EXHIBIT 10.2
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FORM OF PROMISSORY NOTE
AND SECURITY AGREEMENT
U.S. $__________ Tempe, Arizona
_____________, 1997
FOR VALUE RECEIVED, XXXXX ENGINES & COMPETITION COMPONENTS, INC., a
Nevada corporation ("Maker") hereby promises to pay to INTERNATIONAL MOTOR
SPORTS GROUP, INC. ("Payee") the principal amount of ____________________ and
no/100 Dollars ($____________), together with simple interest thereon from and
including the date of this Promissory Note (the "Note") until, but not
including, the date of full and final payment, at the Interest Rate as
hereinafter defined.
1. Interest. Interest shall accrue on the principal amount
then outstanding hereunder at the rate of 12% per annum (the "Interest Rate")
based on the number of days elapsed in a 360-day year. Notwithstanding the
foregoing, if at any time implementation of any provision hereof shall cause the
interest contracted for or charged herein and collectible hereunder to exceed
the applicable lawful maximum rate, then the Interest Rate shall be limited to
such lawful maximum.
2. Payments. Accrued interest on the outstanding principal sum
of this Note shall be due and payable on the first day of each month, commencing
on _______________, 1997. The outstanding principal sum of this Note, together
with all accrued but unpaid interest due hereunder, shall be due and payable at
any time on or after February 1, 1998, upon not less than 15 days' written
notice from Payee to Maker. Payment of the principal of and interest on this
Note is to be made at the offices of Payee or such other place as Payee shall
designate in writing to Maker.
3. Waivers. Except as otherwise expressly provided herein,
Maker hereby waives diligence, demand, grace, presentment for payment, notice of
nonpayment, protest and notice of protest, notice of extension and notice of
default. No delay or omission on the part of Payee in exercising any right
hereunder shall constitute a waiver of any such right or of any other right
hereunder. A waiver on any one occasion shall not be construed to bar the
exercise, or to constitute a waiver of, any such right on any future occasion.
4. Prepayment. Maker may prepay all or any portion of the
interest and the unpaid principal balance of this Note at any time, or from time
to time, without penalty or premium. Any prepayment shall first be credited to
interest and then to principal.
5. Events of Default; Acceleration. The occurrence of any one
or more of the following events shall constitute an "Event of Default"
hereunder, and upon such Event of Default, the entire principal balance
outstanding hereunder, together with all accrued interest and other amounts
payable hereunder, at the election of Payee, shall become immediately due and
payable, without any notice to Maker, presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by Maker:
(a) Nonpayment of principal, interest, or other
amounts when the same shall become due and payable hereunder, and Maker does not
cure such failure to pay within three days after the date such payment is due;
or
(b) Use of the proceeds of this Note for purposes
other than as set forth in Schedule 2.2 of that certain agreement by and among
Maker, Payee, and Xxxxxx X. Xxxxx ("Xxxxx") pursuant to which this Note has been
executed and delivered by Maker ("Loan Agreement and Option"); or
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(c) The insolvency of Maker or the making by Maker of
an assignment for the benefit of its creditors; or
(d) The appointment of a receiver for Maker or the
involuntary filing against Maker, which is not stayed or dismissed within 30
days of filing, or the voluntary filing by Maker of a petition or application
for relief under federal bankruptcy law or any similar state or federal law; or
(e) Fraud or material misrepresentation with respect
to Maker and in connection with the Loan Agreement and Option by any of Maker's
employees who are authorized to make statements to Payee in connection with the
Loan Agreement and Option; or
(f) Any failure by Maker or Xxxxx to honor all of the
conditions and obligations of Maker or Xxxxx, respectively, under the Loan
Agreement and Option.
6. Subordination. The indebtedness evidenced by this Note,
including the principal hereof and interest hereon, is expressly subordinate and
subject in right of payment to the prior payment in full of all present and
future indebtedness of Payee or any of its affiliated companies to banks or
other institutional lenders.
7. Collateral and Security. As security for Maker's
obligations under this Note, Maker hereby grants to Payee a security interest in
all of Maker's equipment and fixtures. The security interest granted hereunder
shall be subordinate to (i) all security interests in the same collateral
granted to secure other debt obligations of Maker existing on the date hereof,
and (ii) all purchase money financing with respect to such collateral existing
on the date hereof or granted by Maker in the future. Upon the occurrence of an
Event of Default under this Note, Payee shall have all rights and remedies
available to it under Article 9 of the Uniform Commercial Code in the state of
Arizona. Upon payment in full of Maker's obligations under this Note, Payee
shall release the security interest granted hereby and shall execute and deliver
to Maker all such termination statements as Maker shall reasonably request.
8. Amendment. This Note may not be changed, modified or
terminated, nor may any provision of this Note be waived except by an agreement
in writing signed by the party to be charged.
9. Binding Nature of Agreement; Assignment. The provisions of
this Note shall be binding upon Maker, and shall inure to the benefit of and
bind the respective successors and assigns of Payee and Maker. Neither Payee nor
Maker may assign or transfer this Note or assign or delegate any of his, her, or
its respective rights or obligations hereunder without the prior written consent
of the other party in each instance.
10. GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF ARIZONA, NOTWITHSTANDING ANY
ARIZONA OR OTHER CONFLICTS-OF-LAWS PROVISIONS TO THE CONTRARY.
11. Collection Costs and Expenses. If this Note shall be
placed in the hands of an attorney for collection, by suit or otherwise, then
Maker's obligations hereunder shall include the payment of all reasonable
collection costs and expenses incurred by Payee in connection therewith,
including, without limitation, reasonable attorneys' fees and costs.
12. Time of Essence. Time is of the essence of this Note and
each and every provision hereof.
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13. Notices. All notices, requests, demands and other
communications required or permitted under this Note shall be in writing and
shall be deemed to have been duly given, made and received when delivered
against receipt or three days after deposited in the United States mails by
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(i) If to Payee:
International Motor Sports Group, Inc.
00000 00xx Xxxxx, X.X.
Xxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxx
(ii) If to Maker:
Xxxxx Engines & Competition Components, Inc.
0000 X. Xxxxxx Xxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxx
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
IN WITNESS WHEREOF, Maker and Payee executed this Note as of the date
first set forth above.
XXXXX ENGINES & COMPETITION COMPONENTS, INC.,
a Nevada corporation
By:__________________________________________
Its:_________________________________________
INTERNATIONAL MOTOR SPORTS GROUP, INC.,
a Delaware corporation
By:__________________________________________
Its:_________________________________________
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