The Zanett Securities Corporation
Tower 49
31st Floor
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March 27, 2000
American Quantum Cycles, Inc.
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer
Ladies and Gentlemen:
Pursuant to the terms and subject to the conditions set forth in this
letter agreement (this "Agreement"), The Zanett Securities Corporation, for
itself and as agent (in such capacity, "Agent") for the lenders set forth on the
signature pages hereof (each a "Lender" and collectively, "Lenders") hereby
agrees to make a secured subordinated term loan to American Quantum Cycles,
Inc., a Florida corporation ("Borrower"), in the principal amount of One Million
Five Hundred Thousand ($1,500,000.00) Dollars (the "Loan"). All references to $
or Dollars herein shall mean United States dollars. The terms and conditions of
the Loan shall be as follows:
1. Advance of Loan Proceeds. Subject to Borrower's fulfillment of each
of the conditions precedent set forth in paragraph 5 hereof, each
Lender shall advance the amount set forth opposite to such Lender's
name on Schedule 1 attached hereto (such Lender's "Commitment") to
Agent prior to the Closing Date (as hereinafter defined). The Loan
shall be advanced by Agent to Borrower in one or more disbursements
beginning March 20, 2000 (the "Closing Date").
2. Financing Documents. The Loan shall be evidenced by convertible
promissory notes payable to the Lenders in an aggregate principal
sum of One Million Five Hundred Thousand ($1,500,000.00) Dollars
(each a "Note" and collectively, the "Notes") and in the form
attached as Exhibit "A" hereto. Each Lender shall receive a Note
executed by Borrower and payable to the order of such Lender in an
amount equal to the product of (a) the proportion that such Lender's
Commitment bears to the original principal amount of the Loan (such
Lender's "pro rata share") multiplied by (b) One Million Five
Hundred Thousand ($1,500,000.00) Dollars. The principal amount of
the Loan and interest thereon, calculated as provided in the Notes,
shall be payable as set forth more particularly therein. The Notes
shall be convertible, at Lenders' election upon the occurrence of an
March 27, 2000
Page 2
Event of Default (as hereinafter defined), into shares of Borrower's
senior convertible preferred stock (the "Conversion Shares"), as
more fully described in the Notes and in accordance with a certain
Certificate of Designations, Rights and Preferences of Series A
Convertible Preferred Stock of Borrower (the "Certificate of
Designation") in the form of Exhibit "B" attached hereto. The Loan
shall be secured pursuant to the provisions of paragraph 3 hereof.
As an inducement to Lenders to make the Loan, Borrower shall grant
Lenders warrants to purchase up to 375,000 shares of Borrower's
capital stock (such capital stock, together with the shares of
capital stock issuable upon the exercise of the Consulting Warrants
(as hereinafter defined), the "Warrant Shares") pursuant to the
terms and subject to the conditions set forth in the Warrant
Agreements (the "Warrants") attached hereto as Exhibits "C", "D",
"F" and "G". Borrower and Lenders shall enter into Registration
Rights Agreements in the form of Exhibit "F" attached hereto (the
"Registration Rights Agreements"). This Agreement, the Notes, the
Warrants, the Registration Rights Agreement, the Consulting Warrants
and each other document executed in connection with the Loan and/or
contemplated hereby are hereinafter collectively referred to as the
"Financing Documents."
3. Collateral. As security for the performance of Borrower's
obligations under this Agreement and/or any of the other Financing
Documents, the payment of principal and interest under the Loan and
the payment of all other liabilities of Borrower to Lenders arising
hereunder, under any of the other Financing Documents, or in
connection with any of the transactions described herein or therein
(collectively, the "Obligations"), whether absolute or contingent,
matured or unmatured, direct or indirect, similar or dissimilar, due
or to become due or heretofore or hereafter, contracted or acquired,
Borrower hereby grants, pledges and assigns to Agent (for the
benefit of Lenders) a security interest in all of its right, title
and interest in and to all of Borrower's equipment, inventory,
accounts and general intangibles, now owned or hereafter acquired,
and all proceeds and products of the foregoing including proceeds of
proceeds (collectively, the "Collateral"); provided, however, such
security interests shall not encumber any assets of Borrower which
are encumbered by security interests in favor of third
parties as of the date hereof and which have been disclosed to Agent
by Borrower in writing. Borrower will also take such commercially
reasonable steps Agent determines are necessary to perfect and
protect Lender's rights in and to the Collateral including, without
limitation, executing and delivering to Agent UCC-1 Financing
Statements for filing with such filing offices deemed appropriate by
Agent and Borrower shall reimburse Agent for the reasonable cost
thereof. Agent agrees to subordinate the lien priority of any and
all security interests held by Agent hereunder to any security
interests granted to by Borrower to third parties who provide
Borrower with debt financing to meet Borrower's working capital
requirements.
March 27, 2000
Page 3
4. Fees and Other Compensation. (a) In consideration of the brokerage
services rendered by The Zanett Securities Corporation ("Zanett") in
connection with the Loan, contemporaneous with the advance of the
Loan, Borrower shall pay to Zanett a fee equal to six (6%) percent
of the aggregate face amount advanced by Lenders to Borrower (the
"Origination Fee"), which fee shall be deemed fully earned and
nonrefundable when paid.
(b) In consideration for certain consulting services to be
rendered by Zanett on behalf of Borrower, Borrower shall grant
to Zanett, contemporaneous with the advance of the Loan,
warrants to purchase 90,000 shares of Borrower's capital stock
pursuant to the terms and subject to the conditions set forth
in the Warrant Agreement (the "Consulting Warrants") attached
hereto as Exhibit "H."
