1
EXHIBIT 10.38
[XXSYS LETTERHEAD]
December 30, 1997
Xx. Xxxx Xxx Xxx
c/o Wardley Securities Ltd.
3rd Floor Xxxxxxxxx House
00 Xxxxxxxx Xxxx
Xxxx Xxxx
Re: Investment in XXsys Technologies, Inc.
Dear Xx. Xxxx:
This Letter Agreement will confirm our recent discussions relating to a
proposed investment (the "Investment Transaction") by Xx. Xxxx Xxx Xxx
("Investor") in XXsys Technologies, Inc., a California corporation ("Company"),
in accordance with the terms described below. On the basis of our discussions,
the Company and Investor hereby confirm our agreement to consummate the
Investment Transaction on the following terms and conditions.
1. Structure of Transaction. Subject to the terms and conditions herein
stated, the Company agrees to sell and issue to Investor, and Investor agrees to
purchase from the Company, $1,500,000 ("Cash Consideration") worth of the shares
("Shares") of the no par value common stock ("Common Stock") of the Company. The
parties agree that the Investor shall purchase the Shares from time to time
during the period commencing on the date of this Letter Agreement and ending on
September 30, 1998 by tendering to the Company all or a portion of the Cash
Consideration. The parties further agree that the purchase price of the Shares
shall be eighty percent (80%) of the average last sale price for the Common
Stock, as quoted on the NASDAQ Small Cap or any alternative electronic stock
exchange, during the twenty (20) trading days immediately preceding the
Company's receipt of any portion of the Cash Consideration. Investor agrees to
use its best efforts to tender one-third (1/3) of the Cash Consideration no
later than March 31, 1998, an additional one-third (1/3) of the Cash
Consideration no later than June 30, 1998 and the balance of the Cash
Consideration no later than September 30, 1998.
2. Warranties, Representations and Indemnity. Each party represents and
warrants that it has full and absolute right, power and authority and legal
capacity to execute, deliver and perform this Letter Agreement and, upon such
execution, this Letter Agreement will be the valid and binding obligation of the
party, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors rights generally. Each
party represents and warrants to the other that the execution, delivery, and
performance of this Letter Agreement by such party does not and will not reach,
violate, conflict with or permit the cancellation of, any agreement to which the
Company or Investor is a party or by which any of its properties are bound.
3. SEC Reports. The Company has delivered to Investor its annual report
on Form 10-
2
Xx. Xxxx Xxx Xxx
December 30, 1997
Page 2
KSB for the fiscal year ended September 30, 1996 and all quarterly
reports on Form 10-QSB subsequently filed with the U.S. Securities and Exchange
Commission (collectively, the "SEC Reports"). The information in the SEC Reports
is true and correct in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
4. Due Diligence/Access. The Company has given and shall continue to
give to Investor and its counsel, accountants and other advisors, agents,
consultants and representatives, full access, during normal business hours
throughout this Letter Agreement, to all of the properties, books, contracts,
commitments and records of the Company, and has furnished and will continue to
furnish during such period all such information concerning it (including its
operations, financial condition and business plan) as Investor may reasonably
request.
5. Confidentiality. Each party agrees on behalf of itself and its
employees, agents, accountants, attorneys and other advisors, that they will not
divulge confidential information obtained from the other to third parties (other
than their employees, agents, accountants and attorneys). In this regard,
Investor acknowledges it is aware, and that it's representatives will be made
aware, that in connection with its discussions with the Company regarding the
Investment Transaction, it may come into possession of material, non-public
information about the Company. Accordingly, Investor agrees that it will not
trade (or cause or encourage any third party to trade), and it will use its best
efforts to assure that none of its representatives will trade (or cause or
encourage any third party to trade), in any securities of the Company while in
the possession of such material non-public information.
6. Acquisition for Investment. Investor is acquiring the Shares for its
own account, for investment purposes only and not with a view to, or for sale in
connection with, a distribution, as that term is used in Section 2(11) of the
Securities Act of 1933 ("1933 Act"), thereof in a manner which would require
registration under the 1933 Act or any state securities laws. Investor
understands that the Shares cannot be sold or assigned without registration
and/or qualification under the 1933 Act and applicable state securities laws.
Investor understands and acknowledges that the certificates evidencing the
Shares will bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION THEREOF UNDER THE
SECURITIES ACT OF 1933 AND/OR THE SECURITIES ACT OF ANY STATE
HAVING JURISDICTION OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
OR ACTS.
3
Xx. Xxxx Xxx Xxx
December 30, 1997
Page 3
7. Miscellaneous.This Letter Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. The rights and obligation of either party to this Letter Agreement may
not be assigned by such party without the prior written consent of the other
party. This Letter Agreement contains the entire agreement of the parties hereto
and may not be modified, altered or changed in any manner whatsoever, except by
a written agreement signed by the parties hereto. This Letter Agreement may be
executed in two counterparts, each signed by one of the parties and both of said
counterparts together shall constitute one and the same instrument. The parties
agree that facsimile signatures may be relied upon by each of the parties hereto
as original signatures. This Letter Agreement shall be construed and interpreted
in accordance with and governed and enforced in all respects by the laws of the
State of California.
If the matters set forth herein accurately reflect the terms and
conditions of the proposed Investment Transaction, please execute a copy of this
Letter Agreement in the location provided below and return an executed copy to
me. Thank you.
Very truly yours,
XXSYS TECHNOLOGIES, INC.
By: /s/ XXXXXX XX
--------------------------------
Xx. Xxxxxx Xx,
Chief Executive Officer
ACKNOWLEDGED AND AGREED:
/s/ XXXX XXX XXX
---------------------------------
Tung Xxx Xxx
4
[XXSYS LETTERHEAD]
December 30, 1997
Xxx. Xx Xxx Xxxx
c/o Wardley Securities Ltd.
