<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
XXSYS TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
XXSYS TECHNOLOGIES, INC.
4619 VIEWRIDGE AVENUE
SAN DIEGO, CA 92123
(619) 974-8200
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 23, 1998
------------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of XXsys
Technologies, Inc., a California corporation (the "Company"), will be held at
10:00 a.m. on Thursday, April 23, 1998, at the Company's offices at 4619
Viewridge Avenue, San Diego, California, for the following purposes:
1. To elect a Board of Directors to serve for the ensuing year or until
their successors have been duly elected and qualified.
2. To vote upon the proposal to retain Feldman Radin & Co., P.C. as the
Company's independent accountants for the 1998 fiscal year; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Nominees for directors are set forth in the enclosed Proxy Statement.
Only shareholders of record at the close of business on February 25, 1998,
will be entitled to vote at this meeting. A list of shareholders entitled to
vote at the meeting will be available at the Company's offices for ten days
prior to the meeting.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF
SHAREHOLDERS IN PERSON. HOWEVER, TO ASSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED. THE EXECUTION OF THE PROXY WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
By Order of the Board of Directors
/s/ GLORIA C. L. MA
Gloria C. L. Ma, Chairman
San Diego, California
March 4, 1998
<PAGE> 3
XXSYS TECHNOLOGIES, INC.
4619 VIEWRIDGE AVENUE
SAN DIEGO, CA 92123
619-974-8200
------------------------
PROXY STATEMENT
------------------------
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 23, 1998
------------------------
GENERAL
The accompanying proxy is solicited on behalf of the Board of Directors of
XXsys Technologies, Inc., a California corporation (the "Company"), for use at
the Annual Meeting of the Shareholders of the Company to be held at 10:00 a.m.
on Thursday, April 23, 1998, at the Company's offices at 4619 Viewridge Avenue,
San Diego, California, and any postponements or adjournments thereof for the
purposes set forth in the preceding notice. Only shareholders of record at the
close of business on February 25, 1998, are entitled to vote. At the close of
business on that date, the Company had approximately 9,362,371 shares of Common
Stock, no par value, issued and outstanding. This Proxy Statement and
accompanying form of proxy were first sent to shareholders on or about March 4,
1998.
VOTING
Each share of Common Stock outstanding on the record date is entitled to
one vote. Additionally, each shareholder, or his proxy, entitled to vote upon
the election of directors may cumulate his votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which his shares are entitled, or distribute his votes calculated on
the same principle among as many candidates as he thinks fit. In accordance with
the California General Corporation Law, no shareholder or proxy may cumulate his
votes unless such candidate or candidates have been nominated prior to the
voting and the shareholder has given notice at the meeting, prior to the voting,
of the shareholder's intention to cumulate the shareholder's votes. If any one
shareholder gives such notice, all shareholders may cumulate their votes for
candidates in nomination. In the event of cumulative voting, the proxy solicited
by the Board of Directors confers discretionary authority on the holders of the
proxy to cumulate votes in such manner as such holders shall deem to be best
calculated to elect the maximum number of the nominees of management. An
affirmative vote of a majority of the shares present and voting at the meeting
is required for approval of all items being submitted to the shareholders for
their consideration.
All shares represented by a valid proxy will be voted in accordance with
the directions given on the proxy if the proxy is properly executed and is
received by the Company prior to the close of voting at the meeting or any
adjournment or postponement thereof. Proxies received by the Company on which no
contrary instruction has been given will be voted FOR the election of the
nominees named herein to the Board of Directors, and otherwise in accordance
with the judgment of the proxy holders. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before its use
by delivering to the Secretary of the Company a written notice of revocation or
a duly executed proxy bearing a later date, or by attending the meeting and
voting in person.
SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In
addition, the Company may reimburse brokerage houses and other custodians,
nominees and fiduciaries for their expenses incurred in forwarding solicitation
materials to the beneficial owners of shares held of record by such persons. It
is
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contemplated that proxies will be solicited principally through the mail, but
directors, officers and regular employees of the Company may, without additional
compensation, solicit proxies personally or by telephone, telegraph or special
letter.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting of Shareholders, the shareholders will elect
directors to hold office until the next annual meeting of shareholders or until
successors have been duly elected and qualified or until the earlier resignation
or removal of such directors. Shares represented by the accompanying proxy will
be voted for the election of the nominees recommended by the Board of Directors,
unless the proxy is marked in such a manner as to withhold authority to vote or
as to vote for one or more alternate candidates. If any nominee for any reason
is unable or unwilling to serve, the proxies may be voted for such substitute
nominees as the proxy holder may determine. The Company does not anticipate any
nominee will be unable or unwilling to serve as a director. The Company's Bylaws
provide for five directors. Currently, there is one vacancy, which is reserved
for election by the holders of the Series A Preferred Stock (the "Series A
Holders"). As of the date of this Proxy Statement, the Series A Holders have not
exercised their rights to elect a Director. Proxies may not be voted for a
greater number of persons than the number of nominees named herein.
The four nominees for director are listed below.
<TABLE>
<CAPTION>
DIRECTOR NAME SINCE AGE PRINCIPAL OCCUPATION
------------------------------------ ----- --- ------------------------------------
<S> <C> <C> <C>
Gloria C. L. Ma, Ph.D............... 1985 50 Chairman and Chief Executive Officer
William J. Dale..................... 1994 64 President, Silverado Capital, Inc.
Robert E. Farris.................... 1996 69 International Transportation
Consultant
Walter Geer......................... 1995 48 President, Greymar Associates, LLC
</TABLE>
Dr. Ma is a co-founder of the Company and served as its President or
Chairman from its inception in 1985 to September 1991. From September 1991 to
July 1994, she was the Company's Executive Vice President; and thereafter as
Chairman. In April 1995, she resumed the position of Chief Executive Officer.
Before founding the Company, Dr. Ma was President of Zealot & Company, Ltd., a
privately held Hong Kong investment company. Dr. Ma received her undergraduate
and masters degrees in genetics from McGill University (Montreal) and a Ph.D.
degree in molecular biology from the University of California, San Diego. She is
a member of the Board of Overseers to the Chancellor of the University of
California, San Diego and the San Diego Technology Council, appointed by San
Diego Mayor, Susan Golding.
Mr. Dale is President of Silverado Capital, Inc., a San Diego-based company
engaged in arranging the exchange of international currencies and in the
international marketing of biorational plant growth enhancers. From 1980 to
1989, Mr. Dale was a partner in a San Diego law firm dealing with corporate and
securities law matters. Prior to that, he was a sole practitioner for two years
and for eight years was general counsel for an agricultural management company.
Mr. Dale received a B.A. degree in Economics from Allegheny College and an LL.B.
degree from the University of Pennsylvania.
Mr. Farris is an International Transportation Consultant, located in
Washington, D. C. From 1986 to 1989, Mr. Farris served as Federal Highway
Administrator, one of four top administrative offices in the U.S. Department of
Transportation. While in the Administration, Mr. Farris had responsibility for
over 3,000 employees and a budget in excess of $13 billion. From 1985 to 1986,
Mr. Farris served as Chairman of the National Council on Public Works
Improvements and conducted the first effort by the Federal Government to
evaluate the Nation's infrastructure. From 1981 to 1985, Mr. Farris served as
Commissioner for the Tennessee Department of Transportation, with responsibility
for the state's highway system having 15,000 miles of roadway and 64 regional
airports.
Mr. Geer is a co-founder and President of Greymar Associates, LLC, a
full-service residential real estate development company. Mr. Geer has over 27
years of building industry and construction experience, working with both public
and private sector organizations, particularly in the field of introducing new
and non-
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traditional building and construction technologies. He has served as a
consultant, speaker or expert witness to the California State Senate, the United
States Congress, the Harvard Joint Center for Housing, the U.S./ Mexico Border
Trade Alliance, the American Institute of Architects, the National Association
of Home Builders, the State Senate of Hawaii, the European Reconstruction Bank,
and numerous local and regional building departments and universities. Mr. Geer
received a Bachelor of Architecture degree from California Polytechnic at San
Luis Obispo, California.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Audit Committee
and Compensation Committee. There is no Nominating Committee.
AUDIT COMMITTEE. The Company's Audit Committee in fiscal 1997 consisted of
Messrs. Dale and Geer. The functions of the Audit Committee include recommending
to the Board of Directors the appointment of the Company's independent auditors
and reviewing the scope of the independent auditors' annual audit and its
compensation, the general policies and procedures of the Company with respect to
accounting and financial controls, any change in accounting principles, and any
recommendations that the auditors may have with respect to policies and
procedures. The Audit Committee met one time during fiscal 1997.
