Exhibit 10.13
DEBT CONVERSION AGREEMENT
THIS DEBT CONVERSION AGREEMENT (the "Agreement") is made this 1st day
of June, 2005, by and between Xxxxxx International, Ltd., a Delaware
corporation, having its principal offices located at 0000 Xxxxxxx #00 &
Ridgewood Road, Wall Township, New Jersey 07719 ("Xxxxxx") and Xxxxxx Motorcycle
Company, Ltd., a Delaware corporation having its principal offices located at
Xxxxxxx Xxxxxx, Xxxxxxxx 0, Xxxxxxxxxxx, Xxx Xxxxxx 00000 (the "Company").
B A C K G R O U N D:
WHEREAS, Xxxxxx organized the Company during the year 2003 originally
as a subsidiary, and since that time has granted an exclusive license to the
Company to utilize its patented technology to the Xxxxxx Spherical Rotary Valve
for motorcycle applications in the countries and territories comprising North,
South and Central America in exchange for a substantial equity stock ownership
position in the Company;
WHEREAS, in addition to the licensing agreement and other agreements
between the parties, and in an effort to assist the Company in its development
and testing of motorcycle engines as well as to meet its development stage
expenses, Xxxxxx has loaned the Company over the course of the last several
fiscal years an aggregate principal amount of approximately $345,000; and
WHEREAS, Xxxxxx acknowledges that the funding received by virtue of a
successful public offering will permit the Company to: (a) finalize the
development of its spherical rotary valve technology in motorcycle applications;
(b) build and sell motorcycles utilizing this technology, and; (c) sublicense
this technology, all of which shall increase the commercialization of the
technology in the marketplace and increase the value of Xxxxxx' equity ownership
position in the Company; and
WHEREAS, Xxxxxx, for the reasons specified above, desires to support
the Company's endeavors by converting its loans to the Company into equity,
resulting in the corresponding conversion of its debt loan amounts into equity;
and
WHEREAS, Xxxxxx and the Company desire to set forth in this
Agreement all of the terms and provisions that shall govern their understanding
and commitments to consummate the conversion transaction.
NOW, THEREFORE, in consideration of the mutual promises made by the
parties to each other, it is agreed:
1. Acknowledgment of Debt. The Company and Xxxxxx acknowledge that the
Company is indebted to Xxxxxx in the principal amount of $344,877.67 together
with $17,322.64 of accrued interest thereon, comprising an aggregate loan amount
due Xxxxxx at December 31, 2004 of $362,200.31 (the "Outstanding Loan Amount").
2. Agreement to Convert. Xxxxxx hereby agrees to convert the
Outstanding Loan Amount into shares of the Company's Series A Senior Convertible
Preferred Stock, with a stated value of $1.00 per share and a par value of $.001
per share (the "Preferred Stock") at the conversion rate of 1 share of Preferred
Stock for $1.00 of the Outstanding Loan Amount, with any fractional amount
rounded to the nearest whole, and; the Company hereby agrees to issue a total of
362,200 shares of its Preferred Stock to Xxxxxx to convert the Outstanding Loan
Amount into that number of shares of its Preferred Stock. The Company hereby
further agrees to issue a certificate representing 362,200 shares of its
Preferred Stock in the name of Xxxxxx as soon as practicable following the
execution and delivery of this Agreement.
3. Investment Representation. Xxxxxx hereby represents that it shall
receive and hold the Preferred Stock issued to it under the terms of this
Agreement as an investment and that it has no present intention to sell or
transfer the Preferred Stock, that the shares of Preferred Stock are deemed
"restricted securities" as defined under Rule 144 promulgated under the
Securities Act of 1933, as amended (the "1933 Act"), may not be sold or
transferred except pursuant to the registration requirements of the 1933 Act or
exemptions therefrom and that the certificate or certificates delivered to
Xxxxxx representing the Preferred Stock shall bear the appropriate restrictive
legend designating such shares as restricted securities.
4. Issuance Representation. The Company hereby represents: that it has
the authority pursuant to its amended Certificate of Incorporation and Bylaws to
create and issue the Preferred Stock; that the Preferred Stock has been duly
created and authorized by the Company's Board of Directors in compliance with
the General Corporation Law of the State of Delaware; that the powers,
preferences, qualifications, limitations or restrictions of each share of
Preferred Stock are as set forth in the Certificate of Designations, Preferences
and Rights of the Shares of the Preferred Stock of Xxxxxx Motorcycle Company,
Ltd. attached to this Agreement as Exhibit A, and; that when issued, the
Preferred Stock shall be validly issued, fully paid and non-assessable.
5. Entire Agreement; Governing Law. This Agreement represents the
complete understanding between Xxxxxx and the Company with respect to the
subject matter identified herein and supersedes any and all previous contracts,
agreements or understandings between the parties, whether oral or written, and;
the parties agree that this Agreement shall be governed by the laws of the State
of Delaware.
6. Legal Representation. Each of the Company and Xxxxxx has relied upon
the legal advice of their own counsel in the review, preparation, execution and
delivery of this Agreement and each shall bear their own costs and expenses in
connection therewith.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day, month and year first above written.
ATTEST: XXXXXX MOTORCYCLE COMPANY, LTD..
/s/ Xxxxxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxx, Secretary Xxxx X. Xxxxxxxxx, President
ATTEST: XXXXXX INTERNATIONAL, LTD.
/s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxxx Xxxxxx, Secretary Xxxxxx X. Xxxxxx, President
CMC Debt Conversion Agreement 06-01-05