(c) Borrower represents that other than the fees expressly payable
pursuant to this Agreement, no party is entitled to any
finders, brokers or similar fees or commissions as a result of
the transactions contemplated hereby.
5. Conditions Precedent. The obligation of Lenders to make the Loan is
subject to Borrower duly executing and/or delivering (or causing to
be executed and/or delivered) each of the following (all documents
to be in form and substance satisfactory to Agent and its counsel):
(a) This Agreement, each of the Notes, the Warrants, the
Consulting Warrants the Registration Rights Agreement, the
Certificate of Designation and each other instrument,
agreement and document to be executed and/or delivered
pursuant to this Agreement;
(b) Payment to Zanett of the Origination Fee;
(c) The Consulting Warrants delivered to Zanett;
(d) A certified copy of the resolutions of the board of directors
of Borrower dated as of the Closing Date, authorizing the
execution, delivery and performance of this Agreement and the
other Financing Documents;
(e) Certified copies of the Articles or Certificate of
Incorporation and Bylaws of Borrower, in each case with all
amendments thereto;
(f) The Certificate of the corporate secretary of Borrower as to
the incumbency and specimen signatures of the officers of
Borrower executing this Agreement and the other Financing
Documents;
March 27, 2000
Page 4
(g) Certificates of status, as of the most recent dates
practicable, of the Secretary of State of Borrower's state of
incorporation and each other state in which Borrower conducts
business;
(h) A certificate, dated as of the Closing Date, signed by the
President of Borrower to the effect that: (i) the
representations and warranties set forth in Paragraph 6 of
this Agreement are true and correct as of the Closing Date;
and (ii) no Event of Default hereunder, and no event which,
with the giving of notice or the passage of time, or both,
would constitute an Event of Default, has occurred as of the
Closing Date;
(i) No material adverse event affecting Borrower shall have
occurred since the date of the most recent financial
statements of Borrower submitted to the Agent; and
(j) The written opinion of Borrower's counsel dated as of the
Closing Date in the form of Exhibit "I" attached hereto.
6. Representations. To induce Lenders to make the Loan, Borrower hereby
warrants and represents to Lenders that at and as of the date
hereof:
(a) Organization and Qualification. Borrower and each of its
subsidiaries is a corporation duly organized and existing in
good standing under the laws of the jurisdiction in which it
is incorporated, and has the requisite corporate power to own
its properties and to carry on its business as now being
conducted. Borrower and each of its subsidiaries is duly
qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes
such qualification necessary and where the failure so to
qualify would have a Material Adverse Effect. "Material
Adverse Effect" means any material adverse effect on (i) the
Securities, (ii) the ability of Borrower to perform its
obligations hereunder or any of the other Financing Documents
or (iii) the business, operations, properties, prospects or
financial condition of Borrower and its subsidiaries, taken as
a whole.
(b) Authorization; Enforcement. (i) Borrower has the requisite
corporate power and authority to enter into and perform its
obligations under this Agreement or the other Financing
Documents, to issue the Warrant Shares upon the exercise of
the Warrants and the Consulting Warrants to issue the
Conversion Shares upon conversion of the Notes in accordance
with the terms of the Certificate of Designation and to issue
the Warrant Shares upon exercise of the Warrants and the
Consulting Warrants in accordance with the terms of such
March 27, 2000
Page 5
warrant agreements; (ii) the execution, delivery and
performance of this Agreement and the other Financing
Documents by Borrower and the consummation by it of the
transactions contemplated hereby and thereby have been duly
authorized by Borrower's Board of Directors and no further
consent or authorization of Borrower, its Board of Directors,
any committee of the Board of Directors or Borrower's
shareholders is required, and (iii) this Agreement
constitutes, and, upon execution and delivery by Borrower of
the other Financing Documents such agreements will constitute,
valid and binding obligations of Borrower enforceable against
Borrower in accordance with their terms.
(c) Stockholder Authorization. Neither the execution, delivery or
performance of this Agreement or other Financing Documents by
Borrower nor the consummation by it of the transactions
contemplated hereby or thereby requires any consent, approval
or authorization of Borrower's stockholders.
(d) Capitalization. The capitalization of Borrower as of the date
hereof, including the authorized capital stock, the number of
shares issued and outstanding, the number of shares issuable
and reserved for issuance pursuant to Borrower's stock option
plans, the number of shares issuable and reserved for issuance
pursuant to securities (other than the Notes, the Warrants and
the Consulting Warrants) exercisable or exchangeable for, or
convertible into, any shares of capital stock and the number
of shares to be reserved for issuance upon conversion of the
Note and the Conversion Shares and exercise of the Warrants
and the Consulting Warrants is set forth on Schedule 6(d). All
of such outstanding shares of capital stock have been, or upon
issuance in accordance with the terms of any such warrants,
options or preferred stock, will be, validly issued, fully
paid and non-assessable. No shares of capital stock of
Borrower (including the Conversion Shares and the Warrant
Shares) are subject to preemptive rights or any other similar
rights of the stockholders of Borrower or any liens or
encumbrances. Except for the Securities and as set forth on
Schedule 6(d), as of the date of this Agreement, (i) there are
no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of Borrower or
any of its subsidiaries, or arrangements by which Borrower or
any of its subsidiaries is or may become bound to issue
additional shares of capital stock of Borrower or any of its
subsidiaries, and (ii) there are no agreements or arrangements
under which Borrower or any of its subsidiaries is obligated
to register the sale of any of its or their securities under
the Securities Act (except the Registration Rights Agreement).