COMPENSATION COMMITTEE. The Compensation Committee, which comprised of
Messrs. Dale and Geer, monitors the nature and levels of compensation paid by
the Company to its executive personnel. The Compensation Committee met one time
during fiscal 1997.
The Company's Board of Directors held ten meetings during the 1997 fiscal
year. No director attended fewer than 75% of the board and committee meetings in
which such director was entitled to participate.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of December 31, 1997, certain
information regarding the beneficial ownership of Common Stock by each person
known to the Company to own more than five percent of the outstanding Common
Stock, each director of the Company, and all directors and executive officers as
a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP(1) OF CLASS
---------------------------------------------------------- -------------------- ---------
<S> <C> <C>
Directors, Nominees and Officers:
Dr. Gloria C. L. Ma....................................... 992,275(2) 9.2%
4619 Viewridge Avenue
San Diego, CA 92123
William J. Dale........................................... 118,558(3) 1.1%
1150 Joshua Way
Vista, CA 92083
Robert E. Farris.......................................... 54,000(3) *
1450 G Street N.W., Suite 700
Washington D. C. 20005
Walter Geer............................................... 58,000(3) *
5070 North 40th Street, Suite 120
Phoenix, AZ 85018
All officers and directors................................ 1,343,533(3) 12.4%
as a group (8 persons)
Other 5% Beneficial Owners:
Law Biu Biu............................................... 1,274,161(4) 11.8%
171 Prince Edward Road, Suite 204
Kowloon, Hong Kong
</TABLE>
- ---------------
* Less than 1%
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(1) Except for Dr. Ma, who beneficially owns 9.2%, and Mr. Dale, who
beneficially owns 1.1%, no current officer or director beneficially owns
more than 1% of the Company's outstanding shares.
(2) Includes 317,624 shares which Dr. Ma has the right to acquire within 60 days
after February 25, 1998, through the exercise of warrants and options. Dr.
Ma is the niece of Law Biu Biu.
(3) Includes 112,000; 54,000; 58,000; and 647,624 shares subject to outstanding
options and warrants held by Messrs. Dale, Farris, Geer and all directors
and officers as a group, respectively, which are currently exercisable or
may become exercisable within 60 days after February 25, 1998.
(4) Law Biu Biu is the uncle of Dr. Ma.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors do not receive cash compensation or attendance fees for serving
on the Board of Directors. However, all directors receive reimbursement for out
of pocket expenses in attending Board of Directors meetings. Each non-officer
director is granted annually a five-year option under the Company's 1991 Stock
Option Plan to purchase 4,000 shares of Common Stock. Each of the Directors
options are granted annually beginning on the date a person becomes an outside
director and on each one-year anniversary date of being a director, at an
exercise price equal to the last sales price for the Company's Common Stock on
that date. Each such option becomes exercisable one year after the date of
grant, subject to continuing service as a director. Options granted pursuant to
being a director are exercisable only during the time the person remains a
director or within one year thereafter.
Non-employee directors may be paid consulting fees for special consultation
concerning corporate development matters. On March 23, 1995, Mr. Dale received
warrants to purchase up to 100,000 shares of Common Stock at a price of $0.25
per share as a separate inducement in connection with his performance of
services to the Company as an outside consultant and were valued at $100,000.
