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                                                                  Exhibit 10.17

CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

                              SETTLEMENT AGREEMENT

     This Settlement Agreement (this "AGREEMENT") is entered into as of this
14th day of August 2002, by and between [*] Inc., a corporation organized
under the laws of the State of Delaware ("[*]"), and Avatech Solutions, Inc.
and Technical Learningware Company, Inc. (collectively hereunder "AVATECH").
[*] and Avatech are referred to herein as the "PARTIES" or individually as
the "PARTY." This Agreement sets forth the terms under which [*] is prepared
to accept a discounted payoff of all of the obligations of Avatech to [*]
under the Loan Agreement dated January 25, 1999 by and between [*] and
Avatech, together with the Secured Promissory Note and the Security Agreement
of the same date attached thereto, all as amended through and as of the date
hereof (the "LOAN AGREEMENT"). This Agreement shall be effective on the date
it is fully executed, which date shall be the date set forth above and is
referred to hereinafter as the "EFFECTIVE DATE."

     1.   DISCOUNTED PAYOFF. Subject to and effective upon due performance by
Avatech of each of the following:

          (a)  On the Effective Date, Avatech shall pay to [*] the total
sum of One Million Dollars exactly ($1,000,000.00) in readily available funds
(the "DISCOUNTED PAYOFF AMOUNT").

          (b)  Immediately upon execution of this Agreement by [*] and prior
to countersignature by Avatech, Avatech shall authorize payment to [*] of the
Discounted Payoff Amount by wire transfer pursuant to the instructions set
forth in Paragraph 2 below, Avatech's signatures below representing
verification that wire transfer instructions have been given to Avatech's
bank.

(clauses 1(a) and (b) being collectively referred to herein as the
"CONDITIONS");

then, upon full satisfaction of the Conditions, all of the outstanding debts,
liabilities and obligations owing by Avatech to [*] under the Loan Agreement
shall be, and be deemed, satisfied in full, and Avatech shall be deemed
released from all liability thereunder; provided that:

               (A) Avatech shall remain obligated to [*] with respect to any
               other obligations or liabilities of Avatech to [*], including
               trade indebtedness and any other obligations arising outside
               the scope of the Loan Agreement.

               (B) At least five days prior to the release by Avatech to the
               public of any oral or written communication in which [*] is
               named, except such references as occur in the normal course of
               business, Avatech shall provide [*] with the text of such
               public disclosure and, consistent with Avatech's requirements
               under applicable law, [*] shall be permitted to review and
               approve any disclosures of non-public information pertaining to
               [*] or its business.

               (C) At least five days prior to any meeting of the board of
               directors of Avatech, or such shorter actual notice period as may
               be given to the members of the board of directors under
               applicable law, [*] shall be given notice of such meeting,
               together with an agenda and such additional documentation as may
               be provided to the members of the board of Avatech, with the
               exception of documentation relating directly to product pricing
               or to Avatech's business relationship with [*], and a
               designated representative of [*] shall be permitted to
               attend meetings of the board upon prior notice to Avatech;
               provided, however, it

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[*] Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
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               is understood that such representative would not participate in
               any session pertaining directly to product pricing or to
               Avatech's business relationship with [*] or where the
               attorney-client privilege could be compromised.

               (D) In the event Avatech is not required to release quarterly and
               annual financial information to the public under the Securities
               Exchange Act of 1934, as amended (the "ACT"), Avatech agrees to
               provide an income statement, cash flow statement and balance
               sheet, together with footnotes if available, to [*] within
               the same time frame such financial information would be required
               to be filed with the Securities and Exchange Commission were
               Avatech subject to the Act.

               (E) Any commissions claimed by Avatech under Section 3.3(a) of
               the [*] Authorized Channel Partner Agreement and the Major
               Account Guide shall be subject to prior review and acceptance by
               [*].

(the obligations described in clauses (A), (B), (C), (D) and (E) above being
hereinafter referred to as the "SURVIVING OBLIGATIONS"). Surviving Obligations
(C), (D) and (E) shall terminate on the earlier to occur of (i) the date upon
which Avatech ceases to act as a reseller of [*]'s products, but only if Avatech
no longer owes any obligations, including trade indebtedness, to [*], or
(ii) August 14, 2006.

