Conversion of Note
The parties to that certain Revolving Credit Note dated April 30, 1998 between
Continental Capital & equity Corporation (hereafter referred to as "Lender') and
Aarica Holdings, Inc. and its affiliates and subsidiaries (hereafter referred to
as "Borrower") hereby acknowledge that Borrower has requested that Lender
extinguish said debt balance, that debt balance being approximately Three
Hundred Thousand Dollars ($300,000.00) as of June 29, 2000, including all
principal, interest, and expenses due Borrower, and Lender has agreed to convert
such debt into shares of common stock of Aarica Holdings, Inc., subject to the
following:
1. Borrower shall instruct its counsel to issue 1 50,00D shares of restricted
common stock to Lender, evidenced by a share certificate dated June 29,
2000, with such certificate bearing the name of Continental Capital &
Equity Corporation. Such certificate shall be delivered to Lender
immediately following the execution of this Agreement.
2. Borrower shall instruct its counsel to retrieve the stock certificate
bearing the name of Carol Kolozs in the amount of 2,400,000 shares which
has been pledged by Mr. Kolozs to a certain Robert E. Schmidt, and to
irrevocably cancel said certificate immediately. The parties acknowledge
that Mr. Schmidt previously had in his possession a stock certificate
bearing the name of Carol Kolozs in the quantity of 2,600,000 shares of
Aarica Holdings, Inc. stock, such certificate having already been
irrevocably canceled.
3. Borrower shall instruct its counsel to prepare a new certificate bearing
the name of Carol Kolozs in the quantity of 2,250,000 shares of Aarica
Holdings, Inc. common stock, and to forward same to Robert E. Schmidt as
collateral pursuant to agreements between Mr. Schmidt and Borrower. Should
Mr. Schmidt object to the return of the 2,400,000 share certificate in
exchange for a new certificate in the quantity of 2,250,000 shares, then
Borrower shall issue Lender 150,000 newly issued shares from the company in
accordance with paragraph 1 of this Agreement.
4. Borrower shall issue no further shares, warrants, nor options without the
prior express written approval of Lender until such time as all shares of
Aarica Holdings, Inc. held by Lender have been registered to become tree
trading and are free from any underwriter lock-up, except Borrower is
authorized to issue any shares, options, and warrants previously approved
and evidenced through actions of the Borrower's Board of Directors as of
June 28, 2000, and further Borrower shaII be allowed to issue up to 300,000
shares of common stock at a price of not less than $2.00 per share without
the prior written approval of the Lender. The parties agree that any
portion of this paragraph that may need further approval of the Borrower's
Board of Directors shall be subject to such approval, and that Carol Kolozs
acknowledges that in the event such further Board approval may be
necessary, that he irrevocably proxies his vote on such matters to James
Schnorf. The parties further acknowledge that in the event further Board
approval is needed for this or any other provision in this Agreement, that
such situation shall not invalidate any other provision in this Agreement
not requiring such Board approval, and that Carol Kolozs irrevocably
proxies his vote to James Schnorf on any other such provisions in this
Agreement requiring Board approval.
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5. Borrower agrees to provide piggy-back registration rights to the 150,000
shares referenced by this Agreement, and if such shares are not registered
on or before April 30, 2001, then Borrower shall initiate a registration
statement upon the written request of Lender, at Borrower's expense, and
use its best efforts to make said registration effective as soon as
possible. Should said shares not be registered by June 28, 2001 then
Borrower shall issue an opinion letter and a non objection letter, at
Borrowers cost, stating that such shares are freely tradable under Rule
144. The parties acknowledge that such registration provisions are
contingent upon Borrower's common stock being publicly traded.
6. Lender is hereby granted an option to purchase up to 250,000 shares of the
Borrowers common stock, to consist of newly issued shares, at a price per
share of $2.00. This option shall expire ninety (90) days from the later of
(i) the date the underlying shares are registered to be free trade, or (ii)
the date all shares of Aarica Holdings, Inc. common stock held by Lender
are free from any underwriter lock-up. These shares shall have piggy-back
registration rights In the event Lender shall exercise any options, then
the Borrower agrees to issue an opinion letter and a non-objection letter
at Borrower's cost indicating such shares are freely tradable under Rule
144 after one year has passed from the date of such option exercise. In the
event that Lender shall exercise a minimum of 100,000 option shares, then
Borrower shall initiate a demand registration to register such shares
within one hundred twenty (120) days of such exercise, at Borrower's cost,
and shall utilize its best efforts to make the registration effective on a
timely basis. The $2.00 exercise price for said options shall increase
according to the following schedule:
A. $2.50 fifteen (15) days after the Borrower has filed its response
to the Securities and Exchange Commission's (SEC) second comment letter
concerning the Borrower's SB-2 prospectus.
B. $3.00 five (5) days after written confirmation has been received
from the SEC deeming Borrower's SB-2 to be effective.
C. $3.50 five (51 days after the Borrower's IPO date.
D. $4.00 thirty (30) days after the Borrower's IPO date or
thereafter. The parties acknowledge that Borrower desires to
engage the services of the Lender for investor relations
support once Borrower is publicly traded, under terms of the
Lenders standard Market Access Program (MAP) Agreement. Such
terms include a twelve month agreement with cash payment in
advance for the length of the agreement, in an amount equal to
$15,000 per month, such cash payment to be made from proceeds
of the IPO. The MAP Agreement shall provide for Lender to be
provided 200,000 shares of stock at 120% of the IPO price. In
the event that Lender does not exercise its option for the
250,000 shares referenced in paragraph 6 prior to the
Borrower's IPO date, then Lender hereby agrees it shall not be
entitled to any options in the MAP Agreement.
7. In the event that Borrower has not consummated its initial public offering
on or before February 28, 2001, then the option exercise price for the
250,000 shares referenced herein shall reduce from $2.00 per share to $.05
per share, and such shares shall come from the personal holdings of Carol
Kolozs as opposed to being newly issued shares from the Borrower. In the
event Robert Schmidt, holder of the pledged shares of Carol Kolozs shall
object to the issuance of such shares from the holdings of Carol Kolozs,
then Borrower shall issue new company shares to Lender.
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8. Upon the execution of this Agreement and the receipt of the 150~000 shares
of Aarica Holdings, Inc. stock by Lender, Lender shall cause to he
delivered to Borrower the original $300,000 Revolving Credit Note stamped
"paid in full" and shall execute any other such reasonable documentation as
requested by Borrower to evidence repayment of said Note.
9. The parties acknowledge that the option for 250,000 shares
represents consideration to Continental Capital for work performed through
June 30, 2000 on coordinating the financing from Robert E. Stemmed, Jr.,
for coordinating the efforts to hire a Chief Financial Officer, and
reviewing and assisting Africa in its audit efforts.
This Agreement has been executed with the full authority of the respective
parties on this June 29, 2000.
Aarica Holdings, Inc. Continental Capital & Equity Corporation
By_________________________________ By_______________________________
Carol Kolazs, President Jim Schnorf, General Manager