Except as set forth on Schedule 6(d), (i) there are no
March 27, 2000
Page 6
securities or instruments containing antidilution or similar
provisions that will be triggered by the issuance of the
Conversion Shares, the common stock of Borrower upon
conversion of the Conversion Shares (the "Converted Shares")
or the Warrant Shares (collectively, the "Securities") in
accordance with the terms of this Agreement or the other
Financing Documents, (ii) there are no outstanding securities
or instruments of Borrower or any of its subsidiaries which
contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by
which Borrower or any of its subsidiaries is or may become
bound to redeem a security of Borrower or any of its
subsidiaries, and (iii) Borrower does not have any stock
appreciation rights or "phantom stock" plans or agreements or
any similar plan or agreement. Borrower has furnished to Agent
and Lenders true and correct copies of Borrower's Articles of
Incorporation as in effect on the date hereof ("Articles of
Incorporation"), Borrower's By-laws as in effect on the date
hereof (the "By-laws"), and all other instruments and
agreements governing securities convertible into or
exercisable or exchangeable for capital stock of Borrower. The
Certificate of Designation, in the form attached hereto, will
be duly filed prior to Closing with the Secretary of State of
the State of Florida and, upon the issuance of the Warrant
Shares in accordance with the terms hereof, each Lender shall
be entitled to the rights set forth therein.
(e) Issuance of Shares. The Conversion Shares, the Converted
Shares and Warrant Shares are duly authorized and, in
accordance with the Certificate of Designation, reserved for
issuance, and, upon conversion of the Note and the Conversion
Shares and exercise of the Warrants and the Consulting
Warrants in accordance with the terms thereof, will be validly
issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances and will not be subject
to preemptive rights or other similar rights of stockholders
of Borrower and will not impose personal liability upon the
holder thereof.
(f) No Conflicts. The execution, delivery and performance of this
Agreement and the other Financing Documents by Borrower, the
performance by Borrower of its obligations under the
Certificate of Designation, and the consummation by Borrower
of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation
for issuance, as applicable, of the Warrants, Consulting
Warrants, Conversion Shares and Warrant Shares and Converted
Shares) will not (i) result in a violation of the Articles of
Incorporation or By-laws or (ii) conflict with, or constitute
a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give to others any
rights of termination, amendment (including, without
limitation, the triggering of any anti-dilution provisions),
March 27, 2000
Page 7
acceleration or cancellation of, any agreement, indenture or
instrument to which Borrower or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state
securities laws and regulations and rules or regulations of
any self-regulatory organizations to which either Borrower or
its securities are subject) applicable to Borrower or any of
its subsidiaries or by which any property or asset of Borrower
or any of its subsidiaries is bound or affected (except, with
respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and
violations that would not, individually or in the aggregate,
have a Material Adverse Effect); provided, however, the
consent of the American Stock Exchange will be required for
Borrower to issue Warrant Shares and Converted Shares. Neither
Borrower nor any of its subsidiaries is in violation of its
Articles of Incorporation, By-laws or other organizational
documents and neither Borrower nor any of its subsidiaries is
in default (and no event has occurred which, with notice or
lapse of time or both, would put Borrower or any of its
subsidiaries in default) under, nor has there occurred any
event giving others (with notice or lapse of time or both) any
rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which Borrower
or any of its subsidiaries is a party, except for actual or
possible violations, defaults or rights that would not,
individually or in the aggregate, have a Material Adverse
Effect. The businesses of Borrower and its subsidiaries are
not being conducted, and shall not be conducted so long as a
Lender owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity, except for
possible violations the sanctions for which either singly or
in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and
Schedule 6(f) and the Registration Rights Agreement, Borrower
is not required to obtain any consent, approval, authorization
or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self
regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement or the
other Financing Documents, in each case in accordance with the
terms hereof or thereof.
(g) SEC Documents, Financial Statements. Except as set forth on
Schedule 6(g) hereto, since December 31, 1998, Borrower has
timely filed (within applicable extension periods) all
reports, schedules, forms, statements and other documents
required to be filed by it with the Securities Exchange
Commission (the "SEC") pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (all of the foregoing and all exhibits
included therein and financial statements and schedules
thereto and documents incorporated by reference therein being
hereinafter referred to herein as the "SEC Documents").
Borrower has delivered to Lenders true and complete copies of
March 27, 2000
Page 8
the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as the
case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and
none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC
Documents is, or has been, required to be amended or updated
under applicable law (except for such statements as have been
amended or updated in subsequent filings made prior to the
date hereof). As of their respective dates, the financial
statements of Borrower included in the SEC Documents complied
as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the
SEC applicable with respect thereto. Such financial statements
have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied, during
the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in
the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the
consolidated financial position of Borrower and its
consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to immaterial year-end audit adjustments). Except
as set forth in the financial statements of Borrower included
in the SEC Documents filed prior to the date hereof and any of
the liabilities described on Schedule 6(g) hereto, Borrower
has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business
subsequent to the date of such financial statements, (ii)
liabilities not required by GAAP to be disclosed on a balance
sheet prepared in accordance with GAAP, and (iii) obligations
under contracts and commitments incurred in the ordinary
course of business and not required under GAAP to be reflected
in such financial statements, which liabilities and
obligations referred to in clauses (i), (ii) and (iii),
individually or in the aggregate, are not material to the
financial condition or operating results of Borrower. Neither
Borrower nor any of its subsidiaries or any of their officers,
directors, employees or agents have provided the Lenders with
any material, nonpublic information.