     2.   TRANSFER OF FUNDS. The Discounted Payoff Amount shall be made by wire
transfer in immediately available funds to the following account:

               Bank Name:       Citibank, N.A.
               Account Name:    [*], Inc.
               Account Number:  [*]
               Routing Number:  [*]

     3.   RELEASES

          (a)  "CLAIMS" are, and the term is defined to mean, all actions,
causes of action, demands, damages, debts, obligations, liabilities, accounts,
costs, expenses, injuries, damages, liens or claims, whether known or unknown,
contingent or liquidated, asserted or unasserted, suspected or unsuspected.

          (b)  "RELEASED CLAIMS" are Claims of whatever character, whether known
or unknown, contingent or liquidated, asserted or unasserted, suspected or
unsuspected, in any way related to, connected with or arising out of the facts
and circumstances related to the Loan Agreement. "Released Claims" do not
include the duties or obligations of any Party under this Agreement or any other
agreements between the parties, except for the Loan Agreement.

          (c)  A releasor's or releasee's "RELATED PERSONS" are, and the term is
defined to mean, its past and present affiliates, subsidiaries, divisions,
predecessors, successors, assigns and its or their current or former partners,
principals, officers, directors, shareholders, owners, members, agents,
employees, trustees, attorneys, representatives, insurers, assigns, any other
current or former persons who managed or directed its or any of their respective
affairs or acted on its or any of their respective behalves or can claim by or
through it or them, and all predecessors, successors and assigns of it or any of
them.

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[*] Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
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          (d)  Release of [*] by Avatech: As an integral part of the
consideration given for the promises contained herein, Avatech, on behalf of
itself and its Related Persons, does hereby absolutely and forever release and
discharge [*] and its Related Persons, jointly and individually, from any
and all Released Claims.

          (e)  Release of Avatech by [*]: As an integral part of the
consideration given for the promises contained herein, [*], on behalf of
itself and its Related Persons, does hereby absolutely and forever release and
discharge Avatech and its Related Persons, jointly and individually, from any
and all Released Claims.

          (f)  General Releases. Each of Avatech and [*], on behalf of
themselves and their respective Related Persons,

               (1) Understand and agree that this Agreement extends to all
               claims of any nature and kind, known or unknown, suspected or
               unsuspected, that are the subject of their respective releases,
               and in that regard acknowledge that they are familiar with and
               understand Section 1542 of the Civil Code of the State of
               California which provides as follows:

                    A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
                    CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
                    THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
                    MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
                    DEBTOR.

               (2) Hereby waive and relinquish every right or benefit which they
               may have under: Section 1542 of the Civil Code of the State of
               California; and every right or benefit that they may have under
               any similar law, statute, rule, or regulation of any jurisdiction
               that may apply to this Agreement for any purpose, including its
               enforcement.

          (g)  Authority to Release: Avatech warrants and represents that it has
the power and authority to release the Released Claims, and that it has not
heretofore assigned or transferred or purported to assign or transfer to any
third party any Released Claim.

          (h)  Authority to Release: [*] warrants and represents that it
has the power and authority to release the Released Claims, and that it has not
heretofore assigned or transferred or purported to assign or transfer to any
third party any Released Claim.

     4.   CONFIDENTIALITY. Each Party agrees not to disclose this Agreement or
the terms hereof to any third party without the prior written consent of the
other, except as required by applicable law. If required to be filed under the
Securities Act of 1933, as amended, or the Act, the filer agrees to request
confidentially from the Securities and Exchange Commission with respect to key
provisions.

     5.   INDEPENDENT REVIEW. Each Party acknowledges that it has had an
adequate opportunity to make whatever investigation or inquiry it deems
necessary or desirable in connection with the release contained in paragraph 3.
This Agreement is made in good faith under applicable law and is fair and
reasonable.

     6.   ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
the understanding concerning the subject matter hereof between the Parties and
supersedes and replaces all prior negotiations, proposed agreements and
agreements, written and oral, which are

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[*] Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
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null, void and of no effect whatsoever. The Parties acknowledge that no other
party hereto nor any agent or attorney of any such party has made any promise,
representation or warranty whatever, express or implied, not contained in this
Agreement to induce them to execute this Agreement. None of the parties to this
Agreement or their counsel shall be deemed the drafter of this Agreement for
purposes of construing its provisions. The language in all parts of this
Agreement shall be interpreted according to its fair meaning and, accordingly
and specifically, shall not be interpreted strictly for or against any Party or
any of the persons released in this Agreement. Each Party shall bear its own
attorneys' fees and costs incurred in connection with the negotiation and
execution of this Agreement. This Agreement can only be modified by a written
agreement executed by the Parties.

