Financial Advisory Agreement

FINANCIAL ADVISORY AGREEMENT
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This Agreement is made and entered into as of the ____ day of _______________, 1999, between American Quantum Cycles, Inc. (the "Company") and Barron Chase Securities, Inc. (the "Financial Advisor").


W I T N E S S E T H :
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WHEREAS, The Company has engaged the Financial Advisor to act as the Underwriter in connection with the public offering of the Company's securities; and


WHEREAS, the Financial Advisor has experience in providing financial and business advice to public and private companies; and


WHEREAS, the Company is seeking and the Financial Advisor is willing to furnish business and financial related advice and services to the Company on the terms and conditions hereinafter set forth.


NOW, THEREFORE, in consideration of, and for the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:


1. PURPOSE. The Company hereby engages the Financial Advisor on a non-exclusive basis for the term specified in this Agreement to render financial advisory and consulting advice to the Company as an investment banker relating to financial and similar matters upon the terms and conditions set forth herein. However, the advisory will only be rendered if specifically requested in writing by the CEO of the Company.


2. REPRESENTATIONS OF THE FINANCIAL ADVISOR AND THE COMPANY. The Financial Advisor represents and warrants to the Company that (i) it is a member in good standing of the National Association of Securities Dealers, Inc. ("NASD") and that it is engaged in the securities brokerage business; (ii) in addition to its securities brokerage business, the Financial Advisor provides consulting advisory services; and (iii) it is free to enter into this Agreement and the services to be provided pursuant to this Agreement are not in conflict with any other contractual or other obligation to which the Financial Advisor is bound. The Company acknowledges that the Financial Advisor is in the business of providing financial services and consulting advice (of the type contemplated by this Agreement) to others and that nothing herein contained shall be construed to limit or restrict the Financial Advisor in conducting such business with respect to others, or rendering such advice to others.


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3. DUTIES OF THE FINANCIAL ADVISOR. During the term of this Agreement, the Financial Advisor will provide the Company with consulting advice as specified below at the request of the Company, provided that the Financial Advisor shall not be required to undertake duties not reasonably within the scope of the consulting advisory service in which the Financial Advisor is engaged generally. In performance of these duties, the Financial Advisor shall provide the Company with the benefits of its best judgment and efforts. It is understood and acknowledged by the parties that the value of the Financial Advisor's advice is not measurable in any quantitative manner, and that the amount of time spent rendering such consulting advice shall be determined according to the Financial Advisor's discretion.


The Financial Advisor's duties may include, but will not necessarily be limited to:


1) Advice relating to corporate financing activities;


2) Recommendations relating to specific business
operations and investments;


3) Advice relating to financial planning; and


4) Advice regarding future financings involving
securities of the Company or any subsidiary.


4. TERM. The term of this Agreement shall be for twelve (12) months commencing on the first day of the month following the Company's receipt of the proceeds from the contemplated public offering (the "Commencement Date"); provided, however, that this Agreement may be renewed or extended upon such terms and conditions as may be mutually agreed upon by the parties hereto.


5. FEE. The Company shall pay the Financial Advisor a fee of $108,000 for the financial services to be rendered pursuant to this Agreement, all of which shall be payable at the Closing Date of the Company's proposed public offering.


6. EXPENSES. In addition to the fees payable hereunder, the Company shall reimburse the Financial Advisor, within five (5) business days of its request, for any and all reasonable out-of-pocket expenses incurred in connection with the services performed by the Financial Advisor and its counsel pursuant to this Agreement, including (i) reasonable hotel, food and associated expenses; (ii) reasonable charges for travel; (iii) reasonable long-distance telephone calls; and (iv) other reasonable expenses spent or incurred on the Company's behalf. All such expenses in excess of $500 shall be pre-approved by the Company.


7. INTRODUCTION OF CUSTOMERS, ORIGINATION OF LINE OF CREDIT AND SIMILAR TRANSACTIONS. In the event the Financial Advisor


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originates a line of credit with a lender or a corporate partner, the Company and the Financial Advisor will mutually agree on a satisfactory fee and the terms of payment of such fee. In the event the Financial Advisor introduces the Company to a joint venture partner or customer and sales develop as a result of the introduction, the Company agrees to pay a fee of five percent (5%) of total sales generated directly from this introduction during the first two years following the date of the first sale. Total sales shall mean cost receipts less any applicable refunds, returns, allowances, credits and shipping charges and m ...