(h) Absence of Certain Changes. Since April 30, 1999, there has
been no material adverse change and no material adverse
development in the business, properties, operations, financial
condition or results of operations
March 27, 2000
Page 9
of Borrower and its subsidiaries, taken as a whole, except as
disclosed in Schedule 6(h) or in the SEC Documents filed prior
to the date hereof.
(i) Absence of Litigation. Except as expressly disclosed in the
SEC Documents filed prior to the date hereof or on Schedule
6(i), there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to
the knowledge of Borrower or any of its subsidiaries,
threatened against or affecting Borrower, any of its
subsidiaries, or any of their respective directors or officers
in their capacities as such. There are no facts which, if
known by a potential claimant or governmental authority, could
give rise to a claim or proceeding which, if asserted or
conducted with results unfavorable to Borrower or any of its
subsidiaries, could reasonably be expected to have a Material
Adverse Effect.
(j) Intellectual Property. Each of Borrower and its subsidiaries
owns or is licensed to use all patents, patent applications,
trademarks, trademark applications, trade names, service
marks, copyrights, copyright applications, licenses, permits,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") which are material to
the conduct of its business as now being conducted and as
described in Borrower's Annual Report on Form 10-K or 10-KSB
for the fiscal year ended April 30, 1999. To the best
knowledge of Borrower, neither Borrower nor any subsidiary of
Borrower infringes or is in conflict with any right of any
other person with respect to any Intangibles which,
individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material
Adverse Effect. Neither Borrower nor any of its subsidiaries
has received written notice of any pending conflict with or
infringement upon such third party Intangibles, which alleged
pending conflict or alleged infringement, if adversely
determined, would result in a Material Adverse Effect. Except
as disclosed in the SEC Documents filed prior to the date
hereof hereto, the termination of Borrower's ownership of, or
right to use, any single Intangible would not result in a
Material Adverse Effect on Borrower. Neither Borrower nor any
of its subsidiaries has entered into any consent agreement,
indemnification agreement, forbearance to ▇▇▇ or settlement
agreement with respect to the validity of Borrower's or its
subsidiaries' ownership or right to use its Intangibles and,
to the best knowledge of Borrower, there is no reasonable
March 27, 2000
Page 10
basis for any such claim to be successful. The Intangibles
which are material to the conduct of Borrower's business are
valid and enforceable and no registration relating thereto has
lapsed, expired or been abandoned or canceled or is the
subject of cancellation or other adversarial proceedings, and
all applications therefor are pending and in good standing.
Borrower and its subsidiaries have complied, in all material
respects, with their respective contractual obligations
relating to the protection of the Intangibles used pursuant to
licenses. To the best knowledge of Borrower, no person is
infringing on or violating the Intangibles owned or used by
Borrower or its subsidiaries.
(k) Foreign Corrupt Practices. Neither Borrower, nor any of its
subsidiaries, nor any director, officer, agent, employee or
other person acting on behalf of Borrower or any subsidiary
has, in the course of his actions for, or on behalf of,
Borrower, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
(l) Disclosure. All information relating to or concerning Borrower
set forth in this Agreement or provided to the Lenders
pursuant to Paragraphs 5 and 6 hereof or otherwise in
connection with the transactions contemplated hereby is true
and correct in all material respects and Borrower has not
omitted to state any material fact necessary in order to make
the statements made herein or therein, in light of the
circumstances under which they were made, not misleading. No
event or circumstance has occurred or exists with respect to
Borrower or its subsidiaries or their respective businesses,
properties, operations or financial conditions, which has not
been publicly disclosed but, under applicable law, rule or
regulation, would be required to be disclosed by Borrower in a
registration statement filed on the date hereof by Borrower
under the Securities Act with respect to the primary issuance
of Borrower's securities.
(m) Acknowledgment Regarding Lender's Acquisition of Securities.
Borrower acknowledges and agrees that none of the Lenders or
the Agent is acting as a financial advisor or fiduciary of
Borrower (or in any similar capacity) with respect to this
Agreement or the transactions contemplated hereby, the
relationship between Borrower and the Lenders and the Agent is
"arms-length" and any statement made by any Lender or the
Agent or any of their respective representatives or agents in
March 27, 2000
Page 11
connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is
merely incidental to such Lender's purchase of Securities or
such Agent's role as an agent and has not been relied upon by
Borrower, its officers or its directors in any way. Borrower
further acknowledges that Borrower's decision to enter into
this Agreement has been based solely on an independent
evaluation by Borrower and its representatives.
(n) No General Solicitation. Neither Borrower nor any distributor
participating on Borrower's behalf in the transactions
contemplated hereby (if any) nor any person acting for
Borrower, or any such distributor, has conducted any "general
solicitation," as such term is defined in Regulation D, with
respect to any of the Securities being offered hereby.
(o) No Integrated Offering. Neither Borrower, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under
circumstances that would require registration of the
Securities being offered hereby under the Securities Act or
cause this offering of Securities to be integrated with any
prior offering of securities of Borrower for purposes of the
Securities Act or any applicable stockholder approval
provisions.
(p) No Brokers. Borrower has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's
fees or similar payments by any Purchaser relating to this
Agreement or the transactions contemplated hereby, except for
Zanett.
(q) Acknowledgment of Dilution. The number of shares of Borrower's
common stock (the "Common Stock") issuable upon conversion of
the Conversion Shares may increase in certain circumstances,
including if the trading price of the Common Stock declines.
