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Exhibit 10.17
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CONVERSION AGREEMENT
Made on the 30th day of November, 2000 as of the 31st day of August, 2000
(the "Effective Date")
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BETWEEN: XBOX TECHNOLOGIES, INC., a corporation duly incorporated under
the laws of the State of Delaware of the United States, having
its registered office and principal place of business located
at 00000 Xxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxxxxx, Xxxxxxxxx,
00000 (hereinafter referred to as the "Corporation").
AND: TECHINSPIRATIONS INC. (CAYMAN), having its registered office
and principal place of business located at CIBC Bank and Trust
Company (Cayman) Limited, P.O. Box 694, CIBC Building, Xxxxxx
Street, Georgetown, Grand Cayman, B.W.I. (hereinafter referred
to as "Investor").
FOR VALUE RECEIVED AND IN CONSIDERATION OF THE MATTERS SET OUT IN THE
PURCHASE AGREEMENT, IT IS AGREED AS FOLLOWS:
1. The parties hereto hereby irrevocably confirm the following recitals of
fact and intention:
(a) At a June 22nd, 2000 meeting of the Board of Directors of the
Corporation, the Board of Directors (together with a
representative of the Investor who is also on the Board of
Directors of the Corporation) approved, in principle,
management of the Corporation negotiating and implementing a
business and financing plan for the Corporation (the "Plan")
which included, amongst other matters, focusing the business
and development operations of the Corporation on the business
of its subsidiary, Knowledge Mechanics Inc., reorganizing the
balance sheet and share capital of the Corporation to include
revised employee stock option plans and the conversion of
secured debt furnished by the Investor to the Corporation into
equity of the Corporation, and pursuing additional equity
investment in the Corporation;
(b) In furtherance of the implementation of the Plan, senior
management of the Corporation, representatives of the
Investor, and representatives of the subsidiary met in
Toronto, Canada, on August 10, 2000 and, negotiated, agreed in
principle, and thereafter reduced to writing in a memorandum
of understanding various features of the Plan, subject to
Board approval and legal documentation, including without
limitation, the conversion of the Investor's secured loans to
the Corporation into equity of the Corporation with effect as
of the Effective Date (the "Debt Conversion");
(c) Those agreements in principle implementing the Plan were
presented, to the extent necessary, to the Board of Directors
of the Corporation at various subsequent Board proceedings
(including, without limitation, at a September 7th, 2000
meeting of the Board of Directors of the Corporation) for
formal approval and were so formally approved, provided that
the approval of the particulars of the Debt Conversion was
referred to a special committee of independent Directors (the
"Special Committee") and, as a result of the foregoing, the
parties instructed their attorneys to prepare legal
documentation implementing those decisions; and
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(d) At a meeting of the Special Committee on October 31st, 2000,
the Special Committee approved the particulars of the Debt
Conversion and the agreements pertaining thereto; and
(e) In accordance with the Debt Conversion aspects of the
foregoing, the Corporation and the Investor have entered into
a purchase agreement of even date (the "Purchase Agreement")
whereby the Investor will purchase from the Corporation
$14,025,137 of Series A Preferred Shares of the capital stock
of the Corporation, at a purchase price of $16.80 per share,
each Series A Preferred Share convertible into 200 shares of
common stock of the Corporation at the rate of $0.084 per
Common Share which purchase price shall be paid or satisfied,
to the extent of $11,806,425.74 thereof, by the conversion,
pursuant to this Conversion Agreement, of that amount of
secured loan advances by the Investor to the Corporation as of
the Effective Date into Series A Preferred Share equity.
2. In this Conversion Agreement, capitalized terms denoting defined terms
shall, if not specifically definedspecifically defined herein, bear the
meanings attributable to them in the Purchase Agreement (as defined
below). Subject to the foregoing, for the purposes hereof, unless there
is something in the subject matter or context inconsistent therewith,
the following terms and expressions shall have the following meanings:
CHARGE: a hypothec, mortgage, priority, charge, pledge,
assignment in guaranty, security interest, lien,
encumbrance, action, claim, demand, option, offer,
right or equity of any nature whatsoever or howsoever
arising on one or more assets or rights;
CREDIT FACILITY: means the secured revolving operating line of credit
extended by the Investor to the Corporation
originally held by Norwest Business Credit, Inc.;
DEBT: means the amount of accrued interest and outstanding
principal owed by the Corporation to the Investor
under the Credit Facility on the date hereof.
3. Pursuant to the provisions of the Purchase Agreement, and
coincidentally with the Closing of the transactions contemplated under
the Purchase Agreement, the Corporation and Investor hereby confirm
their agreement, and the Investor's irrevocable direction, to convert
the following portion of the Debt with the effect as of the Effective
Date: $11,806,425.74 of the Debt shall be converted into 702,763.43
Preferred Shares of the Corporation at a conversion price of $16.80 per
share and in full satisfaction of the subscription price for 702,763.43
Preferred Shares purchased by the Investor from the Corporation
pursuant to the Purchase Agreement.
4. Each of the Corporation and the Investor hereby acknowledges and
confirms that the amount of the Debt outstanding on the Effective Date
is $11,806,425.74. The Corporation hereby acknowledges receipt of the
subscription price referred to in paragraph 3 above and the Investor
hereby confirms that the amount of the Debt outstanding shall be
reduced accordingly.
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5. The Corporation and the Investor hereby waive any notice requirement
from one another and any other procedure, condition or other right
precedent to the conversion of the Debt pursuant to this Agreement.
6. Each party hereto represents and warrants that it has the necessary
power, authority and capacity to execute this Agreement and to perform
its obligations hereunder.
7. The Investor hereby represents and warrants to the Corporation that the
Debt so converted pursuant to this Agreement is free and clear of any
charges created by the Investor whatsoever, except for Charges created
under the Credit Facility.
8. The parties hereto agree that the Credit Facility and terms and
conditions thereof and the Charges applicable thereto shall continue to
remain in full force and effect and the said Charges shall continue to
attach to the assets and undertaking of the Corporation as continuing
and collateral security for all present and future obligations and
indebtedness of the Corporation to the Investor.
9. Each party hereto shall, at the request of the other party, execute and
deliver any further documents and do all acts and things as that party
may reasonably require to carry out the true intent and meaning of this
Agreement.
10. Any notice or other communication to be given in connection with this
Agreement shall be given in writing and transmitted by any means
providing proof of receipt by the addressee to the addresses indicated
at the beginning hereof, or to such other address as any party may
designate by notice given to the other party.
11. This Agreement shall be governed by the laws in force in the State of
Minnesota and the parties hereto agree irrevocably to attorn to the
jurisdiction of the courts of the State of Minnesota and agree that any
proceedings taken in respect of this Agreement shall be taken in such
courts and in no other.
12. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective personal representatives, heirs,
successors and administrators.
13. This Agreement may be executed in separate counterparts, all of which
shall constitute one and the same instrument. This Agreement may be
effectively delivered by the facsimile delivery of a signed original
and such facsimile copy shall be as effective as the signed original.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Effective Date.
XBOX TECHNOLOGIES, INC.
By:
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Its:
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TECHINSPIRATIONS INC. (CAYMAN)
By:
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Its:
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