One-half of Mr. Dale's warrants vested on March 23, 1996, and the balance vested
on March 23, 1997. On June 23, 1995, Mr. Geer received warrants to purchase up
to 50,000 shares of Common Stock at a price of $1.63 per share as a matter of
separate inducement to serve on the Board of Directors of the Company. One-half
of Mr. Geer's warrants vested on June 24, 1996, and the balance vested on June
24, 1997. Mr. Geer's exercise price was slightly above market price on date of
grant. On September 4, 1996, Mr. Farris received a warrant to purchase 25,000
shares of Common Stock at a price of $3.8125 and on March 21, 1997, he received
an additional warrant to purchase 25,000 shares of Common Stock at a price of
$4.188, both warrants were inducements to serve on the Board of Directors of the
Company. Mr. Farris' exercise price was slightly above market price on date of
grant. His warrants are exercisable any time the Common Stock trading price
reaches $10.00 a share. Additionally, on August 1, 1996, Mr. Farris began
providing marketing consulting services to the Company for a retainer of $2,500
a month through his consulting firm, Commodore Corporate Services, Inc. This
amount increased to $5,000 a month on March 22, 1996, and continues thereafter
until it terminates on July 31, 1998.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table shows compensation paid by the Company to its current
Chairman and CEO, Gloria C.L. Ma, Ph.D., the Company's past President, Paul
Pendorf, and the Company's executive officers for the three fiscal years ended
September 30, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ----------------------------
---------------------------- RESTRICTED SECURITIES ALL OTHER
NAME AND COMPENSATION STOCK AWARDS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS ($) ($) OPTIONS (#) ($)(2)
- ------------------------- ---- ------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gloria Ma, Ph.D.......... 1997 $ 126,000 $ -- $ -- -- $ --
Chairman and Chief 1996 126,000 -- -- -- 20,657
Executive Officer 1995 110,250 -- 52,780(3) 349,249 2,667
Paul W. Pendorf (4)...... 1997 -- -- -- -- --
Past President 1996 -- -- -- -- 100,000(5)
1995 77,564(6) -- -- -- 2,667
Gregory P. Hanson, CMA... 1997 90,000 -- -- -- 2,400
Chief Financial Officer 1996 90,000(7) -- -- 100,000 2,400
Lawrence D. Cercone...... 1997 105,000 -- -- -- --
Ph.D., Engineering 1996 91,250(8) 4,030 -- -- --
and Operations 1995 61,875 -- -- 100,000 --
Roger W. Green........... 1997 53,333(9) -- -- 60,000 --
Vice President Sales
James T. Gasparo......... 1997 40,000(10) -- -- 100,000 --
Vice President
Construction
</TABLE>
- ---------------
(1) Salary includes deferred compensation in the year earned for each of the
named executive officers.
(2) Dr. Ma and Mr. Pendorf each received $2,667 from the Company in Fiscal Year
1995 for certain personal guarantees made on behalf of the Company. In
Fiscal Year 1996, Dr. Ma received $20,657 as pay in lieu of vacation.
(3) Represents the dollar value of 55,000 shares of restricted Common Stock
issued to Dr. Ma during Fiscal Year 1995 based on a last sale price for the
Common Stock on the date of grant. The dollar value of the restricted stock
as of December 19, 1997, was $57,728, based on a last sale price for the
Common Stock of $0.656.
(4) Mr. Pendorf resigned as the Company's President and Chief Executive Officer
on March 25, 1995.
(5) In July 1994 the Company's Board of Directors granted to Mr. Pendorf the
right to dispose of a due diligence package, including contracts,
appraisals and environmental studies, on a proposed acquisition target.
Upon such disposal, Mr. Pendorf was to receive a commission of one-third of
the price obtained, up to a maximum of $100,000. He received $100,000 as
settlement of this matter.
(6) Mr. Pendorf's compensation in Fiscal Year 1995 includes $63,000 in
severance pay from the Company.
(7) In September 1995 Mr. Hanson signed a one-year agreement to serve as Chief
Financial Officer beginning October 1, 1995.
(8) In July 1995 Dr. Cercone signed a one-year employment agreement to serve as
Vice President beginning August 1,1995.
(9) On January 31, 1997, Mr. Green was hired as Vice President Sales.
(10) On March 28, 1997, Mr. Gasparo was hired as Vice President Construction.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
The following table provides information on option grants in fiscal 1997 to
the named executive officers and directors and the values of such officers'
unexercised options at December 23, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL OPTIONS/
UNDERLYING OPTIONS/ SARS GRANTED EXERCISE OPTION EXPIRATION
NAME SARS GRANTED(#) IN FISCAL YEAR PRICE ($/SH.) VALUE(5) DATE
- ------------------ ------------------- ------------------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Roger W. Green.... 60,000(2) 12.4% $ 4.188 $ 51,600 01/30/2002
James T.
Gasparo......... 100,000(2) 20.6% $ 4.000 202,000 03/27/2002
William J. Dale,
Esq............. 4,000(3) 0.8% $ 2.438 4,920 07/15/2002
Walter Geer....... 4,000(3) 0.8% $ 2.500 5,040 06/22/2002
Robert E.
Farris.......... 4,000(3) 0.8% $ 1.750 3,440 09/03/2002
Robert E.
