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 Xxxx Xxxxxx 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.
1
(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 fights 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).
2
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 loss, 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 corporate
By: /s/ Xxxxxxx Xxxxx
------------------------------
Xxxxxxx Xxxxx Chairman & CEO
3