Borrower's executive officers have studied and fully
understand the nature of the Securities being sold hereunder.
Borrower acknowledges that its obligation to issue Common
Stock upon conversion of the Conversion Shares in accordance
with the Certificate of Designation is absolute and
unconditional, regardless of the dilution that such issuance
may have on the ownership interests of other shareholders.
Taking the foregoing into account, Borrower's Board of
Directors has determined in its good faith business judgment
that the issuance of the Securities under the Financing
Documents and the consummation of the other transactions
contemplated hereby and thereby are in the best interests of
Borrower and its shareholders.
(r) Title. Borrower and its subsidiaries have good and marketable
title in fee simple to all real property and good and
merchantable title to all personal property owned by them that
March 27, 2000
Page 12
is material to the business of Borrower and its subsidiaries,
in each case free and clear of all liens, encumbrances and
defects except such as are described in the SEC Documents or
such as do not materially affect the value of such property
and do not materially interfere with the use made and proposed
to be made of such property by Borrower and its subsidiaries.
Any real property and facilities held under lease by Borrower
and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and
proposed to be made of such property and buildings by Borrower
and its subsidiaries.
(s) Tax Status. Borrower and each of its subsidiaries has made or
filed all foreign, federal, state and local income and all
other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the
extent that Borrower and each of its subsidiaries has set
aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all
taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such
returns, reports and declarations, except those being
contested in good faith and has set aside on its books
provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of Borrower know of no
basis for any such claim. Borrower has not executed a waiver
with respect to any statute of limitations relating to the
assessment or collection of any federal, state or local tax.
None of Borrower's tax returns is presently being audited by
any taxing authority.
(t) Environmental Laws. Borrower and each of its subsidiaries (i)
are in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), except where
noncompliance with such Environmental Laws would not
constitute a Material Adverse Effect, (ii) have received all
permits, licenses or other approvals required of them under
applicable Environmental Laws which are material to the
conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit,
license or approval. No contaminant, pollutant or toxic or
hazardous waste has been generated, used, treated, stored or
disposed of at, or transported to or from, or released into
the air, soil, surface or ground waters at, on or under any
March 27, 2000
Page 13
real property while such real property has been owned, leased,
operated or used by Borrower which would constitute or give
rise to a Material Adverse Effect. Borrower is not currently
involved in and no person or entity has taken any action or
threatened or proposed to involve Borrower in any
environmental clean-up or remediation or sought to expose
Borrower to contribution or liability for such remediation.
(u) Regulatory Permits. Borrower and each of its subsidiaries
possess all certificates, authorizations and permits issued by
the appropriate federal, state or foreign regulatory
authorities which are material to the conduct of their
respective businesses, and neither Borrower nor any such
subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate,
authorization or permit.
(v) No Other Agreements. Borrower has not, directly or indirectly,
made any agreements with any Lenders relating to the terms or
conditions of the transactions contemplated by this Agreement
or the other except as set forth in such documents.
(w) Use of Proceeds. Schedule "6(w)" attached hereto is a complete
and accurate list of all entities in which Borrower holds a
majority or controlling interest. The proceeds of the Loan
shall be used by Borrower solely for the purpose of funding
Borrower's working capital requirements.
7. Affirmative Covenants. So long as any part of the indebtedness
contemplated hereby shall remain unpaid, Borrower will:
(a) Insurance. Maintain in form, with companies reasonably
acceptable to Agent and with Agent named lender loss
payee, adequate fire with extended coverage and public
liability insurance in amounts customarily carried by
others engaged in a like or similar business and operating
in similar markets and similar geographic locations and
such additional insurance as Agent from time to time may
reasonably require, and upon demand, within a commercially
reasonable time deliver to Agent the policies concerned or
a schedule of all insurance in force.
(b) Taxes. Discharge all tax liens and pay all taxes,
assessments, and other governmental charges imposed on the
assets of or assessed against Borrower; provided, however,
that nothing herein contained shall require Borrower to
pay any tax or discharge any lien so long as its validity
is being contested in good faith and adequate reserves,
acceptable to Agent, have been made therefor.
March 27, 2000
Page 14
(c) Notice of Default. Promptly notify Agent of the occurrence of
an Event of Default or of any event which, with the giving of
notice and/or the passage of time would constitute an Event of
Default.
(d) Form D: Blue Sky Laws. Borrower shall file with the SEC a Form
D with respect to the Securities as required under Regulation
D and to provide a copy thereof to each Purchaser promptly
after such filing. Borrower shall, on or before the Closing
Date, take such action as Borrower shall reasonably determine
is necessary to qualify the Securities for sale to the
Purchasers pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United
States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers on or
prior to the Closing Date.
(e) Reporting Status. So long as any Purchaser beneficially owns
any of the Securities, Borrower shall timely file all reports
required to be filed with the SEC pursuant to the Exchange
Act, and Borrower shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would
permit such termination.
(f) Financial Information. Borrower shall send the following
reports to each Lender until such Lender transfers, assigns or
sells all of its Securities: (i) within 10 days after the
filing with the SEC, a copy of its Annual Report on Form 10-K
or 10-KSB, its Quarterly Reports on Form 10-Q or 10-QSB, its
proxy statements and any Current Reports on Form 8-K; (ii)
within one day after release, copies of all press releases
issued by Borrower or any of its subsidiaries; and (iii)
copies of any notices and other information made available or
given to shareholders of Borrower generally, contemporaneously
with making available or giving thereof to such shareholders.
