CONVERSION AND INVESTMENT AGREEMENT
This Agreement is between Xxxx XxXxxxxx of La Jolla, California,
(hereinafter, "Investor") and Xxxxxx Industries, Inc., a Colorado
corporation (hereinafter, the "Company") and pertains to the mutual
agreement of the Parties to modify certain terms and conditions of
Twenty Eight Million Four Hundred Thousand (28,400,000) shares of
Class B Preferred Stock of the Company held by Investor (hereinafter the "B
Preferred") and an offer by Investor to purchase Seventeen Million
(17,000,000) shares of the Common Stock, $0.0001 par
value ("Investment Shares") for $ 0.005886 per share or an aggregate
of up to $100,000 (the "Purchase Price").
RECITALS
I. Investor holds Twenty Eight Million Four Hundred Thousand
(28,400,000) shares of B Preferred face value of $710,000 which
constitutes all of the issued and outstanding Preferred
Stock of the Company. The B Preferred carries certain rights
including conversion rights into shares of common stock at the rate
of $0.125 per share at the sole option of the Company.
II. The present trading price for shares of the Company's common
stock on the OTC bulletin board of less than $0.01 per share, far
less than the conversion price per share.
III. The Company desires to retire the B Preferred in its present
efforts to recapitalize the Company and at the same time desires to
raise much needed capital to complete a turn-around of its existing
operations.
IV. Investor desires to obtain liquidity for his investment and a
chance to participate in the future growth of the Company, as well
as desires to assist the Company, at a time when there is little
chance for the Company obtaining outside capital to finance the
turn-around.
IV. The parties therefore have a mutual interest in renegotiating
the terms of the B Preferred and desire to set forth herein their
mutual agreement relating thereto.
AGREEMENT
1. In consideration for the mutual agreements, undertakings and
obligations set forth therein, the Parties hereby agree to modify the terms of
the "B Preferred" as follows:
a. Subject to, and in consideration for, the agreement of Investor
to invest (and further subject to payment of the Purchase Price as
provided below) up to $100,000 into the Company as provided below,
the Company grants the holder of the B Preferred the right to
convert such shares of B Preferred at a conversion price of $0.025
per share, or one share of B Preferred into one Common share (the "Conversion
Shares"). The Company will honor conversion of only so many of the
total number of B Preferred currently outstanding as equal the
percentage of the total Purchase Price for the Investment Shares
that has been paid as of the time of conversion.
b. All other terms and conditions of the B Preferred will be
suspended, except voting rights and rights upon liquidation will be
suspended until completion of Conversion. The Conversion must be
completed by November 30, 1998 at which time the original terms and
conditions of the B Preferred will be reinstated, including without
limitation, the original conversion price of $0.125 per share.
2. In consideration for the re-structuring of the terms of the B-
Preferred, Investor agrees and does hereby subscribe to purchase 17
Million shares common stock of the Company for an aggregate purchase
price of $100,000, or $0.005882 per share. The Purchase Price must
be paid in cash or certified funds and be fully funded on or before
November 30, 1998, or the subscription will expire as to any
unpurchased shares. Investor agrees to fill in and execute a proper
Subscription Agreement and Investor Representation Letter in
substantially the form attached hereto as Exhibit A, and
incorporated herein by reference.
3. Investor understands and agrees that while the Company is issuing
the Investment Shares and the Conversion Shares in reliance upon
certain exemptions from registration under the Federal and State
Securities Laws, resale of such securities may be subject to further
restrictions imposed by such laws, and no assurances have been made
in advance that exemptions from registration or from certain resale
restrictions of such laws will be available at the time that
Investor wishes to liquidate his/her investment. It is also
understood that the Company cannot guarantee that there will be a viable trading
market for the securities at the time that Investor desires to liquidate
the securities and is undertaking no duties to provide for such
market at such time.
4. As a condition to the agreement to modify the terms of the B
Preferred, Investor has agreed to imposition of contractual
restrictions on resale of the Investment Shares for a period of one
year from the date of final closing of the Investment or from
November 30, 1998, whichever is sooner (the "Lock-up Period"). The Company
reserves the right to release this restriction as to any Investment Shares in
its sole discretion at any time. Secondly, Investor irrevokably grants
Boulder Sports, LLC., his Proxy to vote any Investment Shares or
Conversion Shares not otherwise previously sold by Investor into the
public market in open market transactions or in private transactions
to bona fide third parties through the duration of the referenced
Lock-up Period.
5. The Company represents and warrants that it has taken all
necessary measures to obtain the authority to issue the Investment
Shares, modify the terms of the B Preferred as set forth herein, and
to issue the Conversion Shares and that upon such issuance, the
shares so issued shall be fully paid and non-assessable. Further, subject to
information contained in periodic and annual reports issued by the
Company, the Company is not insolvent, nor currently plans to effect
the filing of a petition in bankruptcy or file an application for
the appointment of a receiver with any court, has not sold or liquidated nor
agreed to sell or liquidate all or substantially all of the assets of the
Company, nor is there in existence nor presently contemplated any
material agreement for the purchase or sale of the Company, nor a
merger, consolidation or other reorganization in which the Company
is not the surviving entity. Furthermore, except as disclosed to Investor in
writing, the Company represents and warrants that it has not signed any
material underwriting agreement nor declared any stock split or dividend
which would materially alter the current tangible book value per share of
the Common Stock of the Company.
6. Investor represents and warrants: (i) that he owns all 28,400,000
shares of B Preferred directly or through affiliates that he
controls; (ii) that he has in his possession certificates for all
such shares of B Preferred; and (iii) to the best of his knowledge,
there are no liens or encumbrances, and there are no legal,
contractual or other restriction on alienation or conversion of
same. Investor represents that he/she is familiar with and has read
all current annual and period reports of the Company including the
recently issued proxy statement pertaining to the Annual Meeting
held on September 1, 1998, understands the relative risks and merits
of an investment in the Investment Shares and the Conversion Shares
and can afford to bear the risks of an investment in the same.
Finally, Investor represents and warrants that the information
contained in the Exhibit A Subscription Agreement and Investor
Representation Letter are true and correct as of the date executed
and that there are no material misstatements nor material omissions
therefrom.
7. Both parties agree to keep the terms and conditions of this
agreement confidential to the extent possible acknowledging that
certain aspects of this agreement must or should be disclosed in
regulatory filings made by the Company from time to time.
8. This Agreement together with the Exhibit A Subscription Agreement
and Investor Representation Letter which is incorporated herein by
reference constitute the entire agreement of the Parties hereto and
may not be modified except in writing signed by both parties.
Individuals executing this Agreement on behalf of a corporate entity
or partnership represent and warrant by their signature hereon that
they have been duly authorized to do so under applicable law and their
respective corporate charter or partnership agreement. This
Agreement has been made and executed in the state of Colorado and
will be enforceable in accordance with its laws and venue and
jurisdiction for any matter pertaining to this Agreement will be
proper if filed in the appropriate county or district court for the
County of Boulder, State of Colorado. All provisions herein are
severable and any provision of this agreement being held
unenforceable by any court will not invalidate any other provision.
The Parties agree to provide anything by way of further assurances
including representation letters, legal opinions, estoppel
certificates, affidavits or certificates of authenticity reasonably
requested by either party.
Dated this ____ day of _____, 1998.
XXXXXX INDUSTRIES, INC. Investor:
By:
