Exhibit 10.17
CONVERSION AGREEMENT
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CONVERSION AGREEMENT made as of October 3, 2003 between XXXXXXXXX ENERGY
CORPORATION, a Delaware corporation (the "Company"), and XXXXXXX XXXXXX
("Strain").
WHEREAS, the Company is indebted to Strain in the principal amount plus
interest accrued to the date hereof in the aggregate of Ten Million Dollars
($10,000,000) (the "Conversion Amount"), exclusive of indebtedness in the
aggregate amount of $6,892,151.09 which is memorialized in a Loan Agreement and
a Note of even date between the Company and Strain.
WHEREAS, Strain and the Company desire to convert the Conversion Amount
into shares of common stock, $.001 par value per share, of the Company (the
"Shares") at the rate of twenty cents ($.20) of Conversion Amount into one
Share, or an aggregate of Fifty Million (50,000,000) Shares upon the terms and
conditions set forth herein.
NOW, THEREFORE, for and in consideration of the mutual representations
and covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
1. Conversion.
(a) Strain hereby irrevocably agrees that effective as of the date
hereof, the entire Conversion Amount shall be converted into an aggregate of
Fifty Million (50,000,000) Shares, at the rate of twenty cents ($.20) of
Conversion Amount for one (1) Share, and all indebtedness of the Company to
Strain up to the Conversion Amount shall be irrevocably extinguished and
satisfied in all respects.
(b) To the extent that the Company does not have sufficient Shares
authorized for issuance to issue all of the Shares in conversion of the
Conversion Amount, Strain shall have the irrevocable right to such number of
Shares, which shall be issued to Strain as promptly as practicable following the
authorization of a sufficient number of Shares to enable the Company to deliver
all of the Shares to Strain, subject to adjustment for stock dividends, forward
or reverse splits, reclassifications, exchanges, substitutes, mergers,
consolidations and all other matters effecting shares of common stock of the
Company, as if such Shares were issued at the time of such event.
2. Issuance of Shares. The Shares issued and issuable hereunder shall be
issued to NEC Energy, LLC, a New York limited liability company which is a
designee and an affiliate of Strain (the "Strain Designee").
3. Undertaking by the Company. The Company shall, within one hundred eighty
(180) days, take all corporate action necessary under Delaware law and the
federal securities laws, rules and regulations to seek shareholder approval to
increase the number of authorized Shares to a number which is at least
sufficient for the Company to deliver all of the Shares issuable to the Strain
Designee hereunder.
4. Registration Rights. All of the Shares shall have resale registration
rights as set forth in a Registration Rights Agreement of even date between the
Company and Strain and/or the Strain Designee in, or substantially in, a form
mutually acceptable to Strain and/or the Strain Designee.
5. Representations by Strain.
5.1 Strain understands and agrees that the Company is relying and may
rely upon the following representations, warranties and acknowledgments made by
Strain individually, and as a principal of the Strain Designee (for the purposes
of this Section 5, Strain and the Strain Designee are each referred to as the
"Subscriber") in entering into this Agreement:
(a) The Subscriber represents and warrants that the Shares to be
acquired pursuant to the terms hereof are being acquired for Subscriber's own
account, for investment and not for distribution or resale to others. Subscriber
will not sell, assign, transfer, encumber or otherwise dispose of any of such
Shares unless (i) a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") with respect thereto is in effect and the
prospectus included therein meets the requirements of Section 10 of the
Securities Act, or (ii) the Company has received a written opinion of its
counsel that, after an investigation of the relevant facts, such counsel is of
the opinion that such proposed sale, assignment, transfer, encumbrance or
disposition does not require registration under the Securities Act.
(b) The Subscriber represents that he and (i.e., Strain and the Strain
Designee severally) is an "accredited investor," as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act.