     7.   CHOICE OF LAW. This Agreement shall in all aspects be interpreted,
enforced and governed in accordance with the laws of the State of California
without reference to its conflicts-of-law law, except to the extent that federal
law, including but not limited to the United States Bankruptcy Code, applies.

     8.   ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective insurers, heirs, representatives,
successors and assigns. If any provision shall be deemed invalid due to its
scope or breadth, such provision shall be deemed valid to the extent permitted
by law.

     9.   EXECUTION. By executing this Agreement, the Parties hereby indicate
their agreement to all of the foregoing. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so delivered shall be deemed an original, but all of which
counterparts shall constitute but one and the same instrument. Delivery of an
executed counterpart of a signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
thereof.

[*], INC.

By: /s/ Marcia K. Sterling              Date: 8/14/02
   ---------------------------------         ------------------------
Name: Marcia K. Sterling
     -------------------------------
Title: SVP & General Counsel
      ------------------------------

AVATECH SOLUTIONS, INC.

By: /s/ Henry D. Felton                 Date: 8/14/02
   ---------------------------------         ------------------------
Name: Henry D. Felton
     -------------------------------
Title: CEO
      ------------------------------

TECHNICAL LEARNINGWARE COMPANY, INC.

By: /s/ Henry D. Felton                 Date: 8/14/02
   ---------------------------------         ------------------------
Name: Henry D. Felton
     -------------------------------
Title: President
      ------------------------------

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[*] Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.<Page>

                                                                 Exhibit 10.18

                       SENIOR SUBORDINATED PROMISSORY NOTE

$500,000.00                                                      AUGUST 15, 2002
                                                               BOULDER, COLORADO

     FOR VALUE RECEIVED, Avatech Solutions, Inc., a Delaware corporation
("BORROWER"), hereby unconditionally promises to pay to the order of PlanetCAD
Inc., a Delaware Corporation ("LENDER"), in lawful money of the United States of
America and in immediately available funds, the principal sum of $500,000.00 and
any unpaid accrued interest thereon, as set forth below.

     The following is a statement of the rights of Lender under this Senior
Subordinated Promissory Note (this "NOTE") and the conditions to which this Note
is subject, and to which Lender, by the acceptance of this Note, agrees:

     1.   PRINCIPAL REPAYMENT. Lender may require payment of the outstanding
principal amount of this Note at any time beginning on the earlier of (i) the
date on which Borrower becomes unable (whether due to Borrower's inability to
satisfy a closing condition or otherwise) or refuses to close the merger with
Lender contemplated by the merger agreement, as amended, between the parties
dated May 1, 2002 and (ii) July 1, 2003 (either (i) or (ii), the "MATURITY
DATE"). At any time upon prior written notice to Lender, the Borrower may prepay
without penalty, in whole or in part, the principal sum, plus accrued interest
to the date of payment, of this Note.

     2.   INTEREST RATE. Borrower further promises to pay interest on the unpaid
principal balance of this Note, which interest shall accrue at a simple rate of
15.0% per annum beginning on the date hereof. Interest shall be payable on the
Maturity Date or on such earlier date as the entire principal amount shall
become due and payable and shall be calculated on the basis of a 365-day year
for the actual number of days elapsed.

     3.   PLACE OF PAYMENT. All amounts payable hereunder shall be payable to
Lender at the following address: 2520 55th Street, Suite 200, Boulder, CO
80301, Attention: Treasurer

     4.   APPLICATION OF PAYMENTS. All payments on this Note shall first be
applied to accrued interest and thereafter to the outstanding principal balance
hereof.