Farris.......... 25,000(4) 5.1% $ 4.188 53,000 03/20/2002
</TABLE>
- ---------------
(1) No stock appreciation rights were granted to executive officers or directors
in fiscal 1997.
(2) The options granted are exercisable 10% after the first year from the grant
date, 20% after the second year, 30% after the third year, and 40% after the
fourth year.
(3) The options granted are exercisable after the first year from the grant
date.
(4) The warrant granted to purchase Common Stock is exercisable after the Common
Stock reaches $10.00 a share.
(5) Estimated on the date of grant using the Black-Scholes option-pricing model.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (1)
The following table provides information on option exercises in fiscal 1997
by the named executive officers and the values of such officers' unexercised
options at September 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
SHARES OPTIONS AT FISCAL
ACQUIRED ON YEAR-END (#)
EXERCISE VALUE -----------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gloria C. L. Ma... -- -- 317,624 49,625 -- --
Gregory P.
Hanson.......... -- -- 50,000 50,000 -- --
Lawrence D.
Cercone......... -- -- 50,000 50,000 -- --
</TABLE>
- ---------------
(1) No stock appreciation rights are held by any of the named executive
officers.
(2) Values for the period ended September 30, 1997, are based upon the closing
market price of the Company's Common Stock as reported on NASDAQ on December
19, 1997, of $0.656 a share less the exercise price. None of the options
were in-the-money at September 30, 1997.
EMPLOYMENT CONTRACTS
The Company has an employment agreement with Dr. Ma, which has been in
effect since September 1, 1991, and is terminable by vote of a majority of the
board of directors or by Dr. Ma upon three month's notice. Her agreement
contains provisions that prohibit competition with the Company for a period of
two years after the termination of employment. The employment agreement is
terminated in the event of the officer's death or disability and may be
terminated for cause.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In May 1994, the Company sold to the brother of Dr. Gloria Ma, Chairman and
Chief Executive Officer of the Company, in a private transaction 4,500 shares of
Series A Preferred Stock in exchange for the assignment of a nonrecourse
promissory note made by Dr. Ma in the principal amount of $450,000, plus
$198,750 of accrued interest, secured by a second deed of trust on real
property. The nonrecourse promissory note has an interest rate of 10% per annum
and is due in January 1999, including accrued interest. Each preferred share has
a liquidation preference of $100, is redeemable at the Company's option at a
price of $120 per share, and is convertible at the option of the holder into 80
shares of the Company's Common Stock. (See also Note 6 to the Financial
Statements, Shareholders' Equity, Preferred Stock.) In May 1996 Dr. Ma reduced
the amounts owing to the Company under the note by $446,928, of which $264,272
was applied to reduction of accrued interest and $182,656 was applied to the
outstanding principal amount. Dr. Ma effected the reduction through a cash
payment of $309,916 and the relinquishment of her rights to deferred salaries,
accrued vacation and unreimbursed travel and entertainment expenses, partially
offset by other amounts she owed the Company, the net of which reduced the
amounts owing under the note by an additional $137,012. The balance, including
accrued interest, still owed the Company at September 30, 1997, is $335,840.
In July 1994, the Board of Directors granted to the then president of the
Company, the right to dispose of the asset "deferred acquisition expenses"
(consisting of a due diligence package, including contracts, appraisals and
environmental studies on a targeted company representing in excess of $1,000,000
expended by the Company). Upon any such disposal, the individual was to receive
a commission of one-third of the price obtained, up to a maximum amount of
$100,000. In September 1995, the owner of the target company announced a pending
sale to another party. The Company and its former president filed suit claiming
breach of contract and breach of fiduciary relationship by the purchaser.
Pursuant to a settlement agreement reached in October 1995, the Company received
a cash payment of $1,300,000 (net of legal fees). Subsequently, the Company has
received payments pursuant to a consulting contract between the target and the
Company, totaling $900,000, which has now been terminated. The target company
still has one remaining contractual obligation, which is for supply of materials
and/or technical services (for research and development, materials testing,
etc.). As part of the litigation settlement the former executive received
$100,000.
On September 1, 1995, the Company agreed to sell 352,000 shares of
restricted Common Stock to an uncle of Dr. Ma in consideration of $1,056,000
($3.00 per share). The last sale price of the Common Stock quoted on the NASDAQ
Small Cap Market on that day was $3.75. In December 1995, the purchase agreement
was renegotiated to provide for the Company's sale of a total of 211,200 shares
of restricted Common Stock at $5.00 per share, plus a five year Warrant to
purchase 352,000 shares of restricted common stock at $6.00 a share. Of the
total purchase commitment, $176,000 consisted of a two-year note and the balance
was paid in cash.
