Document:

EXHIBIT 10.15

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                           EXCLUSIVE CABLE DEVELOPMENT

                                       AND

                         PROGRAMMING SERVICES AGREEMENT
                         ------------------------------

     THIS EXCLUSIVE CABLE DEVELOPMENT & PROGRAMMING SERVICES AGREEMENT (the
"Agreement"), is made and entered into as of the day of May, 1999, by and
between SUNCOAST HOME AUTOMATION, INC., a Florida corporation, its successors
and assigns ("SUNCOAST"), having its principal office at 3000 Gulf to Bay Blvd.,
Suite 312, Clearwater, Florida 33759, and SUNTERRA COMMUNICATIONS CORPORATION, a
______________ corporation (the "COMPANY"), having its principal office at
___________________________________ , Florida _________________.

                                    RECITALS
                                    --------

     A. SUNCOAST in the business of providing cable television services.

     B. COMPANY, which is a wholly owned subsidiary of Sunterra Corporation
("Sunterra"), is in the business of providing telecommunications services,
including but not limited to cable TV, to certain resorts which are owned and
operated by Sunterra.

     C. COMPANY desires to grant SUNCOAST the exclusive right to provide
construction, maintenance, and programming Services (as defined herein) at the
Three (3) resorts listed on the attached Exhibit "A" (hereinafter each resort
shall be referred to as the "Resort" and all Resorts collectively shall be
referred to as the "Project") and SUNCOAST has agreed to such services subject
to the terms of this Agreement.

     NOW, THEREFORE, in consideration of Ten and No/100 Dollars ($10.00), the
mutual covenants and promises contained herein, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties herein covenant and agree as follows:

                                    Agreement
                                    ---------

     1. Recitals: The Recitals stated above are true and correct and are
incorporated herein by reference.

     2. Installation of Cable System: Upon execution of this Agreement SUNCOAST
agrees to install a "Cable System" (as defined below) at each Resort in the
Project, utilizing existing cabling, dishes, and/or electronics existing at each
Resort, in a timely manner subject to the following:

          2.1 For purposes of this Agreement, the term "Cable System" shall be
defined as Thirty (30) basic cable TV channels with a distribution system
capable of One gigahertz Two way interaction. Cable System does include
converters but does not include head-end computer equipment to make the system
interact. The term "Equipment" shall be defined as satellite dishes, head-end
equipment, distribution equipment, and any other equipment utilized by SUNCOAST
to distribute programming to each Resort.

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          2.2 The COMPANY agrees as follows:

               (a) COMPANY shall be required to provide SUNCOAST with reasonable
space at each Resort for the installation of the Equipment, including indoor
space of approximately 10 feet by 10 feet for the electronic equipment and
outdoor space of approximately 30 feet by 30 feet for the satellite dish(s).

               (b) COMPANY shall provide SUNCOAST with such information,
including maps, working drawings and other records, as are reasonably necessary
to assist in the installation of the Cable System.

               (c) During the installation of the Cable System, the COMPANY
shall provide SUNCOAST employees and agents handling the installation with
reasonable lodging facilities at no charge at a mutually agreeable time.

               (d) COMPANY shall provide to SUNCOAST, its successors and
assigns, a right of ingress, egress and right of-way, across, through, in, on,
and across exterior boundaries or any part of each Resort in the Project as
required by SUNCOAST for the installation and maintenance of the Cable System
and the Equipment. These rights shall last for the term of this Agreement and
shall survive termination of this Agreement for a period not to exceed Ninety
(90) days, to enable SUNCOAST to remove its Equipment, as applicable.

               (e) SUNCOAST and COMPANY will cooperate in obtaining all
governmental licenses and/or permits for the installation of the Cable System
and buildings or towers for the Equipment.

          2.3 SUNCOAST agrees as follows:

               (a) SUNCOAST will be responsible, at SUNCOAST's expense, for
purchasing and installing the necessary Equipment in order to complete the Cable
System at each Resort in the Project. (b) Following installation, SUNCOAST will
provide COMPANY with an "as built" print of the Cable System for each Resort and
a list of the Equipment installed.

          2.4 Installation of the Cable System at each Resort will begin
following written notice to commence from the COMPANY and SUNCOAST will use its
best effort to complete each Project within Ninety (90) days thereafter.

          2.5 During the entire term of this Agreement, including any renewals,
the COMPANY agrees that any modifications to the Cable System, including the
expansion of programming Services, shall be performed or supervised by SUNCOAST
in order to insure quality and consistency of the Cable System.

     3. Ownership of Equipment: During the Initial Term of this Agreement,
COMPANY and SUNCOAST agree that the Equipment is and shall remain the personal
property of SUNCOAST and that none of the Equipment is or will become a fixture.
At the expiration of the Initial Term (as defined herein) of this Agreement,
this Agreement shall act as the transfer of SUNCOAST's right, title and interest
in the Equipment to the COMPANY.

                                       2
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     4. Maintenance of Cable System: During the term of this Agreement,
including any renewals, the parties agree as follows:

          4.1 During the first Twelve (12) months immediately following the
Programming Commencement Date, SUNCOAST agrees to preform all maintenance on the
Cable System and Equipment at SUNCOAST's sole expense. Thereafter, SUNCOAST
shall be compensated by the COMPANY at the rate of $47.00 per hour per person,
including travel time, plus reasonable travel expenses and lodging for such
Cable System maintenance. To the extent possible, SUNCOAST will make every
effort to utilized local technicians to perform these tasks in order to minimize
travel and lodging costs.

          4.2 SUNCOAST will provide and pay for all replacement parts unless
such parts are necessitated by reason of the gross negligence of the COMPANY,
its employees, servants, agents, guests, or invitees, in which case, the COMPANY
shall be responsible for such replacement parts.

