EXHIBIT 10.34


 


AGREEMENT TO OFFSET AND CONVERT


 


This Agreement
to Offset Certain Demand Notes, Convertible notes and Subordinated Promissory
Notes and Convert the remaining Demand Notes into Common Stock  is made as of December
       , 2003, by and between AXCESS
International, Inc., a Delaware corporation (the “AXCESS”), and Amphion Ventures L.P., a
Delaware limited partnership (“Amphion”).


 


RECITALS


 


A.                                   AXCESS issued to Amphion a 10% Convertible
Note due September 30, 2002 (the “Convertible Note”) having a principal amount
up to Six Million Dollars ($6,000,000.00) and as of November 30, 2003 has an
outstanding principal balance of $2,477,979.04 and unpaid interest of
$784,693.54.


 


B.                                     AXCESS also issued to Amphion a Demand Note
on November 14, 2001 and February 28, 2002 (the “Demand Notes”).  As of November 30, 2003 AXCESS has
outstanding Principal balances of $300,000 and $1,747,021.85 under the Demand
notes, respectively.  AXCESS also owes
interest of $27,344.18 and $193,598.23, respectively.


 


C.                                     Amphion issued to AXCESS a Subordinated
Promissory Note due March 31, 2002 (the “Promissory Note”) having a principal amount
of Four Million Dollars ($4,000,000.00) and as of November 30, 2003 has an
outstanding principal balance of $3,902,374.62 and unpaid interest of
$1,407,405.17.


 


AGREEMENT


 


NOW THEREFORE, in consideration
of the foregoing and the mutual covenants contained herein, the parties hereto
agree as follows:


 


1.                                       Offset.   Amphion agree to offset the $5,309,779.79
of principal and interest owed to them by AXCESS against $3,262,672.58
(principal and interest) owed them for the Convertible Note and  $2,047,107.21 (principal and interest) owed
them for Demand Notes.


 


2.                                       Conversion.  AXCESS and Amphion agree that the remaining
$220,857.05 owed to Amphion by AXCESS for Demand Notes and unpaid interest will
be converted into Common Stock and Warrants as follows:


 


i.              AXCESS
upon the execution of this Agreement shall issue and deliver to Amphion 294,476
shares of the Common Stock, and


 


ii.           As
further consideration for entering into this Agreement upon the execution of
this Agreement AXCESS shall issue and deliver to Amphion a warrant to purchase
up to 294,476 shares of the Common Stock of AXCESS.  The exercise prise of the warrants will be $2.75 and they will
expire on November 30, 2005.


 


3.                                       Securities
Act Legend; Registration Rights. 
The Securities issued in connection with this agreement  (hereinafter collectively, 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 JUSRISDICTION.  THEY
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENSE 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 COMPANY, AS THE CASE MAY BE, ARE SET
FORTH IN THE RESPECTIVE CERTIFICATES OF DESIGNATIONS, PREFERENCES, POWERS AND
RIGHTS FOR THE SHARES.


 


4.                                       Representations
and Warranties by AXCESS.  AXCESS
hereby represents and warrants to Amphion as follows:


 


a.               AXCESS 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.


 


a.               The execution and delivery by the AXCESS
of this letter agreement, the issuance of the Shares, and the performance by
AXCESS of its obligations hereunder, have been duly authorized by all requisite
corporation action on the part of AXCESS 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 AXCESS, 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
AXCESS or any of its subsidiaries, in each case if such violation, conflict,
default, lien, charge or encumbrance would have a material adverse effect on
AXCESS.


 


a.               This letter has been duly executed and
delivered by AXCESS and constitutes the valid and legally binding obligation of
AXCESS, 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.


 


a.               Based in part upon the representations
and warranties of Amphion 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 AXCESS and the issuance of the Shares hereunder, other that 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


 


a.               The Shares are duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock and are not
subject to any preemptive rights.


 


5.                                       Representations
and Warranties by Amphion.  Amphion
hereby represents and warrants to AXCESS as follows:


 


a.               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.


 


a.               Amphion understands that the Shares have
not been registered under the Securities Act, by reason of their issuance by
AXCESS 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


 


a.               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.


 


a.               Amphion understands that its investment
hereunder involves substantial risks and represents and warrants that it has
made such independent examinations and investigations of AXCESS 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 AXCESS as it has deemed necessary to conduct
such examination and investigation and make such investment decision


 


a.               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.


 


a.               This letter agreement constitutes our
entire agreement with respect to the subject matter hereof.  This letter agreement may not be modified or
amended of any provision hereof waived except by an instrument in writing
signed by AXCESS and Amphion.


 


a.               This letter agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.  The
rights of Amhion hereunder shall be assignable to any other holder of the
Shares.  Except as provided in the
immediately preceding sentence, this agreement and the rights of Amhion
hereunder shall not be assignable, and any purported assignment hereof or
thereof shall be void


 


a.               This letter 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 letter agreement may be attached to any other


 

















 


counterpart of this
letter agreement without in any way changing the effect thereof.  This letter agreement shall be effective
when executed and delivered by AXCESS and Amhion.


 


a.               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:


 


	
  AXCESS:

  	
  3208
  Commander Drive

  
	
   

  	
  Carrollton,
  Texas 75093

  
	
   

  	
  Attention:  Chief Financial Officer

  
	
   

  	
  Facsimile No.:  972-407-9085

  
	
   

  	
   

  
	
  With a Copy
  to:

  	
  Craig G.
  Ongley

  
	
   

  	
  Vial,
  Hamilton, Koch & Knox, LLP

  
	
   

  	
  1700 Pacific
  Avenue, Suite 2800

  
	
   

  	
  Dallas,
  Texas 75201

  



 


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 receipt, (c) if sent by overnight courier, on the next business
day following the date sent and (d) in the case of mailing, on the third
business day following such mailing


 


a.               Entire Agreement. 
This Agreement sets forth the entire agreement of the parties hereto
with respect to the subject matter hereof.


 


a.               Governing Law. 
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware.


 


 


IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first written above.


 


 


	
   

  	
  AXCESS
  INTERNATIONAL, INC.,

  
	
   

  	
   

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
  By:

  	
  /s/ Allan Frank

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Allan Frank

  	
   

  	 

	
   

  	
  Title:

  	
   

  	
  Vice President
  and CFO

  	
   

  	 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AMPHION
  VENTURES, L.P.

  
	
   

  	
   

  
	
   

  	
  a Delaware
  limited partnership

  by Amphion Partners LLC, General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert J. Bertoldi

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Robert J.
  Bertoldi

  	
   

  	 

	
   

  	
  Title:

  	
   

  	
  Managing Member