Exhibit 10.14
DEBT CONVERSION AGREEMENT
THIS DEBT CONVERSION AGREEMENT (the "Agreement") is made this 1st day of
June, 2005, by and between Xxxx X. XxXxxxxxx, M.D., an individual, having an
address at1 Main Street, Suite 104, XX Xxx 000, Xxxxxxxxx, Xxx Xxxxxx 00000,
("XxXxxxxxx") and Xxxxxx Motorcycle Company, Ltd., a Delaware corporation having
its principle offices located at Xxxxxxx Xxxxxx, Xxxxxxxx 0, Xxxxxxxxxxx, Xxx
Xxxxxx 00000 (the "Company").
B A C K G R O U N D:
WHEREAS, XxXxxxxxx was introduced to the Company, its management and its
motorcycle technology during calendar year 2003 and loaned the Company $100,000
in October, 2003; and
WHEREAS, the Company is in a position to proceed with an initial public
offering of its securities and, in order to qualify to list its shares for
trading on the American Stock Exchange (the "AMEX"), the Company must maintain a
shareholder equity position of at least $5,000,000 through the initial closing
of its public offering; and
WHEREAS, XxXxxxxxx 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 value of the Company's assets
and business; and
WHEREAS, XxXxxxxxx is desire to make an equity investment in the Company
and believes that such an investment will increase in value over the next 12
months as a result of the abovementioned Company business prospects; and
WHEREAS, XxXxxxxxx, for the reasons specified above, desires to support
the Company's application to list its shares for trading on the AMEX by
converting his loan to the Company into equity, resulting in the corresponding
conversion of his debt loan amount into equity on the Company's financial
statements and thereby enhancing the Company's ability to meet the $5,000,000
shareholder equity threshold required by the AMEX in order to for the Company to
qualify to list its shares for trading; and
WHEREAS, XxXxxxxxx 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 XxXxxxxxx acknowledge that the
Company is indebted to XxXxxxxxx in the principal amount of $100,000 and
$5,917.81 of accrued interest thereon, comprising an aggregate loan amount due
XxXxxxxxx at December 31, 2004 of approximately $105,918 (the "Outstanding Loan
Amount").
2. Agreement to Convert. XxXxxxxxx 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
105,918 shares of its Preferred Stock to XxXxxxxxx 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 105,918 shares of its
Preferred Stock in the name of XxXxxxxxx as soon as practicable following the
execution and delivery of this Agreement.
3. Investment Representation. XxXxxxxxx hereby represents that he shall
receive and hold the Preferred Stock issued to him under the terms of this
Agreement as an investment and that he 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
XxXxxxxxx 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 XxXxxxxxx 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 XxXxxxxxx 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 /s/ Xxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxx Xxxx X. Xxxxxxxxx, President
WITNESS:
/s/ Xxxxxxx Xxxxxx /s/ Xxxx X. XxXxxxxxx
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Xxxx X. XxXxxxxxx, Individual
CMC Debt Conversion Agreement-XxXxxxxxx 06-01-05