     5. Programming Services and Fees: Upon completion of the Cable System at
each Resort, the COMPANY shall and does hereby grant to SUNCOAST the exclusive
right, privilege, and license to provide Services (as defined below) to each
Resort in the Project and the individual units therein during the term of this
Agreement, including any extensions, upon the following terms:

          5.1 Services. Upon substantial completion of the Cable System at each
Resort (hereinafter referred to as the "Programming Commencement Date"),
SUNCOAST will provide to each Resort, pursuant to FCC rules in effect or
hereinafter modified, governing the resale of satellite and off-air television
transmissions, except as indicated otherwise, the following:

               (a) Thirty (30) basic cable TV channels ("Cable Services") as
listed on the attached Exhibit "B". COMPANY may change the Cable Services upon
Thirty (30) days prior written notice. There will be no charge for the first
such change; however, future changes for the same Cable Services will require a
Fifty ($50.00) Dollar fee per change. SUNCOAST reserves the right, at its
discretion, to provide ad insertions on the Cable Services, and to delete, add
or substitute portions of the basic programming described in Exhibit "B", but
agrees to use its best efforts to maintain continuity of this programming or the
equivalent thereof. Programming shall be subject to COMPANY approval which shall
not be unreasonably withheld or delayed.

               (b) Tiered programming packages ("Tiered Packages") which will
consist of a group of channels in each separate package and will be provided to
COMPANY Resort guests on an individual basis at the guest's discretion and
billed on a weekly basis using the COMPANY's billing system.

               (c) The Cable System shall include Two (2) additional channels
which will be reserved for use by SUNCOAST during the entire term of this
Agreement. These Two (2) channels may be used by SUNCOAST for programming which
is not competitive with COMPANY programming and shall not contain adult channels
and will not be billed to the Resort guests or the COMPANY. Programming shall be
subject to COMPANY approval which shall not be unreasonably withheld or delayed.

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               (d) As used in this Agreement, the term "Services" shall be
defined to include Cable Services and Tiered Packages.

          5.2 Programming Fees. Beginning on the Programming Commencement Date,
the COMPANY shall pay SUNCOAST the following fees for Services at each Resort
(the "Programming Fees"):

               (a) From the Programming Commencement Date at each Resort and
continuing for a term of Seven (7) years (the "Initial Programming Term"), the
COMPANY shall pay SUNCOAST the following Programming Fees for the Services:

                    (i) For Cable Services, the sum of $21.53 per Unit (as
defined herein) per month; and

                    (ii) For Tiered Packages, the COMPANY shall pay SUNCOAST
Eighty (80%) percent of the gross billing price for each separate Tiered Package
which is ordered by a Resort Guest. The pricing and content of each Tiered
Packages will determined by SUNCOAST.

               (b) Following the end of the Initial Programming Term and
continuing throughout the remaining term of this Agreement, the COMPANY shall
pay SUNCOAST the same Programming Fees as indicated in 5(a) above except for
Cable Services which shall be reduced to $8.26 per Unit per month, plus any
increases per Paragraph 5.2(c) below.

               (c) In addition to the Programming Fees price change as stated
above, the Programming Fees for Cable Services may be increased at any time
during the entire term of this Agreement in the event Cable Service programming
costs provided to SUNCOAST by suppliers are increased. Such Programming Fees
increase(s) will be limited to the increase charged SUNCOAST by its programming
supplier. The COMPANY shall, within Thirty (30) days from notice by SUNCOAST of
a Programming Fees increase, have the option of requesting cancellation or
replacement of the specific service for which the rate increase applies by
submitting written notification to SUNCOAST. Failure of COMPANY notifying
SUNCOAST within the allotted time shall act as COMPANY's acceptance of the
Programming Fees increase.

          5.3 Cable Service Units. Three (3) days immediately prior to the
Programming Commencement Date, the COMPANY shall send written notice to SUNCOAST
reporting the total number of units which are wired for Cable Service
distribution in each Resort (the "Units"). All lock-out units will be considered
as One (1) Unit for Cable Services. During the term of this Agreement, the
COMPANY shall submit to SUNCOAST all change(s) in the number of Units at least
Sixty (60) days prior to the activation of such additional Unit(s). SUNCOAST
will accept facsimile with signature for such reporting purposes. Thereafter,
the Programming Service Fees for Cable Services will be modified by the
increased number of Units as of the activation date. COMPANY shall make
available to SUNCOAST, at COMPANY's office during regular business hours, once
each calendar year, on Five (5) days advance notice, its books and records
regarding the number of Units for SUNCOAST's inspection and/or audit. COMPANY

                                       4
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and SUNCOAST agree that under reporting of Units applicable to Services supplied
herein shall constitute a material breach of this Agreement. Should any audit
determine that such under Unit reporting has occurred, SUNCOAST, at its option,
may cancel this Agreement and accelerate all monthly payments remaining due
hereunder. COMPANY further agrees to indemnify SUNCOAST for auditing fees and
expenses, and penalties or damages assessed SUNCOAST by SUNCOAST's programming
suppliers as a result of such under Unit reporting.

          5.4 Billing & Payment for Programming Services. Each month during the
term of Programming Services, SUNCOAST shall bill the COMPANY for each Resort
for Cable Services in advance for each month and for Tiered Services and Pay Per
View in arrears for the immediately preceding month. Payment for all Services
shall be due by the Tenth (10th) day of the month for which the billing applies,
time being of the essence, and interest at the rate of 1.5% percent per month
(18% per annum) will be added for late receipt of any payment. A service charge
of Twenty-five ($25.00) Dollars will be assessed for any returned check, and a
cashier's check will be required as future payment until credit has been
re-established as determined by SUNCOAST. COMPANY shall pay SUNCOAST a late
payment charge of Two (2%) percent for each and every payment(s) which is
outstanding for a period of more than Twenty-five (25) days. Should COMPANY fail
to make payment within Forty-five (45) days from the required billing due date,
or fail to comply with applicable Federal, State, or Local Law governing the
purchase of the Services, SUNCOAST may at its discretion terminate such
Services. Upon such default by COMPANY, SUNCOAST shall be entitled to accelerate
all monthly payments remaining due under this Agreement which will then be
immediately due and payable.

          5.5 Programming Services Term.

               (a) Initial Programming Services Term. The initial Programming
Services Term ("Initial Term") shall begin on the Programming Commencement Date
for each Resort and shall continue thereafter for a period of Seven (7) years.

               (b) Renewal of Program Servicing Term. COMPANY shall have the
option, but not the obligation, to renew the Programming Services Term for each
Resort for an additional Five (5) year term ("Renewal Term") by providing
written notice to SUNCOAST at least Ninety (90) days prior to the expiration of
the Initial Term of each Resort that it will exercise such option to renew. The
terms of this Agreement shall govern during any Renewal Term except as agreed
upon in writing by the parties.