     5.   DEFAULT.

          5.1  EVENT OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default ("EVENT OF DEFAULT")
hereunder:

          (a)  Failure to pay, when due, the principal, any interest, or any
other sum payable hereunder;

          (b)  The admission by Borrower in writing of its inability to pay its
debts as such debts become due, or the making by Borrower of any general
assignment for the benefit of creditors;

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          (c)  The commencement by Borrower of any case, proceeding, or other
action seeking reorganization, arrangement, adjustment, liquidation,
dissolution, or composition of its debts under any law relating to bankruptcy,
insolvency, or reorganization, or relief of debtors, or seeking appointment of a
receiver, trustee, custodian, or other similar official for it or for all or any
substantial part of its property;

          (d)  The commencement of any case, proceeding, or other action against
Borrower seeking to have any order for relief entered against it as debtor, or
seeking reorganization, arrangement, adjustment, liquidation, dissolution, or
composition of Borrower's debts under any law relating to bankruptcy,
insolvency, reorganization, or relief of debtors, or seeking appointment of a
receiver, trustee, custodian, or other similar official for it or for all or any
substantial part of the property of Borrower, and (i) Borrower, by any act or
omission, indicates its consent to, approval of, or acquiescence in such case,
proceeding, or action, or (ii) such case, proceeding, or action results in the
entry of an order for relief which is not fully stayed within 60 days after the
entry thereof, or (iii) such case, proceeding, or action remains undismissed for
a period of 60 days or more; or

          (e)  Default in the performance of any obligation, covenant or
agreement contained or referred to herein.

          5.2  CONSEQUENCES OF DEFAULT. Upon the occurrence of any Event of
Default, the entire principal amount hereof, and all accrued and unpaid interest
thereon, shall be accelerated, and shall be due and payable, at the option of
Lender, on the fifth day after Lender provides notice of such Event of Default,
provided that such Event of Default is not cured to Lender's satisfaction in
that five-day period, and in addition thereto, and not in substitution therefor,
Lender shall be entitled to exercise any one or more of the rights and remedies
provided by applicable law. Failure to exercise said option or to pursue such
other remedies shall not constitute a waiver of such option or such other
remedies or of the right to exercise any of the same in the event of any
subsequent Event of Default hereunder. Lender shall be entitled to collect all
reasonable costs and expenses of collection and/or suit, including, but not
limited to, reasonable attorneys' fees.

     6.   PRIORITY. All rights and priorities of the authorized holder of this
Note and the indebtedness evidenced hereby shall rank in all respects (i) junior
to Borrower's obligations under that certain Financing Agreement dated October
25, 2000 between The CIT Group/Business Credit, Inc. ("CIT") and Borrower as set
forth in that certain subordination agreement between Lender and CIT dated on or
about the date hereof, (ii) senior to all other indebtedness of the Borrower,
including, without limitation, amounts owed under those obligations known as the
10% Subordinated Notes and (iii) PARI PASSU with the promissory note issued by
Borrower to James Hindman on or about the date hereof (the "HINDMAN NOTE").
Other than the Hindman Note, Borrower shall not incur any indebtedness outside
the ordinary course of business after the date hereof without Lender's prior
written consent.

     7.   WAIVER; AMENDMENT. No delay or omission on the part of the Lender in
the exercise of any right or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any right or remedy preclude any
other or further exercise thereof or the exercise of any other right or remedy.
The Borrower hereby waives demand, presentment and

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protest and notices thereof as well as notice of non-payment. The provisions of
this Note may be amended with the written consent of Borrower and Lender. The
obligations of Borrower and the rights of Lender under this agreement may be
waived by written notice delivered to Borrower.

     8.   EXPENSES. The Borrower agrees to pay on demand all costs and expenses,
including, without limitation, reasonable attorney's fees, incurred by the
Lender in connection with this Note. In addition, the Borrower agrees to pay on
demand all costs and expenses, including, without limitation, reasonable
attorney's fees, incurred by the Lender in endeavoring to enforce the rights of
the Lender hereunder.

     9.   GOVERNING LAW. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of Colorado, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.

     10.  ASSIGNMENT. This Note shall inure to the benefit of and be enforceable
by Lender's successors and authorized assigns, and shall be binding and
enforceable against Borrower's successors and assigns.

     IN WITNESS WHEREOF, Borrower has executed this Note as of the date first
written above.

                                    BORROWER
                                    Avatech Solutions, Inc.

                                    By: /s/ Henry D. Felton
                                       ------------------------------------

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