The Company has in the past conducted, and intends in the future to
conduct, all related party transactions involving the Company on terms no less
favorable than could be obtained from unaffiliated parties and approved by the
majority of the independent and disinterested members of the Company's board of
directors. In addition, any loans by the Company to officers, directors,
shareholders or affiliates will be approved by a majority of the independent and
disinterested directors.
PROPOSAL NO. 2
ADOPTION OF FELDMAN RADIN & CO., P.C.
The Company engaged Feldman Radin & Co., P.C. as its independent public
accountants to perform the audit of the Company's financial statements for the
years 1989 through 1997. It is recommended by the Board of Directors that
Feldman Radin & Co., P.C. be retained as the Company's independent accountants
for the 1998 Fiscal Year. Representatives of Feldman Radin & Co., P.C. are not
expected to be present at the Annual Meeting of Shareholders.
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COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Directors, officers and each beneficial owner of more than 10% of the
Common Stock of the Company are required by Section 16(a) of the Securities
Exchange Act of 1934 to file reports periodically disclosing their transactions
in the Company's securities. Based on a review of such reports, the Company has
noted that Form 4 was not filed by Gregory P. Hanson on the specified due date.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
FOR 1998 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 1998 Annual
Meeting of Shareholders of the Company must be received by the Company at its
offices at 4619 Viewridge Avenue, San Diego, California 92123, no later than
September 30, 1997, and must satisfy the conditions established by the
Securities and Exchange Commission for shareholder proposals to be included in
the Company's Proxy Statement for that meeting.
OTHER BUSINESS
The Board of Directors is not aware of any matter that may properly be
presented for action at the Annual Meeting other than the matters set forth in
the accompanying notice. As to any business that may properly come before the
meeting, however, it is intended that proxies, in the form enclosed, will be
voted in accordance with the judgment of the proxy holders.
By Order of the Board of Directors
San Diego, California
Dated March 4, 1998
ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOUR PROMPT ATTENTION TO THIS
MATTER IS APPRECIATED.
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PROXY--XXSYS TECHNOLOGIES, INC.
This proxy is solicited on behalf of the Board of Directors. The
undersigned hereby appoints Gloria C. L. Ma and William J. Dale and
each of them, as proxies for the undersigned, with full power of
substitution, and hereby authorizes each of them to represent and to
vote as designated below, all the shares of common stock of XXsys
Technologies, Inc. held of record by the undersigned on February 25,
1998, at the Annual Meeting of Shareholders to be held on Thursday,
April 23, 1998, or any adjournment or postponement thereof.
<TABLE>
<S> <C>
1.. ELECTION OF DIRECTORS: FOR ALL NOMINEES LISTED BELOW ________ WITHHOLD VOTE ________
Gloria C. L. Ma William J. Dale Robert E. Farris Walter Geer
(INSTRUCTION: To withhold vote for any individual nominee, write the nominee's name on the line provided below.)
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2. Proposal to retain Feldman Radin & Co., P.C. as Independent Accountants
for the Company for fiscal 1998:
FOR: ____________________ WITHHOLD: _______________
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
</TABLE>
PROXY SOLICITED ON BEHALF OF THE DIRECTORS
(Please Sign and Date the Proxy on the Reverse Side.)
Please check box if you plan to attend the annual meeting [ ]
<PAGE> 12
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, the Proxy will be voted
FOR the election of the nominees named in Item 1 on the reverse of this card. In
the election of directors, the proxy holder(s) shall have discretion and
authority to cumulate votes and to distribute the votes represented by this
Proxy among the nominees named in Item 1 in such proportions as they in their
sole judgment shall determine. If any such nominee is unable or unwilling to
serve or is otherwise unavailable, said proxy holder(s) shall have discretion
and authority to vote for other nominees or to distribute such votes in such
proportions among other nominees as they in their sole judgment shall determine.
Please sign exactly as name appears herein.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by president or other authorized
officer. If a partnership, please sign in
the partnership's name by an authorized
person.
DATED________________________________, 1998
___________________________________________
Signature
___________________________________________
Signature
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