               (c) Notwithstanding the above, SUNCOAST may cancel this Agreement
due to the occurrence of adverse circumstances that are beyond SUNCOAST's
reasonable control, including, but not limited to, microwave interference or the
institution of any governmental law, rule or regulation making it unreasonable
for SUNCOAST to maintain the Services as agreed to.

          5.6 Compliance. Except as stated otherwise herein, SUNCOAST will be
responsible for providing equipment and maintenance necessary for adequate
reception for distribution of signal throughout the Agreement term. COMPANY
shall not allow interference with the Equipment or the master antenna television
system ("MATV") or allow the connection of any device to the Equipment or MATV
which causes interference. COMPANY shall cooperate in preventing theft of the
Services by third parties including residents.

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          5.7 Program Advertising. COMPANY and SUNCOAST will jointly publish
information about the Services available to Resort guests with the costs of such
advertising divided as mutually agreeable between the parties.

     6. Insurance: During the Initial Term of this Agreement, SUNCOAST shall, at
its sole cost and expense, carry insurance covering all of the Equipment
involved in this Agreement, or any amendments thereto, against any loss by
theft, fire or other hazard or perils ordinarily included under a standard
extended coverage endorsement. Further, during the Initial Term, SUNCOAST shall,
at its sole cost and expense, carry insurance against liability for death or
personal injury in an amount not less than a combined single limit of $500,000
for each occurrence and a $500,000 aggregate regarding the Cable System and
Equipment. Said insurance shall name COMPANY as an additional insured and
COMPANY shall be provided with a copy of said insurance upon request. SUNCOAST,
in no event, shall be liable for any uninsured damages or for the consequences
of acts and events beyond its reasonable control concerning the Cable System or
Equipment. These acts and events include, but are not limited to: a) acts of God
or acts of the government of the United States: b) fires, floods, explosions,
wind, storms, hurricanes, lightning or other catastrophes; c) civil riot or
disturbances; d) acts of persons other than SUNCOAST and SUNCOAST's agents.

     7. Representations and Warranties of COMPANY: As a material inducement to
SUNCOAST to enter into this Agreement, without which inducement COMPANY
acknowledges SUNCOAST would not enter into this Agreement, COMPANY represents
and warrants to SUNCOAST as follows:

          7.1 That the COMPANY has full power and authority to make, enter into,
deliver and perform pursuant to this Agreement and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement.

          7.2 That the COMPANY is a corporation, duly established, validly
existing in good standing under the laws of the State of Florida.

          7.3 That this Agreement and all exhibits are valid, binding and
enforceable against the COMPANY in accordance with their respective terms and
provisions.

          7.4 Other than this Agreement, COMPANY has not entered into, and shall
not enter into, any other oral or written lease, license, contract or agreement
regarding cable television service within the Project during the term of this
Agreement.

          7.5 There is no outstanding license, contract, agreement, document,
lease, notice, or any other instrument which in any way regulates or restricts
the exclusive full right, power and authority of COMPANY to enter into and
perform this Agreement. There is no restriction, covenant, zoning or other
matter which would prohibit the installation, maintenance and operation of the
contemplated cable television system within the Project.

     8. Indemnification: COMPANY and SUNCOAST each hereby agrees to indemnify
and hold harmless the other party from any and all expenses, losses, damages or
costs or every kind, character and nature whatsoever (including, without
limitation, attorneys fees and expenses) which such party may suffer or incur
based upon or arising out of the inaccuracy or breach of any of the
representations and/or warranties contained herein or the acts or omissions of
the indemnifying parties.

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     9. Notice: All notices, requests, demands and other communications required
or permitted to be given hereunder shall he in writing and shall be deemed to
have been duly given if delivered personally or sent by a recognized overnight
carrier or mailed by certified mail, return receipt requested, with postage
prepaid, at the address set forth below:

SUNCOAST:           3000 Gulf to Bay Blvd., Suite 312
                    Clearwater, FL 33759
                    Attention:  Mr. Kent P. Spears

COMPANY:
                    -----------------------------------

                    -----------------------------------

                    -----------------------------------

     10. Right to Cure: COMPANY shall not be in default of any non-monetary
provision of this Agreement and SUNCOAST shall not pursue any remedy provided
hereunder or permitted by applicable law unless SUNCOAST gives written notice to
COMPANY specifically identifying the provision or provisions of this Agreement
which COMPANY has failed to perform and COMPANY fails to cure such failure
within Five (5) days of receipt of such notice, or, if such failure to perform
is of the nature that it cannot be cured within Five (5) days, the COMPANY fails
to commence cure of such failure to perform within Five (5) days of receipt of
such notice and proceed diligently and continuously to complete curing such
failure to perform.

     11. COMPANY Termination: SUNCOAST agrees that the COMPANY shall have the
right at any time to terminate this Agreement, without prejudice to any other
legal rights to which the COMPANY may be entitled, upon occurrence of any one or
more of the following events:

          11.1 A material default by SUNCOAST in performance of any of the
material provisions of this Agreement subject to the COMPANY providing prior
written notice to SUNCOAST specifically identifying the provision or provisions
of this Agreement which SUNCOAST has materially defaulted and SUNCOAST failing
to cure such material default within Five (5) days of receipt of such notice,
or, if such material default is of the nature that it cannot be cured within
Five (5) days, SUNCOAST failing to commence cure of such material default within
Five (5) days of receipt of such notice and proceeding diligently and
continuously to complete curing of such material default; or

          11.2 SUNCOAST making an assignment for the benefit of creditors; or

          11.3 The appointment of a trustee, receiver or similar officer of any
court for a substantial part of the property of SUNCOAST, whether with or
without its consent; or

          11.4 The institution of bankruptcy, composition, reorganization,
insolvency or liquidation proceedings by or against SUNCOAST without such
proceedings being vacated, stayed, or dismissed within Sixty (60) days from the
date of the institution thereof.

