10% Secured Promissory Note

AMERICAN QUANTUM CYCLES, INC.


March 31, 1999 $750,000.00


10% SECURED PROMISSORY NOTE


FOR VALUE RECEIVED, AMERICAN QUANTUM CYCLES, INC., a Florida corporation ("the "Company"), hereby promises to pay to the order of ANCHOR CAPITAL CORPORATION, a Maryland corporation (the "Lender"), at the offices of the Lender at 1607 Spring Ridge Road, Potomac, Maryland 20854 or such other place as the Lender may specify, the principal sum equal to the lesser of SEVEN HUNDRED FIFTY THOUSAND AND NO/1OO DOLLARS ($750,000.00) or the then aggregate unpaid principal amount of all advances made hereunder by Lender to the Company, together with interest as specified herein.


This Note evidences advances made and to be made by the Lender from time to time under a revolving line of credit governed by a certain Loan and Security Agreement of even date herewith made by the Company and the Lender (the "Loan Agreement"). Capitalized terms used herein but not defined herein shall have the respective meanings given them in the Loan Agreement. The Company may borrow, repay, and re-borrow advances from time to time under said revolving line of credit, subject to the terms and conditions set forth in the Loan Agreement.


The Company further promises to pay interest on the outstanding amount of all advances made under this Note at the rate of ten percent (10%) per annum, commencing from the date of the initial advance hereunder and until all amounts of principal and interest accrued thereon are paid in full, except that during the existence of any Event of Default, the principal outstanding under this Note shall bear interest at the rate of eighteen percent (18%) per annum at the option of the Lender. Interest hereunder shall be payable monthly in arrears, commencing May 1, 1999.


Outstanding principal under this Note may be prepaid by the Company, in whole or in part, without premium or penalty at any time. The entire outstanding principal balance of this Note, together with all accrued but unpaid interest, shall be due and payable on the "Maturity Date" as defined in the Loan Agreement.


At the option of Lender, the entire unpaid principal balance of this Note, together with all unpaid interest accrued thereon and all other sums owing under this Note or the Loan Agreement, shall become immediately due and payable, without notice or demand, upon the occurrence of any of Event of Default as defined in the Loan Agreement. If any such Event of Default shall occur, then Lender shall be entitled to pursue any and all rights and remedies provided by applicable law and/or under the terms of this Note or the Loan Agreement, including without limitation the foreclosure of any security interest and realization against any collateral for this Note, all of which rights and remedies shall be cumulative and may be exercised successively or concurrently. Lender's delay in exercising or failure to exercise any rights or remedies to which Lender may be entitled in the event of any default shall not constitute a waiver of any of Lender's rights or remedies with respect to that or any subsequent default, whether of the same or a


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different nature, nor shall any single or partial exercise of any right or remedy by Lender preclude any other or further exercise of that or any other right or remedy.


The Company does hereby: (a) waive demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note; (b) waive any right to trial by jury in any legal action or proceeding to enforce their obligations hereunder, waive any right to immunity from any such action or proceeding and waive any immunity or exemption of any property, wherever located, from garnishment, levy, execution, seizure or attachment prior to or in execution of judgment, or sale under execution or other process for the collection of debts; (c) waive any right to ...