(c) The Subscriber represents and warrants that he and it alone, or with
his and its purchaser representative, if any, has such knowledge and experience
in financial and business matters that he and it is capable of evaluating the
merits and risks of the acquisition of the Shares contemplated hereby. The
Subscriber will execute and deliver to the Company such documents as the Company
may reasonably request in order to confirm the accuracy of the foregoing.
(d) The Subscriber hereby represents that he and it has reviewed all of
the Company's reports, registration statements, proxy and for information
statements which the Company has filed with the Securities and Exchange
Commission via the Electronic Data Gathering and Retrieval (XXXXX) system since
October 1, 2002 and he and it has been furnished by the Company with all
information regarding the Company which he had requested or desired to know;
that all documents which could be reasonably provided have been made available
for his and its inspection and review; that he and it has been afforded the
opportunity to ask questions of and receive answers from duly authorized
representatives of the Company concerning the terms and conditions of the
offering, and any additional information which he and it had requested; and that
he has had the opportunity to consult with his own tax or financial advisor
concerning an investment in the Company.
(e) The Subscriber understands that the Shares are not being registered
under the Securities Act in part on the ground that the issuance thereof is
exempt under Section 4(2) of the Securities Act as a transaction by an issuer
not involving any public offering and that Company's reliance on such exemption
is predicated in part on the foregoing representations and warranties of the
Subscriber.
(f) The Subscriber understands that since the Shares are not being
registered under the Securities Act and they may not be sold, assigned,
transferred, encumbered, or disposed of unless they are subsequently registered
thereunder or an exemption from such registration is available. Accordingly, the
following restrictive legend will be placed on any instrument, certificate or
other document evidencing the Shares:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933.
These shares have been acquired for investment and
not for distribution or resale. They may not be sold,
assigned, mortgaged, pledged, hypothecated or
otherwise transferred or disposed of without an
effective registration statement for such shares
under the Securities Act of 1933 or an opinion of
counsel for the Company that registration statement
is not required under such Act."
6. Representations by the Company.
6.1 The Company represents and warrants to Strain as follows:
(a) The Company is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware and has the corporate power to
conduct its business.
(b) The execution, delivery and performance of this Agreement
by the Company has been duly approved by the Board of Directors of the Company.
(c) The Shares, to the extent of the authorized Shares available for
issuance, have been duly and validly authorized and, when issued in accordance
with the terms hereof, will be duly authorized, validly issued, fully paid and
nonassessable. The Shares to be issued pursuant to Section 1(b) hereof, shall,
when authorized and issued, constitute duly authorized, validly issued, fully
paid and non-assessable shares of common stock of the Company.
7. Miscellaneous.
7.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and hand delivered or sent by first class mail, postage
prepaid, or overnight mail, addressed to the Company, 0000 X. Xxxx Xxxxx, Xxxxxx
Xxxx, Xxxxxxxx 00000, Attention: Xxxx Xxxxxx, Chief Executive Officer, and to
Strain
at 000 Xxxxxxxxxx Xxxx, Xxxxxxxxxxxx, Xxx Xxxx 00000. Notices shall be deemed to
have been given on the date of mailing, except notices of change of address,
which shall be deemed to have been given when received.
7.2 This Agreement shall not be changed, modified or amended except by
a writing signed by the party to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
7.3 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective permitted successors and assigns
including, without limitation, the Strain Designee. This Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter thereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature between them.
7.4 This Agreement and its validity, construction and performance shall
be governed in all respects by the laws of the State of Delaware, applicable to
agreements to be performed wholly within the State of Delaware.
7.5 This Agreement may be executed in counterparts.
7.6 Facsimile signatures hereon are deemed to be original signatures.
Remainder of page intentionally left blank. Signature page follows.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ XXXXXXX XXXXXX
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XXXXXXX XXXXXX
Social Security No.
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XXXXXXXXX ENERGY CORPORATION
By: /S/ XXXX XXXXXX
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Name: XXXX XXXXXX
Title: President/ CEO
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