                                       7
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     12. Confidentiality in Favor of SUNCOAST: COMPANY acknowledges that the
concept including provisions, terms, and conditions as contained in this
Agreement (the "Concept") is proprietary to SUNCOAST and has been developed by
SUNCOAST at great expense, and over lengthy periods of time, is secret and
confidential and is unique and constitutes the exclusive property of SUNCOAST
and that any use of the Concept by COMPANY other than for the benefit of
SUNCOAST would be wrongful and would cause irreparable injury to SUNCOAST.
Accordingly, except as required by law, COMPANY agrees that it shall not, either
during or subsequent to the termination of this Agreement, use, reveal, report,
publish, copy, transcribe, transfer or otherwise disclose to any person,
corporation, or other entity, the Concept without the prior written consent of
SUNCOAST, with the exception of responsible officers and employees of COMPANY
and with the exception of information which legally and legitimately is or
becomes known in the public domain through sources other than through COMPANY.
COMPANY hereby acknowledges and agrees that in the event of any violation or
threatened violation of this paragraph of the Agreement, SUNCOAST shall be
authorized and entitled to obtain from any court of competent jurisdiction,
preliminary and permanent injunctive relief as well as an equitable accounting
of all profits and benefits arising out of such violation plus reasonable
attorneys' fees and costs, which right and remedies shall be cumulative and in
addition to any other rights or remedies to which it may be entitled.

     13. Confidentiality in Favor of COMPANY: During the term of this Agreement,
SUNCOAST may be entrusted with and may assimilate written and non-written
information of a confidential nature relating to the business of the COMPANY,
excluding information or materials publicly disclosed and a matter of common
knowledge in the field of work of the COMPANY, hereinafter referred to as
"Confidential Information". Accordingly, except as required by law, SUNCOAST
agrees that it shall not, either during or subsequent to the termination of this
Agreement, disclose to any person, corporation, or other entity, the
Confidential Information without the prior written consent of COMPANY, with the
exception of responsible officers and employees of SUNCOAST and with the
exception of information which legally and legitimately is or becomes known in
the public domain through sources other than through SUNCOAST. SUNCOAST hereby
acknowledges and agrees that in the event of any violation or threatened
violation of this paragraph of the Agreement, COMPANY shall be authorized and
entitled to obtain from any court of competent jurisdiction, preliminary and
permanent injunctive relief as well as an equitable accounting of all profits
and benefits arising out of such violation plus reasonable attorneys' fees and
costs, which right and remedies shall be cumulative and in addition to any other
rights or remedies to which it may be entitled.

     14. Miscellaneous:

          I. Attorney Fees and Costs. The parties agree that if any action at
law or equity is required to enforce or interpret the provisions of this
Agreement, the prevailing party shall be entitled to recover all costs of
collection, including without limitation, reasonable attorneys' fees and costs
incurred in any litigation, mediation, arbitration, or administrative or
bankruptcy proceedings, and any appeals therefrom, in addition to any other
relief to which they may be entitled.

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          B. Section and Other Headings. Section, paragraph and other headings
contained in this Agreement are for reference purposes only and shall not effect
in any way the meaning or interpretation of this Agreement.

          C. Gender. All personal pronouns used in this Agreement shall include
the other genders whether used in the masculine or feminine or neuter gender and
the singular shall include the plural wherever and as often as may be
appropriate.

          D. Severability. In case any one or more provisions contained in this
Agreement shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not effect
any other provision herein and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had not been contained herein.

          E. Choice of Law. It is the intention of the parties that the law of
the State of Florida shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties.

          F. Entire Agreement. This Agreement, including attachments,
constitutes the entire agreement between the parties and there are no
agreements, understandings, restrictions, warranties, or representations,
expressed or implied, oral or written between the parties other than those
herein contained.

          G. Time of Essence. It is understood and agreed by the parties hereto
that time shall be of the essence in this Agreement and such time shall be an
essential part of this Agreement.

          H. Amendment. No amendment, waiver or modification of this Agreement,
or any provisions of this Agreement, shall be valid unless in writing and duly
executed by all parties.

          I. Counterpart execution. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.

          J. Parties and Interest. All terms and provisions of this Agreement
shall be binding upon and inure to the benefit of, and be enforceable by
SUNCOAST, COMPANY, their heirs, legal representatives, successors, and assigns.

          K. Survival. The executory provisions of this Agreement and all
representations and warranties shall survive the consummation of the
transactions contemplated by this Agreement.

          L. No Partnership. Notwithstanding anything to the contrary contained
herein, neither this Agreement nor the conduct of the parties hereto shall be
deemed or construed to create a partnership or joint venture or other such
business relationship between the parties.

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<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
date and year indicated immediately below their signatures.

"SUNCOAST"                                     "COMPANY"
Suncoast Home Automation, Inc.                 Sunterra Communications
                                               Corporation

By:
-----------------------------                  ---------------------------------
Kent Spears, President                         (Authorized Agent)

                                               ---------------------------------
                                               (Printed Name & Title)
Date:                                          Date:
-----------------------------                  ---------------------------------

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                            LEASE AGREEMENT GUARANTY
                            ------------------------

     Sunterra Corporation, as the sole shareholder and parent company of
COMPANY, does hereby jointly and severally give to SUNCOAST its continuing and
unconditional guaranty of all the representations, covenants, warranties, and
obligations of COMPANY as contained in the above EXCLUSIVE CABLE DEVELOPMENT &
PROGRAMMING SERVICES AGREEMENT, to the same extent as if Sunterra were the
COMPANY, and further waives any right to require suit against the COMPANY or any
other party before SUNCOAST enforces this guaranty.

                              Sunterra Corporation

                              By:
                              ---------------------------------------
                              (Authorized Officer)

                              ---------------------------------------
                              (Printed Name & Title)
                              Date:
                              ---------------------------------------

<PAGE>

                                   EXHIBIT "A"

List of Resorts
---------------

Carambola Beach            Estate Davis Bay                            152 Units
                           P.O. Box 3031
                           St. Croix, U.S. Virgin Islands

Flamingo Beach             Billy Folly Road                            182 Units
                           Pelican Key, Saint Maarten 10 Lockouts

Royal Palm Beach           115 Airport Road                            141 Units
                           Simpson Bay, Saint Maarten

<PAGE>

                                   EXHIBIT "B"

                                "Cable Services"
                                ----------------

     Community Channel 1                               Golf Channel
     Black Entertainment TV                            Knowledge TV
     Community Channel 2                               The Learning Channel
     C-Span 1                                          MSNBC
     C-Span 2                                          NBC
     CNN                                               QVC
     CNN EN ESPANPOL                                   WTBS
     CNN Financial News                                TNT
     CNN Headline News                                 Travel Channel
     CNN International/Financial News                  TV Food Network
     Comedy Central                                    TV Land
     ABC                                               CBS
     E! Entertainment                                  VH-1
     ESPN                                              Weather Channel
     ESPN 2                                            WGN ChicagoAmerican Motorcycle Company
                               23 Harnish Crescent
                                Toronto, Ontario
                                     M2M 2C2

August 15, 2000

DELIVERED

Mr. Richard K. Hagen
Chairman and Chief Executive Officer
American Quantum Cycles, Inc.
731 Washburn Road
Melbourne, Florida
U.S.A.  32934

Dear Mr. Hagen:

Re:  Binding Merger Agreement of American Motorcycle Company into a wholly-owned
     subsidiary of American Quantum Cycles, Inc.