(g) Reservation of Shares. Borrower shall at all times have
authorized and reserved for the purpose of issuance a
sufficient number of shares of Common Stock to provide for the
full conversion of the outstanding Conversion Shares in
connection therewith and the full exercise of the Warrants and
the Consulting Warrants and the issuance of the Warrant Shares
in connection therewith, subject to and as otherwise required
by the Note, Certificate of Designation, the Warrants and the
Consulting Warrants.
(h) Listing. Borrower will use its commercially reasonable best
efforts to continue the listing and trading of its Common
Stock on the Bulletin Board, the Nasdaq SmallCap Market
March 27, 2000
Page 15
("NSCM"), The Nasdaq National Market ("NNM"), the New York
Stock Exchange ("NYSE") or the American Stock Exchange
("AMEX") and will comply in all respects with the reporting,
filing and other obligations under the bylaws or rules of the
Bulletin Board, NSCM, NNM, NYSE or AMEX as applicable.
(i) Corporate Existence. So long as a Lender beneficially owns any
Securities, Borrower shall maintain its corporate existence,
and in the event of a merger or consolidation where Borrower
is not the surviving entity or where shareholders of Borrower
immediately prior to such merger or consolidation own less
than fifty percent (50%) of the issued and outstanding shares
of Common Stock, on a fully-diluted basis, immediately
following such merger or consolidation or sale of all or
substantially all of Borrower's assets, Borrower shall ensure
that the surviving or successor entity in such transaction (i)
assumes Borrower's obligations hereunder and under the other
Financing Documents and (ii) is a publicly traded corporation
whose common stock is listed for trading on the Bulletin
Board, NSCM, NNM, NYSE or AMEX.
(j) Reimbursement of Expenses. Promptly reimburse Agent for all
reasonable expenses, including the fees and expenses of legal
counsel for Agent, incurred in connection with the
preparation, negotiation, amendment, modification or
enforcement of this Agreement, the other Financing Documents
and the Notes.
8. Negative Covenants. So long as any part of the indebtedness
contemplated hereby shall remain unpaid Borrower will not, directly
or indirectly, without the prior written consent of Agent:
(a) Create or acquire any subsidiaries unless such subsidiaries
join in and become obligors under the Financing Documents by
executing and delivering to Agent a joinder agreement in form
acceptable to Agent and such other documents, instruments and
agreements as Agent may reasonably require.
(b) Merge or consolidate, with or into any other person or entity,
or convey, lease, or sell all or substantially all of its
assets to any person or entity, whether in one transaction or
a series of transactions.
(c) Make loans to others.
(d) Become liable in any manner for the debts or obligations of
others.
(e) Borrower shall not make any offers or sales of any security
(other than pursuant to this Agreement and the Registration
Rights Agreement) under circumstances that would require
March 27, 2000
Page 16
registration of the Securities under the Securities Act or
cause the offering of the Securities to be integrated with any
other offering of securities by Borrower for purposes of any
stockholder approval provision applicable to Borrower or its
securities.
(f) Engage in any business other than that in which it is
currently engaged and businesses related thereto.
(g) So long as any part o the Loan remains outstanding, make any
payments to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇") on account of deferred
compensation or any other indebtedness of Borrower to ▇▇▇▇▇
outstanding as of the Closing Date.
9. Events of Default; Remedies. Each of the following shall constitute
an "Event of Default" hereunder:
(a) Failure by Borrower to make any payment of principal or
interest on the Notes when due after two (2) days' notice from
Agent to Borrower of such default, provided, however, after
the first occurrence of a default by Borrower in the payment
of interest when due under the Notes, Borrower shall have an
additional thirty (30) days to make such payment; provided
further that if Borrower exercises such right, Borrower shall
pay to Lenders a late fee equal to three (3%) percent of the
principal then outstanding as liquidated damages;
(b) Failure by Borrower to observe or perform any covenant, other
term or provision of this Agreement, the Notes or any other
Financing Document within five (5) business days of the
earlier of Borrower's knowledge of such failure and receipt by
Borrower of written notice from the Agent of such failure;
(c) Upon two (2) days' notice from Agent to Borrower, if any
representation made by or on behalf of Borrower in this
Agreement, the Notes or any Financing Document shall be
inaccurate in any material respect;
(d) A change in control or ownership of Borrower;
(e) Failure of Borrower to issue Warrant Shares upon the exercise
of Lender or Zanett of the Warrants or the Consulting
Warrants, respectively;
(f) Borrower shall admit in writing its inability to pay its debts
as they become due or shall become insolvent (however
evidenced) or there shall be commenced any bankruptcy,
insolvency, arrangement, reorganization, or other
debtor-relief proceedings by or against Borrower and, if such
March 27, 2000
Page 17
case or proceeding is not commenced by Borrower as the case
may be, or converted to a voluntary case, such case or
proceeding shall be consented to or acquiesced in by Borrower
as the case may be, or shall result in the entry of an order
for relief or shall remain for sixty (60) days undismissed, or
Borrower shall dissolve or terminate its existence;
(g) The making of demand by any lender or other creditor of
Borrower for payment of any indebtedness of Borrower for
borrowed money, which is payable upon demand, or the
acceleration of the maturity of any indebtedness of Borrower
for borrowed money upon default by Borrower; or
(h) Entry of any judgment against Borrower which, to the extent
not covered by insurance, equals or exceeds Fifty Thousand
($50,000.00) Dollars and within thirty (30) days from the date
of entry, such judgment shall not have been discharged or
execution thereof stayed pending appeal, or, within thirty 30
days after the expiration of any such stay, such judgment
shall not have been discharged;
Upon the occurrence of an Event of Default Agent may:
(i) Increase the interest rate on the unpaid
principal amount of the Notes to a fixed per annum rate equal
to eighteen (18%) percent; and
(ii) At its election and without demand or notice of
any kind, which are hereby waived, declare the unpaid balance
of the Notes, and accrued interest thereon, immediately due
and payable, proceed to collect same, and exercise any and all
other rights, powers and remedies given it by this Agreement,
the Notes, and the other Financing Document or otherwise at
law or in equity.
