September __, 1997 $750,000.00
Santa Ana, California
THE QUARTZ GROUP, INC.
Limited Recourse Promissory Note
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER THE TRUST
INDENTURE ACT OF 1939, AS AMENDED (THE "ACTS"). ACCORDINGLY, NO TRANSFER OF
THIS NOTE OR ANY INTEREST HEREIN MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACTS UNLESS THE ISSUER HAS RECEIVED A
SATISFACTORY OPINION OF COUNSEL THAT SUCH TRANSFER DOES NOT REQUIRE
REGISTRATION UNDER THE ACTS.
THE QUARTZ GROUP, INC., a Colorado corporation (herein called the
"Company"), for value received, hereby promises to pay to
(the "Payee"), or order, at the principal office of the
Company in the State of California, the principal sum of SEVEN HUNDRED FIFTY
THOUSAND DOLLARS ($750,000.00) in United States funds, without interest on the
unpaid principal amount of this Note, payable only from the first $750,000 in
proceeds realized by the Company, if any, from the exercise of those certain
Class E Common Stock Purchase Warrants issued and originally sold to the Payee
concurrently with the original issuance of this Note and from the exercise of
any other common stock purchase warrants issued and sold by the Company on or
prior to September 30, 1997 which remained outstanding as of September 30,
1997 (the Class E warrants and any other warrants referenced herein are
collectively called the "Warrants"). Any payment of principal becoming due
hereunder as a result of the exercise of Warrants shall be due and payable to
the Payee within one business day after the Company has received unconditional
payment in good U.S. funds of the applicable Warrant exercise price for
Warrants so exercised. At the election of the Payee (provided that Payee
shall then be the registered holder of a sufficient number of unexercised
Class E common stock purchase warrants), the Payee may elect in writing to
exercise Class E common stock purchase warrants by crediting the Company with
payment for the account of the Company of that portion of the principal amount
of this Note which is then equal to the exercise price required for the
Payee's exercise of such Class E common stock purchase warrants.
The Payee, by its acceptance of this Note, acknowledges that all of the
Warrants issued by the Company will expire on or before December 31, 2002, and
the Company's obligations under this Note will accordingly expire (except to
the extent of any obligations arising from the exercise of Warrants) on either
December 31, 2002 or, if earlier, upon payment in full to the Payee of the
principal amount of this Note without interest.
1. NOTES. This Note is one of a duly authorized issue of Limited
Recourse Promissory Notes (herein called the "Notes") made by the Company in
an aggregate principal amount not exceeding $750,000 U.S. funds and originally
issued by the Company pursuant to a private placement of securities in 1997.
All of the Notes are issuable substantially in the form of this Note.
2. NON-RECOURSE EXCEPT AS TO PROCEEDS FROM EXERCISE OF WARRANTS.
This Note is issued upon the express condition, to which the Payee and each
successive holder by receiving the same agrees hereby assents, that no
recourse under or upon any obligation, covenant or agreement of this Note, or
for the payment of the obligations of this Note, or for any claim based on
this Note or otherwise in respect thereof, shall be had against the Company
(except as to proceeds from the exercise of Warrants or in the event of a
default by the Company under Section 4 as to costs of collection only) or in
any event against the assets of any stockholder, creditor, officer, director
or
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other representative of this Company as a result of their relationship as such
to the Company, except to the extent of any proceeds from the exercise of
Warrants, whether by virtue of any constitution, statute or rule of law, or by
any assessment or penalty or otherwise howsoever, all such liability being
hereby expressly waived and released as a condition of and as part of the
consideration for the execution and issue of this Note.
The Payee, by acceptance of this Note, further acknowledges that the
Company cannot predict whether, or the extent to which, any holder of Warrants
may or may not elect to exercise Warrants, and accordingly there is no
assurance of the payment of this Note unless Warrants are exercised.
3. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. The holder of this
Note, by acceptance hereof, represents and warrants that this Note has been
acquired by said holder for its own account for investment, and acknowledges
that any proposed sale, assignment or transfer of this Note is prohibited
unless such sale, assignment or transfer will not require the prior registra-
tion of this Note under the Securities Act of 1933, as amended, or the
qualification of this Note under the Trust Indenture Act of 1939, as amended.
4. COSTS OF COLLECTION. The Company covenants that, if default be
made in any payment of the principal of this Note as the same shall become due
and payable in accordance with its terms, the Company will pay the holder of
this Note such further amount as shall be sufficient to cover the costs and
expenses of collection, including without limitation reasonable attorneys'
fees of such holder and all other costs incurred for court filings, witnesses,
preparation, prosecution and enforcement of collection.
5. MISCELLANEOUS.
5.1. Any notice or demand which by any provision of this Note is
required or provided to be given or served to or upon the Company shall be
deemed to have been sufficiently given or served for all purposes by being
sent as registered or certified mail, postage prepaid, addressed to the
Company at its principal office in the State of California, marked for the
attention of its Chief Executive Officer.
5.2. No course of dealing between the Company and the holder of this
Note or any delay on the part of the holder in exercising any rights under
this Note shall operate as a waiver of any rights of any holder of this Note.
5.3. This Note shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
corporate name by an thereunder duly authorized, and to be dated as of the day
and year first above written.
THE QUARTZ GROUP, INC.
By:
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President
ATTEST:
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Secretary
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