This letter will serve as a formal contract for the merger between a
wholly-owned subsidiary (the "Subsidiary") of American Quantum Cycles, Inc. (the
"Purchaser") and American Motorcycle Company (the "Company") by agreement of all
the shareholders of the Company (the "Vendors"), the Purchaser and the Company,
to be effective on the date hereof (the "Closing Date") by execution by all
parties to this letter agreement and receipt by Mr. Murray Smith of 500,000
preferred shares of the Purchaser, having the attributes attached hereto as
Schedule "A" (the "Preferred Stock"). Each Preferred Stock will have 38.39 votes
and be convertible into 38.39 common shares of the Purchaser.

The Preferred Stock is received on the basis that in all cases the 500,000
Preferred Stock will be convertible into 50% of the aggregate issued and
outstanding common shares of the Purchaser on a fully diluted basis, subject
only to Section 2 herein. In addition, the Preferred Stock prior to conversion
will, in all cases, have at least 50% of the aggregate votes attributable to the
preferred stock and the common shares of the Purchaser, with an anti-dilution
provision in effect until such time as all necessary shareholder and regulatory
approvals have been obtained to increase the authorized capital to, among other
things, permit the conversion of the Preferred Stock into common shares as
contemplated herein. Such anti-dilution provision shall have the effect of
ensuring that the Preferred Stock shall maintain at least 50% of the aggregate
votes attributable to all of the preferred stock and common shares issued and
outstanding or to be issued and outstanding until such time as the said
approvals have been obtained. It is intended that these provisions will apply
until such time as the merger of the Subsidiary and the Company has been
completed and all necessary shareholder and regulatory approvals have been
obtained to increase the authorized capital to, among other things, permit the
conversion of the Preferred Stock into common shares as contemplated pursuant to
the terms of this letter.

<PAGE>

However, in order to continue to have the Purchaser's common stock listed on the
American Stock Exchange, it is a condition of the American Stock Exchange that,
until the shareholders of the Purchaser have approved the issuance of the
Preferred Stock, the Vendors may not collectively vote in excess of 19.99% of
the Preferred Stock in any matter submitted to the shareholders of the
Purchaser.

It is intended by the parties hereto that this letter is a legal and binding
agreement.

1.   Purchase. The Purchaser hereby agrees to acquire from the Vendors and the
     Vendors hereby agree to sell to the Purchaser 100% of the issued and
     outstanding shares in the capital stock of the Company (the "Purchased
     Shares") for the 500,000 Preferred Stock of the Purchaser (the "Purchase
     Price"). The Purchase Price, subject to the Adjustments (as defined in
     Section 2 below), shall be paid to the Vendors through the payment at the
     Closing Date to each Vendor of the following Preferred Stock set out beside
     such Vendor's name:

          Name                                        Number of Preferred Stock
          ----                                        -------------------------

          Merchant Banking Services Inc.                      200,000
          Andrew C. Smith                                      42,500
          Praxis International Inc.                            15,000
          Jeff and Dominique Mathers Eisen                      5,000
          Hugh D. Turner                                       15,000
          Robert Klienschmidt                                   5,000
          Life Success Ventures Inc.                            2,500
          Transam Holdings Inc.                                15,000
          Lionel and Janice Mercier                            75,000
          Richard A. and Andrea A. Block, JT                   75,000
          Dan Almagor                                           5,000
          Robert Kramer                                         2,500
          Murray Smith, in trust                               42,500

          all of which shall be issued at the Closing Date as fully paid and
          non-assessable Preferred Stock of the Purchaser on the Closing Date
          and delivered to Murray Smith, as representative of the Vendors and
          the Company.

2.   Adjustments to the Purchase Price. To allow for a complete due diligence
     review of the Company and of the Purchaser, and the respective financial
     positions as represented in Section 7, adjustments will be made to the
     Purchase Price within six (6) months of the Closing Date as follows:

     (a)  The Purchaser has represented and warranted its value in terms of
          assets, liabilities, contracts and obligations according to such
          information attached hereto on Exhibit 1 (the "Purchaser Value"), and
          its capital structure according to the capital structure of the
          Purchaser attached hereto on Exhibit 1 (the "Purchaser Capital"). In
          the event that the Purchaser Value is determined to be adversely
          incorrect for an amount (the "Purchaser Amount") of at least
          $100,000.00, in the aggregate, then additional Preferred Stock equal
          to the Purchaser Amount will be issued to the Vendors. For these

                                       2
<PAGE>

          purposes, the Preferred Stock will be issued at the rate of $42.16 per
          share of Preferred Stock, with the same provisions as the Preferred
          Stock issued for the Purchase Price. In the event the number of
          outstanding shares of the Purchaser is higher than disclosed as the
          Purchaser Capital, the number of Preferred Stock issued to the Vendors
          will be increased on a 1 for 1 basis, with the same provisions as the
          Preferred Stock issued for the Purchase Price; and

     (b)  The Company has represented and warranted its value and structure
          according to the obligations and capital structure of the Company
          attached hereto as Exhibit 2 (the "Company Value"). In the event that
          the Company Value is determined to be adversely incorrect for an
          amount (the "Company Amount") of at least $100,000.00, in the
          aggregate, then the Preferred Stock equal to the Company Amount will
          be returned to the treasury of the Purchaser for cancellation. For
          these purposes, the Preferred Stock will be cancelled at the rate of
          $42.16 per share of Preferred Stock.