In lieu of the foregoing remedies, Lenders may elect to exercise
the conversion rights set forth in the Notes.
March 27, 2000
Page 18
10. Agency Provisions.
(a) Each Lender hereby irrevocably appoints and authorizes Agent
to take such action as Agent on its behalf and to exercise
such powers under this Agreement and the other Financing
Documents as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental
thereto. The duties of the Agent shall be mechanical and
administrative in nature and the Agent shall not by reason of
this Agreement be a trustee or fiduciary for any Lender. The
Agent shall have no duties or responsibilities except as
expressly set forth in the Financing Documents.
(b) Neither the Agent nor any of its directors, officers, agents
or employees shall be liable to the Lenders for any action
taken or omitted to be taken by it or them under or in
connection with any Financing Documents in the absence of its
or their own gross negligence or willful misconduct.
(c) With respect to its obligation to advance its Commitment, the
Agent shall have the same rights and powers under the
Financing Documents as any other Lender and may exercise the
same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include
the Agent in its individual capacity.
(d) Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender and based
on such documents and information as it has deemed appropriate
made its own credit analysis and decision to enter into this
Agreement.
(e) The Lenders agree to indemnify the Agent (to the extent not
reimbursed by Borrower), pro rata according to their
respective pro rata shares of the Loan, from and against any
and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Agent in any way relating
to or arising out of any of the Financing Documents or any
action taken or omitted by the Agent under the Financing
Documents, provided that no Lender shall be liable for any
portion of any of the foregoing resulting from the Agent's
gross negligence or willful misconduct. Without limiting the
foregoing, each Lender agrees to reimburse the Agent (to the
extent not reimbursed by Borrower) promptly upon demand for
its pro rata share for out-of-pocket expenses (including
counsel fees) incurred by Agent in connection with the
administration, or enforcement of, or legal advice in respect
of rights or responsibilities under, any of the Financing
Documents.
March 27, 2000
Page 19
(f) Upon receipt of funds on account of the Obligations, the Agent
will promptly thereafter caused to be distributed such
payments of principal, interest and other fees payable to
Lenders hereunder and under the other Financing Documents to
each Lender, in like funds, an amount equal to such Lender's
pro rata share of the amount collected by Agent.
(g) Lenders acknowledge that Zanett's right to receive the
Organization Fee and the Consulting Warrants inures to Zanett
in its individual capacity and not in its capacity as Agent.
11. Representations of Lenders. Each Lender severally and not jointly
represents and warrants to Borrower as follows:
(a) Purchase for Own Account, Etc. Lender is purchasing the Notes,
Warrants, Warrant Shares, Conversion Shares and Converted
Shares issuable hereunder or under the Notes or Warrants for
Lender's own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales
that are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") or
sales registered under the Securities Act. Lender understands
that Lender must bear the economic risk of this investment
indefinitely, unless the Securities are registered pursuant to
the Securities Act and any applicable state securities or blue
sky laws or an exemption from such registration is available,
and that Borrower has no present intention of registering the
resale of any such Securities other than as contemplated by
the Registration Rights Agreement. Notwithstanding anything in
this Paragraph 11(a) to the contrary, by making the
representations herein, the Lender does not agree to hold the
Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an
exemption from the registration requirements under the
Securities Act.
(b) Accredited Investor Status. Lender is an "Accredited Investor"
as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Lender understands that the Securities
are being offered and sold to Lender in reliance upon specific
exemptions from the requirements to provide Lenders with a
prospectus, to sell the Securities through a person or
Borrower registered to sell the Securities and from the
registration requirements of United States' federal and state
securities laws and that Borrower is relying upon the truth
and accuracy of, and Lender's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of Lender set forth herein in order to
determine the availability of such exemptions and the
eligibility of Lender to acquire the Securities.
March 27, 2000
Page 20
(d) Information. Lender understands that Lender's investment in
the Securities involves a high degree of risk.
(e) Governmental Review. Lender understands that no federal or
state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement or
provides any insurance with respect to the Securities.
(f) Transfer or Resale. Lender understands that (i) except as
provided in the Registration Rights Agreement, the sale or
resale of the Securities have not been and are not being
registered under the Securities Act or any state securities
laws, and the Securities may not be transferred unless (a) the
resale of the Securities has been registered thereunder; or
(b) Lender shall have delivered to Borrower an opinion of
counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions)
to the effect that the Securities to be sold or transferred
may be sold or transferred pursuant to an exemption from such
registration; or (c) the Securities are sold under Rule 144
promulgated under the Securities Act (or a successor rule)
("Rule 144"); or (d) the Securities are sold or transferred to
an affiliate of Lender who agrees to sell or otherwise
transfer the Securities only in accordance with the provisions
of this Paragraph 12(f) and who is an Accredited Investor; and
(ii) neither Borrower nor any other person is under any
obligation to register such Securities under the Securities
Act or any state securities laws (other than pursuant to the
Registration Rights Agreement). Notwithstanding the foregoing
or anything else contained herein to the contrary, the
Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement. Lender
understands that it is its responsibility to comply with all
transfer restrictions.
