indemnifying party from the sale of Registrable
Securities in the offering to which the losses, claims, damages or liabilities
of the indemnified parties relate, less the amount of any indemnification
payment made pursuant to Section 4.8(b).
(e) Other Indemnification. Indemnification and contribution
similar to that specified in Section 4.8 (with appropriate modifications) shall
be given by the Company and the Stockholder with respect to any required
registration or other qualification of securities under any federal, state or
blue sky law or regulation of any governmental authority other than the
Securities Act. The indemnification agreements contained in this Section 4.8
shall be in addition to any other rights to indemnification or contribution
which any indemnified party may have pursuant to law or contract and shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the transfer of
any of the Registrable Securities by any of the sellers.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 4.8 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
SECTION 5. Unlegended Certificates. In connection with the offering of
any Registrable Securities registered pursuant to Section 4, the Company shall
(i) facilitate the timely preparation and delivery to the Stockholder of
unlegended certificates representing ownership of such Registrable Securities
being sold in such denominations and registered in such names as requested by
the Stockholder and (ii) instruct any transfer agent and registrar of such
Registrable Securities to release any stop transfer orders with respect to any
such Registrable Securities.
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SECTION 6. Representations and Warranties of the Company. The Company
represents and warrants to the Stockholder as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation of By-laws of the Company, or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to considerations of public
policy in the case of the indemnification provisions hereof.
SECTION 7. Changes in Common Stock. If, and as often as, there are any
changes in the Company's common stock by way of stock split, stock dividend,
combination or reclassification, or through merger, consolidation,
reorganization, recapitalization, or other form of business combination in which
the Company's common stock is converted into other securities, or by any other
means, appropriate adjustment shall be made in the provisions hereof, as may be
required, so that the rights and privileges granted hereby shall continue with
respect to the Restricted Stock as so changed.
SECTION 8. Modification and Waiver. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by the parties hereto, except
that any of the terms or provisions of this Agreement may be waived in writing
at any time by the party which is entitled to the benefits of such waived terms
or provisions. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar). No delay on the part of any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof.
SECTION 9. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier, registered or certified mail (return
receipt requested), or by telecopy (receipt confirmed):
if to the Company: AXCESS Inc.
Attention: Chief Financial Officer
3208 Commander Drive
Dallas, TX 75006
Telecopy No. (972) 407-0814
with a copy to: Sayles & Lidji
Attention: Michael R. Dorey
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Telecopy No. (214) 939-8787
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and if to Stockholder: Amphion Ventures L.P.
c/o Amphion Capital
Attention: Richard C.E. Morgan
590 Madison Avenue, 32nd Floor
New York, New York 10022
Telecopy No. (212) 849-8171
with a copy to
Proskauer Rose LLP
Attention: Henry O. Smith III
1585 Broadway
New York, New York 10036
Telecopy No. (212) 969-2900
or such other address as shall be furnished in writing by any of the parties,
and any such notice or communication shall be deemed to have been given as of
the date so delivered personally, three (3) days after so mailed, or the next
business day following transmission by telecopy (except that a notice of change
of address shall not be deemed to have been given until received by the
addressee).
SECTION 10. Registration Rights Nontransferable. The registration
rights set forth in this Agreement may not be transferred, except to the holders
of all or any portion of (a) the indebtedness represented by the Convertible
Note, (b) the Warrant or (c) the Restricted Stock; provided, however, that if
any such transfer shall occur, the "Stockholder" shall be deemed to mean the
holder of a majority of the Restricted Stock, after giving effect to the deemed
conversion of the Convertible Note and the exercise of the Warrants.
SECTION 11. Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
SECTION 12. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of Delaware, without giving effect to the principles of
conflict of laws of this or any other jurisdiction.
SECTION 13. No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the Stockholder in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to the holders of
Registrable Securities hereunder do not in any way conflict with and are not
inconsistent with any other agreements to which the Company is a party or by
which it is bound. The Company further agrees that if any other registration
rights agreement entered into after the date of this Agreement with respect to
any of its securities contains terms which are more favorable to, or less
restrictive on, the other party thereto than the terms and conditions contained
in this Agreement are (insofar as they are applicable) to the holders of
Registrable Securities, then the terms and conditions of this Agreement shall
immediately be deemed to have been amended without further action by the Company
or the holders of Registrable Securities so that the holders of Registrable
Securities shall be entitled to the benefit of any such more favorable or less
restrictive terms or conditions.
SECTION 14. Further Assurances. At any time or from time to time, each
party hereto shall, at the request of another party and at the expense of the
requesting party, execute and deliver any further
11
<PAGE> 12
instruments or documents and take all such further action as the requesting
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and evidence the consummation of the transactions
contemplated hereby.
SECTION 15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
SECTION 16. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the transactions contemplated
hereby, and supersede all prior agreements and understandings, written or oral,
among the parties to this agreement or between any of such parties, with respect
thereto.
SECTION 17. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid, but
if any provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
<TABLE>
<S> <C>
AXCESS INC. AMPHION VENTURES L.P.
By: Amphion Partners, LLC
By: /s/ James R. Craig By: /s/ Richard C.E. Morgan
---------------------------------------------- -------------------------------------------
James R. Craig, Chief Financial Officer Richard C.E. Morgan, Managing Member
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET AT SEPTEMBER 30, 1999 (UNAUDITED) AND THE CONDENSED
STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 81,124
<SECURITIES> 0
<RECEIVABLES> 223,558
<ALLOWANCES> 0
<INVENTORY> 1,007,346
<CURRENT-ASSETS> 2,067,706
<PP&E> 1,334,213
<DEPRECIATION> (713,682)
<TOTAL-ASSETS> 12,891,852
<CURRENT-LIABILITIES> 3,652,010
<BONDS> 0
0
29,144,880
<COMMON> 32,919
<OTHER-SE> (26,869,825)
<TOTAL-LIABILITY-AND-EQUITY> 12,891,852
<SALES> 545,953
<TOTAL-REVENUES> 545,953
<CGS> 279,501
<TOTAL-COSTS> 5,745,900
<OTHER-EXPENSES> (1,794,779)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 394,480
<INCOME-PRETAX> (1,828,044)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,684,669)
<DISCONTINUED> 1,856,625
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,828,044)
<EPS-BASIC> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET AT SEPTEMBER 30, 1998 (UNAUDITED) AND THE CONDENSED
STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,702,103
<PP&E> 1,750,544
<DEPRECIATION> 1,119,023
<TOTAL-ASSETS> 11,535,167
<CURRENT-LIABILITIES> 7,239,905
<BONDS> 0
0
21,939,880
<COMMON> 29,919
<OTHER-SE> (19,679,742)
<TOTAL-LIABILITY-AND-EQUITY> 11,535,167
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 5,407,207
<OTHER-EXPENSES> 420,760
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 525,009
<INCOME-PRETAX> (10,471,487)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,827,967)
<DISCONTINUED> (4,643,520)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,471,487)
<EPS-BASIC> (4.47)
<EPS-DILUTED> (4.47)
</TABLE>