3.   Merger. The parties acknowledge that the 500,000 Preferred Stock are to be
     delivered to the custody of Mr. Murray Smith on Closing, on behalf of the
     shareholders of the Company in exchange for all of the stock of the
     Company, following which, on Closing, the Company shall be merged into the
     Subsidiary of the Purchaser in a transaction intended to qualify as a
     tax-free reorganization to the shareholders of the Company under Section
     368 of the Internal Revenue Code of 1986 as amended. The resulting merged
     company will be named "American Motorcycle Company", and will own all of
     the assets of the Company as described below. For the purposes of this
     letter agreement, the post-merger American Motorcycle Company will be
     referred to as the "Merged Company".

4.   Business Plan. The Purchaser and Vendors each acknowledge that a number of
     operational and procedural issues will be mutually agreed to and will form
     the basis of a business plan (the "Business Plan") for the Purchaser and
     the Merged Company. The essence of the Business Plan is for the Purchaser
     and the Merged Company to acquire companies currently involved in the
     worldwide motorcycle industry. These target companies have various holdings
     in the areas of trademarks, engines, motorcycle sales and some combinations
     thereof. The Business Plan shall be designed to capitalize on the Company's
     unique expertise in corporate management, corporate finance and trademarks
     to form a strategic alliance available only by the inclusion of the Company
     in the Purchaser's family of companies. It is intended initially, until
     shareholder approval is received to increase the authorized capital of the
     Purchaser and subject to the anti-dilution provision attaching to the
     Preferred Stock, to use the unissued preferred shares of the Purchaser to
     facilitate such transactions, with conversion rates on a 1:1 basis into
     common shares or such other basis as agreed to by the board of directors at
     that time.

5.   Capital Restructuring of the Purchaser or Merged Company. The Purchaser and
     the Company agree that the Purchaser will take all steps necessary to
     obtain shareholder approval forthwith for an amendment of the Purchaser's
     Articles of Incorporation to increase its authorized common shares to
     permit conversion of the Preferred Stock, to allow conversion of any other
     preferred shares of the Purchaser used to accommodate the acquisitions
     contemplated in the Business Plan, and to permit exercise of the options
     and warrants issued by the Purchaser. The board of directors will use its

                                       3
<PAGE>

     best efforts to support the said amendment, implementation of the Business
     Plan and all matters contemplated by this letter agreement. The Purchaser
     shall cause an annual or special meeting of the shareholders to deal with
     foregoing amendment and, to the extent necessary or desirable, the
     implementation of the Business Plan and matters contemplated by this letter
     agreement on or before December 1, 2000.

6.   Attorney. The Vendors collectively hereby irrevocably appoint Murray Smith
     as their proxy and authorized attorney to vote all of the Vendors Preferred
     Stock at any meeting of the shareholders to approve any matters whatsoever
     contemplated by or arising out of this Agreement including, without
     limitation, this transaction, any changes to the authorized or issued
     capital or shares and any transaction contemplated by or arising out of the
     Business Plan, as same may be amended or modified from time to time, and
     any financings related thereto. Each Vendor agrees to provide such further
     documents or materials as are required to implement the foregoing.

7.   Representations and Warranties.

     (a)  The Purchaser represents and warrants to the Vendors as follows, and
          acknowledges that the Vendors are relying upon such representations
          and warranties in connection with entering into this agreement and
          completing the transactions contemplated thereby:

          (i)  Each of the Purchaser and the Subsidiary is a corporation
               incorporated and subsisting under the laws of Florida, has all
               legal capacity to own its properties and conduct its business as
               presently being conducted by it, and is duly registered or
               otherwise qualified to carry on business in all jurisdictions in
               which the nature of its assets or business makes such
               registration or qualification necessary or advisable.

          (ii) This agreement has been duly executed and delivered by the
               Purchaser and constitutes, and the agreements contemplated herein
               when executed will constitute, valid and binding obligations of
               the Purchaser enforceable against it in accordance with the terms
               hereof and thereof.

          (iii) The entering into and performance of this agreement and the
               agreements contemplated herein will not violate, contravene,
               breach or offend against or result in any default under any
               security agreement, indenture, mortgage, lease, order,
               undertaking, licence, permit, agreement, instrument, charter or
               by-law provision, resolution of shareholders or directors,
               statute, regulation, judgment, decree or law to which either the
               Purchaser or the Subsidiary is a party or by which it may be
               bound or affected. No licenses, agreements or other instruments
               or documents will terminate or require assignment as a result of
               the entering into of this Agreement or the consummation of the
               transactions contemplated hereby.

          (iv) The authorized capital of the Purchaser is now, and on the
               Closing Date will be, 12,500,000 common shares and 2,500,000
               preferred shares of which 19,194,031 common shares of the Company

                                       4
<PAGE>

               are presently outstanding on a fully diluted basis, and on the
               Closing Date 19,194,031 common shares on a fully diluted basis
               and the 500,000 Preferred Stock will be issued and outstanding.
               All of the Preferred Stock have been validly authorized, allotted
               and issued and are outstanding as fully-paid and non-assessable
               preferred shares and on the Closing Date will be the only issued
               and outstanding preferred shares of the Purchaser. The
               aforementioned shares are or would be, as the case may be,
               entitled to only 1 vote per common share.

          (v)  The Purchaser's audited financial statements (the "Financial
               Statements"), which are attached hereto as a schedule and include
               a balance sheet, a statement of income, retained earnings and
               source and application of funds, and the notes thereto are true
               and correct and have been prepared in accordance with GAAP
               applied on a basis consistent with those of preceding periods and
               present fairly on a consolidated basis:

               (A)  all of the assets, liabilities (whether accrued,
                    determinable, absolute, contingent or otherwise) and the
                    financial condition of the Purchaser as at the Purchaser's
                    fiscal 2000 year end; and

               (B)  the sales, earnings and results of operations of the
                    Purchaser during the period(s) covered by such financial
                    statements.

          (vi) There are no material liabilities of the Purchaser or the
               Subsidiary of any kind whatsoever, whether or not accrued and
               whether or not determined or determinable, in respect of which
               the Purchaser or the Merged Company may become liable on or after
               the transaction contemplated by this Agreement other than
               liabilities incurred in the ordinary course of business and
               reflected in the Purchaser's Financial Statements.