(g) Restrictions on Resale. There are restrictions on the Lenders'
ability to resell the Securities and it is the responsibility
of each Lender to determine the nature and extent of such
restrictions and to comply with such restrictions prior to
selling the Securities.
March 27, 2000
Page 21
12. Miscellaneous.
(a) The representations and warranties of Borrower contained
herein shall survive the making of the Loan and shall remain
effective until all indebtedness contemplated hereby shall
have been paid by Borrower in full.
(b) This Agreement shall be governed and construed in accordance
with the laws of the State of New York applicable to contracts
made and to be performed in the State of New York. Borrower
irrevocably consents to the jurisdiction of the United States
federal courts located in the Southern District of New York,
in any suit or proceeding based on or arising under this
Agreement and irrevocably agrees that all claims in respect of
such suit or proceeding may be determined in such courts.
Borrower irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. Borrower
agrees that service of process upon Borrower mailed by first
class mail shall be deemed in every respect effective service
of process upon Borrower in any such suit or proceeding.
Nothing herein shall affect the Agent's right to serve process
in any other manner permitted by law. Borrower agrees that a
final non-appealable judgment in any such suit or proceeding
shall be conclusive and may be enforced in other jurisdictions
by suit on such judgment or in any other lawful manner.
(c) Any forbearance, failure, or delay by Agent in exercising any
right, power, or remedy on behalf of Lenders shall not
preclude the further exercise thereof, and all of Agent's
rights, powers, and remedies shall continue in full force and
effect until specifically waived by Agent.
(d) This Agreement may be executed in two or more counterparts,
all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed
by each party and delivered to the other party.
(e) The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the
interpretation of, this Agreement.
(f) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other
jurisdiction.
March 27, 2000
Page 22
(g) This Agreement and the instruments referenced herein contain
the entire understanding of the parties with respect to the
matters covered herein and therein. No provision of this
Agreement may be waived or amended other than by an instrument
in writing signed by the party to be charged with enforcement.
(h) Any notices, demands or waivers required or permitted to be
given under the terms of this Agreement shall be in writing
and sent by mail or delivered personally or by courier and
shall be effective five business days after being placed in
the mail, if mailed, or upon receipt, if delivered personally
or by courier, in each case addressed to a party. The
addresses for such communications shall be:
If to Borrower:
American Quantum Cycles, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Executive Officer
With a copy to:
Atlas, ▇▇▇▇▇▇▇▇, Trop & Borkson P.A.
New River Center, Suite 1900
▇▇▇ ▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
If to Lenders or Agent, addressed to Agent at:
The Zanett Securities Corporation
Tower 49
31st Floor
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Managing Director
With a copy to:
Klehr, Harrison, ▇▇▇▇▇▇, Branzburg & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
March 27, 2000
Page 23
Each party shall provide notice to the other party of any change in
address, such notice to become effective upon receipt.
(i) This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and assigns. Borrower
shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of Agent.
Notwithstanding the foregoing, Agent and Lenders may assign
their respective rights hereunder to any other Lender, without
the consent of Borrower, provided, however, nothing herein
shall be construed to limit Agent's right to dispose of the
Collateral upon the occurrence and during the continuance of
an Event of Default by way of assignment, sale or other means
of conveyance to a third party including, without limitation,
a competitor of Borrower.
(j) This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns,
and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
(k) Notwithstanding anything to the contrary contained in this
Agreement or the Notes, if Borrower is prohibited by the rules
or regulations of any securities exchange or quotation system
on which the Warrant Shares are then listed or traded or by
the rules of any commission or other regulatory body having
jurisdiction over Borrower (each, a "Governmental Body"), from
listing or issuing a number of shares of capital stock in
excess of an amount prescribed by a Governmental Body to
holders of Notes (the "Cap Amount") without first obtaining
the approval of Borrower's stockholders, then Borrower shall
not be required to list or issue, as applicable, shares in
excess of the Cap Amount unless Borrower has obtained the
required approvals. The Cap Amount, as of the date hereof,
equals 19.99% of the number of shares of Common Stock
outstanding as of the date hereof, as set forth on Schedule
6(d) hereof.
March 27, 2000
Page 24
(l) Each Lender shall have the right to review and approve any
disclosure in any press release, Securities and Exchange
Commission, National Association of Securities Dealers or
similar filing or public announcement (each a "Public
Disclosure") which specifically names such Lender; provided,
however, if such Public Disclosure, including the names of
such Lender, is required by applicable law or regulation such
approval shall be deemed to have been received if Borrower
uses all commercially reasonable efforts to provide Lenders
with copies of such Public Disclosure not less than three
business days (or such other period as is practicable) prior
to the disclosure thereof. Borrower shall use all commercially
reasonable efforts to provide Lenders with copies of all other
Public Disclosure relating to the transactions contemplated
hereby not less than one business day prior to the disclosure
thereof (or such other period as is practicable).
Very truly yours,
THE ZANETT SECURITIES CORPORATION,
as Agent
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Managing Director
By executing the appropriate signature lines below, each party, intending to be
legally bound hereby, agrees to the terms and conditions of this Agreement as of
the date appearing opposite such party's signature.
BORROWER:
AMERICAN UANTUM CYCLES, INC.
Date: March 27, 2000 By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------- ----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and C.E.O.