3rd Floor Xxxxxxxxx House
00 Xxxxxxxx Xxxx
Xxxx Xxxx
Re: Investment in XXsys Technologies, Inc.
Dear Xxx. Xx:
This Letter Agreement will confirm our recent discussions relating to a
proposed investment (the "Investment Transaction") by Xxx. Xx Xxx Xxxx
("Investor") in XXsys Technologies, Inc., a California corporation ("Company"),
in accordance with the terms described below. On the basis of our discussions,
the Company and Investor hereby confirm our agreement to consummate the
Investment Transaction on the following terms and conditions.
1. Structure of Transaction. Subject to the terms and conditions herein
stated, the Company agrees to sell and issue to Investor, and Investor agrees to
purchase from the Company, $1,500,000 ("Cash Consideration") worth of the shares
("Shares") of the no par value common stock ("Common Stock") of the Company. The
parties agree that the Investor shall purchase the Shares from time to time
during the period commencing on the date of this Letter Agreement and ending on
September 30, 1998 by tendering to the Company all or a portion of the Cash
Consideration. The parties further agree that the purchase price of the Shares
shall be eighty percent (80%) of the average last sale price for the Common
Stock, as quoted on the NASDAQ Small Cap or any alternative electronic stock
exchange, during the twenty (20) trading days immediately preceding the
Company's receipt of any portion of the Cash Consideration. Investor agrees to
use its best efforts to tender one-third (1/3) of the Cash Consideration no
later than March 31, 1998, an additional one-third (1/3) of the Cash
Consideration no later than June 30, 1998 and the balance of the Cash
Consideration no later than September 30, 1998.
2. Warranties, Representations and Indemnity. Each party represents and
warrants that it has full and absolute right, power and authority and legal
capacity to execute, deliver and perform this Letter Agreement and, upon such
execution, this Letter Agreement will be the valid and binding obligation of the
party, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors rights generally. Each
party represents and warrants to the other that the execution, delivery, and
performance of this Letter Agreement by such party does not and will not reach,
violate, conflict with or permit the cancellation of, any agreement to which the
Company or Investor is a party or by which any of its properties are bound.
3. SEC Reports. The Company has delivered to Investor its annual report
on Form 10-
5
Xxx. Xx Xxx Xxxx
December 30, 1997
Page 2
KSB for the fiscal year ended September 30, 1996 and all quarterly
reports on Form 10-QSB subsequently filed with the U.S. Securities and Exchange
Commission (collectively, the "SEC Reports"). The information in the SEC Reports
is true and correct in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
4. Due Diligence/Access. The Company has given and shall continue to
give to Investor and its counsel, accountants and other advisors, agents,
consultants and representatives, full access, during normal business hours
throughout this Letter Agreement, to all of the properties, books, contracts,
commitments and records of the Company, and has furnished and will continue to
furnish during such period all such information concerning it (including its
operations, financial condition and business plan) as Investor may reasonably
request.
5. Confidentiality. Each party agrees on behalf of itself and its
employees, agents, accountants, attorneys and other advisors, that they will not
divulge confidential information obtained from the other to third parties (other
than their employees, agents, accountants and attorneys). In this regard,
Investor acknowledges it is aware, and that it's representatives will be made
aware, that in connection with its discussions with the Company regarding the
Investment Transaction, it may come into possession of material, non-public
information about the Company. Accordingly, Investor agrees that it will not
trade (or cause or encourage any third party to trade), and it will use its best
efforts to assure that none of its representatives will trade (or cause or
encourage any third party to trade), in any securities of the Company while in
the possession of such material non-public information.
6. Acquisition for Investment. Investor is acquiring the Shares for its
own account, for investment purposes only and not with a view to, or for sale in
connection with, a distribution, as that term is used in Section 2(11) of the
Securities Act of 1933 ("1933 Act"), thereof in a manner which would require
registration under the 1933 Act or any state securities laws. Investor
understands that the Shares cannot be sold or assigned without registration
and/or qualification under the 1933 Act and applicable state securities laws.
Investor understands and acknowledges that the certificates evidencing the
Shares will bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION THEREOF UNDER THE
SECURITIES ACT OF 1933 AND/OR THE SECURITIES ACT OF ANY STATE
HAVING JURISDICTION OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
OR ACTS.
6
Xxx. Xx Xxx Xxxx
December 30, 1997
Page 3
7. Miscellaneous.This Letter Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. The rights and obligation of either party to this Letter Agreement may
not be assigned by such party without the prior written consent of the other
party. This Letter Agreement contains the entire agreement of the parties hereto
and may not be modified, altered or changed in any manner whatsoever, except by
a written agreement signed by the parties hereto. This Letter Agreement may be
executed in two counterparts, each signed by one of the parties and both of said
counterparts together shall constitute one and the same instrument. The parties
agree that facsimile signatures may be relied upon by each of the parties hereto
as original signatures. This Letter Agreement shall be construed and interpreted
in accordance with and governed and enforced in all respects by the laws of the
State of California.
If the matters set forth herein accurately reflect the terms and
conditions of the proposed Investment Transaction, please execute a copy of this
Letter Agreement in the location provided below and return an executed copy to
me. Thank you.
Very truly yours,
XXSYS TECHNOLOGIES, INC.
By: /s/ XXXXXX XX
--------------------------------
Xx. Xxxxxx Xx,
Chief Executive Officer
ACKNOWLEDGED AND AGREED:
/s/ XX XXX XXXX
---------------------------------
Li Xxx Xxxx