          (vii) The Purchaser has no subsidiaries and is not bound by any
               agreements of any nature to acquire any subsidiary, save and
               except for the Subsidiary which was recently incorporated, has
               carried on no business and has no assets or liabilities
               whatsoever.

          (viii) No options, warrants, convertible obligations or other rights
               to purchase or otherwise acquire shares or other securities of
               the Purchaser or the Subsidiary are issued or outstanding, except
               as disclosed in the Purchaser Value. The Purchaser shall not
               issue or enter into any agreements to issue any securities of the
               Purchaser other than the Preferred Stock.

          (ix) The Purchaser has not given or agreed to give, nor is it a party
               to or bound by, any indemnity, or any guarantee of indebtedness
               or other obligations of third parties or any other commitment by
               which the Purchaser or the Subsidiary is or is contingently
               responsible for such indebtedness or other obligations, except as
               disclosed in the Purchaser Value.

                                       5
<PAGE>

          (x)  The Purchaser is duly registered as a public company with the
               Securities and Exchange Commission (the "SEC") and is in
               compliance in all material respects with all regulations,
               policies and rules of the SEC and all applicable securities laws
               of the United States. The Purchaser is up to date on all filings
               required by the SEC and applicable securities laws of the United
               States in order to be a public company in good standing. The
               issue of the Preferred Stock to the Vendors under the terms of
               this letter agreement is in compliance with all requirements of
               the SEC and all policies and regulations related thereto. The
               Preferred Stock is subject to American Stock Exchange approval,
               but if such approval is not given, although the Purchaser may be
               de-listed from the American Stock Exchange, the Preferred Stock
               shall nonetheless be validly authorized, allotted, issued,
               outstanding, fully paid and non-assessable with all rights and
               attributes previously described herein and on any schedule
               attached. The issuance of the Preferred Stock may be done without
               registration with the SEC, pursuant to one ore more exemptions
               from registration available pursuant to the Securities Act of
               1933 or regulations promulgated thereunder. Subject to obtaining
               necessary shareholder and regulatory approval to increase the
               authorized capital, the Preferred Stock may be converted by the
               holders thereof into shares of common stock of the Purchaser
               without registration. In the event that the common shares
               issuable on the conversion of the Preferred Stock are not
               registered, then such common shares may be resold provided they
               have been held for a period of one (1) year, compliance with rule
               144 procedures are accomplished and all required filings and
               opinions pursuant to the aforementioned exemptions from
               registration, are completed and complied with as required.
               Subject to obtaining necessary shareholder and regulatory
               approval to increase the authorized capital, upon the filing of
               an effective Registration Statement qualifying the distribution
               of the common shares issued to the Vendors on the conversion of
               the Preferred Stock provided for in Section 11, there will be no
               restrictions preventing the Vendors from freely trading the
               common shares on the American Stock Exchange or on such other
               exchange as the shares of the Merged Company may be listed from
               time to time.

          (xi) The Purchaser shall use its best efforts to ensure that the
               merger shall qualify as a tax-free re-organization.

          (xii) A quorum for directors' meetings shall not be less than the
               minimum number of directors required by the Florida Business
               Corporations Act and, on, from and after Closing, until validly
               changed, one (1) of which must be Murray Smith or one (1) of his
               nominees.

     (b)  Each Vendor severally and the Company hereby represent and warrant to
          the Purchaser as follows, and acknowledge that the Purchaser is
          relying upon such representations and warranties in connection with
          entering into this agreement and completing the transactions
          contemplated thereby:

          (i)  The Company is a corporation incorporated and subsisting under
               the laws of Delaware, has all legal capacity to own its
               properties and conduct its business as presently being conducted

                                       6
<PAGE>

               by it, and is duly registered or otherwise qualified to carry on
               business in all jurisdictions in which the nature of its assets
               or business makes such registration or qualification necessary or
               advisable.

          (ii) This agreement has been duly executed and delivered by the
               Company and on behalf of such Vendor, and constitutes, and the
               agreements contemplated herein when executed will constitute,
               valid and binding obligations of the Company and such Vendor
               enforceable against each in accordance with the terms hereof and
               thereof.

          (iii) The entering into and performance of this agreement and the
               agreements contemplated herein will not violate, contravene,
               breach or offend against or result in any default under any
               security agreement, indenture, mortgage, lease, order,
               undertaking, licence, permit, agreement, instrument, charter or
               by-law provision, resolution of shareholders or directors,
               statute, regulation, judgment, decree or law to which the Company
               or such Vendor is a party or by which it may be bound or
               affected. No licenses, agreements or other instruments or
               documents to which the Company or such Vendor is a party will
               terminate or require assignment as a result of the entering into
               of this Agreement or the consummation of the transactions
               contemplated hereby.

          (iv) The authorized capital of the Company is now, and on the Closing
               Date will be, 1,000 common shares of which only 1,000 common
               shares of the Company are presently outstanding, and on the
               Closing Date 1,000 common shares will be issued and outstanding.

          (v)  The Company holds full title and interest in pending trademark
               applications (the potential for success of which is not
               represented or warranted) in the United States with the United
               States Patent and Trademark Office for the "American Motorcycle"
               and "American Motorcycle Company" trademarks and designs, in the
               form attached.

          (vi) Each of the Vendors is an "accredited" (as defined in Regulation
               D of the SEC) or a sophisticated investor with the ability to
               bear the risks of an investment in the securities of the
               Purchaser; each Vendor is acquiring the securities for
               investment, for his, her or its own account without a view to the
               distribution or resale thereof; and each Vendor has engaged
               heretofore in transactions similar to that contemplated herein
               and has such knowledge and experience in financial and business
               matters that he, she or it is capable of evaluating the merits
               and risks of an investment in the securities. Each of the Vendors
               has been provided through its representatives with access to
               information pertaining to the Purchaser in order to make an
               informed judgment with regard to the investment merit of the
               Preferred Stock being issued to each of them.

          Although Murray Smith is signing this Agreement on behalf of all of
          the Vendors, he shall have no personal liability whatsoever for any
          covenant, representation or warranty made by any such Vendor herein
          (other than himself) and each Vendor, by accepting its respective

                                       7
<PAGE>

          Preferred Stock on Closing shall be conclusively deemed to have made
          its covenants, representations and warranties herein severally on its
          own behalf and with respect to only itself and the Corporation and not
          any of the other Vendors.

