THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY BE TRANSFERRED
ONLY IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, THIS LEGEND
SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.
AMERICAN QUANTUM CYCLES, INC.
8% SUBORDINATED NOTE
DUE October 1, 1999
$100,000 February 25, 1999
AMERICAN QUANTUM CYCLES, INC., a Florida corporation (the "Company"), for
value received, hereby promises to pay to Xx. Xxxxx Xxxxx registered assigns
(the "Holder") on demand or prior thereto as hereinafter provided (the "Maturity
Date") at the principal offices of the Company, the principal sum of one hundred
thousand dollars ($100,000) in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts, and to pay interest on the outstanding principal
balance at the rate of eight percent (8%) per annum from the date hereof until
the Company's obligation with respect to the payment of such principal sum shall
be discharged as herein provided. Interest hereunder shall accrue from the date
of this Note and shall be payable together with principal at the Maturity Date,
in like coin or currency to the Holder hereof at the office of the Company as
hereinabove set forth.
1. Transfers of Note to Comply with the Securities Act of 1933.
The Holder agrees that the Note may not be sold, transferred, pledged,
hypothecated or otherwise disposed of except as follows: (1) to a person who, in
the opinion of counsel to the Company, is a person to whom the Note may legally
be transferred without registration and without the delivery of a current
prospectus under the Securities Act of 1933, as amended (the "1933 Act"); or
(2) to any person upon delivery of a prospectus then meeting the requirements of
the 1933 Act relating to such Note and the offering thereof for such sale or
disposition, and thereafter to all successive assignees.
2. Covenants of Company
A. The Company covenants and agrees that, so long as this Note shall
be outstanding, it will:
(i) Promptly pay and discharge all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or upon its
income and profits, or upon any of its property, before the same shall
become in default, as well as all lawful claims for labor, materials
and supplies which, if unpaid, might become a lien or charge upon such
properties or any part thereof, provided, however, that the Company
shall not be required to pay and discharge any such tax, assessment,
charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and the Company
shall set aside on its books adequate reserves with respect to any
such tax, assessment, charge, levy or claim so contested.
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(ii) Do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, rights and
franchises and comply with all laws applicable to the Company as its
counsel may advise;
(iii) Keep adequately insured, by financially sound reputable
insurers, all property of a character usually insured by similar
corporations and carry such other insurance as is usually carried by
similar corporations; and
(iv) At all times keep true and correct books, records and
accounts.
3. Events of Default
A. This Note shall become and be due and payable upon written demand
made by the Holder hereof if one or more of the following events, herein
called "events of default", shall happen and be continuing:
(i) Default in the payment of the principal and accrued interest
on this Note when and as the same shall become due and payable,
whether by acceleration or otherwise, if such default shall continue
uncured for 30 days after written notice, specifying such default,
shall have been given to the Company by the Holder of the Note;
(ii) Default in the due observance or performance of any
covenant, condition or agreement on the part of the Company to be
observed or performed pursuant to the terms hereof, if such default
shall continue uncured for 30 days after written notice, specifying
such default, shall have been given to the Company by the Holder of
the Note;
(iii) Application for, or consent to, the appointment of a
receiver, trustee or liquidator of the Company or of its property;
(iv) Admission in writing of the Company's inability to pay its
debts as they mature;
(v) General assignment by the Company for the benefit of
creditors;
(vi) Filing by the Company of a voluntary petition in bankruptcy
or a petition or an answer seeking reorganization or an arrangement
with creditors; or
(vii) Entering against the Company of a court order approving a
petition filed against it under the Federal bankruptcy laws, which
order shall not have been vacated or set aside or otherwise terminated
within 30 days.
B. The Company agrees that notice of the occurrence of any event of
default will be promptly given to the Holder at his or her registered
address by certified mail.
C. In case any one or more of the events of default specified above
shall happen and be continuing, the Holder may proceed to protect and
enforce his, her or its rights by suit in the specific performance of any
covenant or agreement contained in this Note or in aid of the exercise of
any power granted in this Note or may proceed to enforce the payment of
this Note or to enforce any other legal or equitable rights as such Holder.
4. Miscellaneous
A. This Note has been issued by the Company pursuant to authorization
of the Board of Directors of the Company, which provides for an aggregate
of up to $100,000 in face amount of identical Notes to be issued (subject
to increase in certain circumstances).
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B. The Company may consider and treat the person in whose name this
Note shall be registered as the absolute owner thereof for all purposes
whatsoever (whether or not this Note shall be overdue) and the Company
shall not be affected by any notice to the contrary. The registered owner
of this Note shall have the right to transfer it by assignment subject to
the provisions elsewhere contained herein, and the transferee thereof
shall, upon his registration as owner of this Note, become vested with all
the powers and rights of the transferor. Registration of any new owner
shall take place upon presentation of this Note to the Company at its
principal offices, together with a duly authenticated assignment. In case
of transfer by operation of law, the transferee agrees to notify the
Company of such transfer and of his address, and to submit appropriate
evidence regarding the transfer so that this Note may be registered in the
name of the transferee. This Note is transferable only on the books of the
Company by the Holder hereof, in person or by his attorney, on the
surrender hereof, duly endorsed. Communications sent to any registered
owner shall be effective as against all holders or transferees of the Note
not registered at the time of sending the communication.
C. Payments of interest shall be made as specified above to the
registered owner of this Note. Payment of principal shall be made to the
registered owner of this Note upon presentation of this Note upon or after
maturity. No interest shall be due on this Note for such period of time
that may elapse between the maturity of this Note and its presentation for
payment.
D. The Holder shall not, by virtue hereof, be entitled to any rights
of a stockholder in the Company, either at law or in equity, and the rights
of the Holder are limited to those expressed in this Note.
E. Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Note, and (in the
case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Note, if
mutilated, the Company shall execute and deliver a new Note of like tenor
and date. Any such new Note executed and delivered shall constitute an
additional contractual obligation on the part of the Company, whether or
not this Note so lost, stolen, destroyed or mutilated shall be at any time
enforceable by anyone.
F. This Note shall be construed and enforced in accordance with the
laws of the State of Florida.
G. No recourse shall be had for the payment of the principal or
interest of this Note against any incorporator or any past, present or
future stockholder, officer, director or agent of the Company or of any
successor corporation, either directly or through the Company or any
successor corporation, under any statute or by the enforcement of any
assessment or otherwise, all such liability of the incorporators,
stockholders, officers, directors and agents being waived, released and
surrendered by the Holder hereof by acceptance of this Note.
IN WITNESS WHEREOF, AMERICAN QUANTUM CYCLES, INC. has caused this Note to
be signed in its name by its President.
AMERICAN QUANTUM CYCLES, INC.
a Florida corporation
By: /s/ Xxxxxxx Xxxxx
-----------------------------
Xxxxxxx Xxxxx, Chairman & CEO
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