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PROMISSORY NOTE
$150,000 CHARLOTTE, NORTH CAROLINA
OCTOBER 24, 1997
FOR VALUE RECEIVED, Wheels Sports Group, Inc., a North Carolina
corporation with executive offices at 1368 Salisbury Road, Mocksville, North
Carolina 27028 (the "Maker"), promises to pay to the order of David W. Dupree
at 149 Gasoline Alley Drive, Mooresville, North Carolina (the "Payee"), or at
such other place as the Payee may designate from time to time by notice in
writing to the Maker, the sum of ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000)
together with all accrued interest thereon based on a 365 day year from the
date hereof in lawful money of the United States of America in accordance with
the following terms and conditions:
1. Payment Terms. The unpaid principal balance and all accrued but
unpaid interest thereon shall be paid on the earlier of October 24, 1998 (one
year from the date hereof), or five business days from the closing date of the
Maker's proposed secondary offering. Interest shall accrue on the unpaid
principal balance at the rate of 10% per annum.
2. Prepayments. This Note may be prepaid in whole or in part, at any
time, without premium or penalty, provided that accrued interest on the amount
of the prepayment shall be paid to the date of prepayment.
3. Default Interest. Upon an Event of Default, as defined below, the
unpaid principal balance shall bear interest at the rate of 16%. Upon the cure
of the Event of Default, the rate of interest shall revert to 10% per annum.
4. No Security. This Note is an unsecured obligation of the Maker.
5. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this Note:
(a) Failure of the Maker to make any required payment under this
Note when due;
(b) If the Maker (i) commences any proceeding or other action in
bankruptcy or seeking reorganization or liquidation of its business
or a substantial portion of its business under the Bankruptcy Code of
the United States or any similar law of any other jurisdiction, (ii)
applies for a receiver, trustee, custodian, liquidator or similar
official for all or a substantial part of its assets or makes an
assignment for the benefit of creditors, or (iii) admits in writing
its inability to pay its debts as they mature;
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(c) If (i) a proceeding or action is commenced against the
Maker in bankruptcy or seeking reorganization or liquidation under the
Bankruptcy Code of the United States or any similar law of any other
jurisdiction, (ii) a receiver, trustee, custodian, liquidator or
similar official is appointed for all or a substantial part of its
assets, or (iii) a warrant of attachment, execution or similar process
against substantially all the assets of the Maker is issued, and any
of such events set forth in this subsection (c) continues undismissed,
unbonded or undischarged for sixty (60) days after written notice of
default from Payee; or
(d) If the Maker shall default in the performance of its
obligations under the Pledge Agreement, and such default is not cured
after notice of such default within any applicable cure period; or
(e) the merger, consolidation, dissolution or reorganization
of the Maker.
6. Setoff. Payee agrees that Maker shall have a right to setoff any
claim for indemnification (a "Claim") which Maker may be entitled to collect
against Payee under Article IX of the Agreement and Plan of Reorganization
dated as of October 3, 1997 by and between Maker and High Performance Sports
Marketing, Inc. (the "Agreement") against principal payments required under
this Note; provided, however that any setoff for a Claim shall be
proportionally applied to the Note and that certain Promissory Note dated
October 24, 1997 made by Maker and payable to the order of Randy C. Baker in
the original principal amount of $850,000 (the "Baker Note") based on the
respective principal amounts of this Note and the Baker Note. The Maker's right
to setoff may be exercised at such time as the Payee's liability under a Claim
is determined in accordance with the terms and conditions of Article IX of the
Agreement. Upon the assertion of a Claim, and until the determination of the
Payee's liability under the Claim, the Maker shall have the right to defer the
payment of principal hereunder in an amount (the "Deferral Amount") which is
equal to the Claim amount; all accrued interest on the Deferral Amount shall
also be deferred on the same terms and conditions. Upon the determination of
Payee's liability under the Claim:
(a) That portion of the Deferral Amount which is equal to
Payee's liability under the Claim shall immediately be subject to
Maker's right of setoff, and such amount shall be deemed not to have
accrued interest from the date of the Claim; and
(b) That portion of the Deferral Amount which is not setoff
pursuant to the preceding paragraph shall be deemed to have accrued
interest at the rate of 10% per annum from the date the Claim was
asserted. That portion of the Deferral Amount which is not setoff,
together with accrued interest thereon, shall be paid on the maturity
date in
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accordance with the terms of this Note as though no deferral
had occurred; provided, however, that if the determination of Payee's
liability under the Claim occurs after the maturity date, then that
portion of the Deferral Amount which is not setoff, together with
accrued interest thereon, shall be paid within five days after the
date of such determination.
7. Usury. Notwithstanding anything to the contrary contained
herein or in any instrument now or hereafter securing this Note, the total
liability for payments in the nature of interest shall not exceed the limits
imposed by the usury laws of the State of North Carolina. If the Payee receives
as interest an amount which would exceed such limits, such amount which would
be excessive interest shall be applied to the reduction of the unpaid principal
balance and not to the payment of interest; and if a surplus remains after full
payment of principal and lawful interest, such surplus shall be remitted to
Maker by the Payee, and Maker hereby agrees to accept such remittance.
8. Miscellaneous.
(a) If the Payee is required to institute any action or
arbitration to enforce collection and payment of this Note, there
shall become due and payable from the Maker, in addition to the unpaid
principal balance and accrued interest, all costs and expenses of such
action or arbitration including all costs of levy or execution or
appellate proceedings or review, or both, and including reasonable
counsel and litigation fees, and the Payee shall be entitled to
recover all such additional amounts from the Maker.
(b) No delay or failure on the part of the Payee of this Note
to exercise any power or right hereunder, shall operate as a waiver
thereof, and no right or remedy of the Payee of this Note shall be
deemed abridged or modified by any course of conduct.
(c) This Note shall be governed by and construed in
accordance with the laws of the State of North Carolina applicable to
agreements made and to be performed in North Carolina without giving
effect to applicable conflicts of law principles.
(d) This Note may be modified or amended only by a writing
signed by the Maker and the Payee.
(e) By executing this Note the individual signing below
represents and warrants that he has the power and authority to act for
and bind the Maker and that the Maker has duly authorized the
execution and delivery of this Note, and such individual agrees that
the Payee is entitled to rely upon such representation and warranty.
(f) The Payee, without prejudice to any other rights, is
authorized to proceed against the Maker to enforce its rights under
this Note, and shall not be required to have
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recourse to any security given for payment of this Note. The powers
and remedies of the Payee under this Note shall not be exclusive of
any other powers, rights or remedies available to the Payee.
(g) Any and all notices or other communications required or
permitted under this Note shall be in writing and shall be deemed
given upon (1) personal delivery, (2) upon the next business day if
sent by overnight courier service, or (3) upon the third business day
next following the mailing of such notice by certified or registered
mail, return receipt requested, to the respective addresses of the
Maker and the Payee set forth above or to such other address as the
Maker or the Payee may specify by written notice given as aforesaid.
(h) The Maker hereby waives presentment for payment, demand,
protest, notice of non-payment or dishonor, and of protest, and any
and all other notices and demands whatsoever and agrees to remain
bound hereunder until the principal and interest hereunder are paid
in full notwithstanding any release, waiver, surrender, substitution,
compromise, modification of or to or indulgence granted with respect
to this Note or any security for this Note.
IN WITNESS WHEREOF, Maker has executed this Note as of the date first
written above.
WHEELS SPORTS GROUP, INC.
By: /s/ Howard L. Correll
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Howard L. Correll, President
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