8.   Reliance. The Purchaser hereby expressly acknowledges that the Company and
     the Vendors are relying upon the covenants, representations and warranties
     of the Purchaser contained in this agreement and in any agreement,
     certificate or other document delivered pursuant hereto in connection with
     the completion of the transactions contemplated hereunder. The Company and
     each Vendor hereby expressly acknowledge that the Purchaser is relying upon
     the covenants, representations and warranties of the Company and severally
     of each such Vendor contained in this agreement and in any agreement,
     certificate or other document delivered pursuant hereto in connection with
     the completion of the transactions contemplated hereunder.

9.   Survival. The covenants, representations and warranties of the parties
     contained in this agreement and in any document or certificate given
     pursuant hereto shall survive the Closing Date for a period of two (2)
     years thereafter and, with respect to tax matters only, two (2) years after
     the period during which assessments or re-assessments could be issued.

10.  Conditions to Closing. Notwithstanding any other provision of this
     agreement, the completion of the transactions contemplated hereby is
     subject to the following conditions which are inserted for the sole benefit
     of the Vendors (any of which may be waived in writing at any time prior to
     the Closing Date by Mr. Murray Smith on behalf of all of the Vendors):

          (i)  delivery of the 500,000  Preferred  Stock to Mr.  Murray Smith on
               Closing in accordance with the terms of this agreement;

          (ii) approval by banks, lessors or similar creditors of the Purchaser,
               if necessary;

          (iii)receipt of opinions of counsel to the  Purchaser  concerning  the
               representations  and warranties of the Purchaser contained herein
               relating to corporate, share and securities matters; and

          (iv) all other such  approvals as are required in order to  consummate
               the transactions contemplated by this letter agreement.

11.  Registration Rights. At any time and from time to time for a period of two
     (2) years after the effective date of the conversion of the Preferred
     Stock, the holders of 15% of the then outstanding shares of common stock
     which were originally issued upon the conversion of the Preferred Stock may
     request registration under the Securities Act of 1933 or all or part of
     their common stock, but in no case less than 100,000 of such shares. Within
     ten (10) business days after receipt of any such request, the Purchaser
     will give written notice of such requested registration to all other
     holders of the then unregistered shares of common stock which were
     originally issued upon the conversion of the Preferred Stock and will
     include in such registration all shares of such common stock with respect
     to which the Purchaser has received written request for inclusion therein
     within fifteen (15) business days after receipt of the Purchaser's notice.
     The Purchaser will then use reasonable efforts to effect as soon as

                                       8
<PAGE>

     practicable the registration and sale of such shares, completely at its own
     expense, and the Purchaser shall indemnify, to the extent permitted by law,
     each person selling common stock pursuant to any registration statement,
     against all losses, claims, damages, liabilities and expenses caused by any
     failure to comply with the Securities Act or other applicable laws,
     including any untrue or alleged untrue statement or material fact or
     omission or alleged omission of a material fact required to be made or
     necessary under the Securities Act or the Securities Exchange Act of 1934
     other than a failure by the selling person. The holders of such common
     stock are entitled to request an aggregate of three (3) registrations on
     Form S-1 or any similar long form registration statement and unlimited
     registrations on Form S-3 or any similar short form registration statement;
     a registration on Form S-1 shall not be deemed to have been requested if
     such registration shall not have become effective.

12.  Covenants. The parties hereto hereby agree to implement the following
     covenants to each party, as applicable:

     (a)  on Closing, two (2) of the current six (6) directors shall resign,
          such that the remaining four (4) current directors shall be Richard
          Hagen, Barbara Connors, Jeff Starke and A.J. Foyt. On Closing, the
          board shall be increased to eight (8) directors and the following four
          (4) persons shall each be appointed directors: Murray Smith, Rick
          Block, Hugh Turner and Dan Almagor;

     (b)  the new board of directors of the Merged Company shall appoint a
          Compensation Committee comprised of Messrs. Hagen and Smith and two
          (2) of the independent directors to determine management compensation
          packages;

     (c)  the Purchaser or the Merged Company, as the case may be, shall assume
          the master license agreement attached hereto as Exhibit 2;

     (d)  each party agrees not to enter into any transaction (or to cause such
          a transaction to occur), that would significantly and materially
          preclude the consummation of this letter agreement, the merger forming
          the Merged Company, or any long form agreement replacing this letter
          agreement; and

     (e)  each party hereto agrees that it will not issue any press release or
          other disclosure concerning this letter agreement or of the
          transaction to form the Merged Company without the prior approval of
          the other, which shall not be unreasonably withheld, unless, in the
          good faith opinion of counsel to such party, such disclosure is
          required by law and time does not permit the obtaining of such
          consent, or such consent is withheld.

13.  Expenses. Subject to paragraph 14, each party to this letter agreement
     shall bear its own expenses relating thereto, except those expenses
     incurred in the preparation of this letter agreement and the confidential
     memorandum of information which shall be paid or be reimbursed by the
     Purchaser following the merger forming the Merged Company.

14.  Payment. The Purchaser acknowledges and agrees that the Company and the
     Vendors have already fully demonstrated to the Purchaser the expertise of
     the principals of the Company in the motorcycle industry generally, the

                                       9
<PAGE>

     recapitalization of motorcycle companies specifically, and with respect to
     trademarks and other intellectual properties related thereto. In the event
     that: (i) the Preferred Stock is or is deemed not to be validly authorized,
     allotted, issued, outstanding, fully paid and non-assessable with all
     rights and attributes previously described herein and on any schedule
     attached for any reason whatsoever or the shareholders do not approve of
     the transaction contemplated by this Agreement for any reason whatsoever;
     or (ii) without limiting the rights of the Vendors and the Company under
     subsection (i), the merger transaction contemplated herein cannot be
     completed or the shareholder's meeting described in Section 5 of this
     letter agreement does not take place within the time frame stipulated for
     any reason attributable to the conduct or lack of conduct of the Purchaser
     which it has the capacity to prevent, or through its good faith efforts
     should have the ability to satisfy, then the Vendors shall be relieved of
     all obligations herein and the Purchaser agrees to pay to the Vendors all
     fees, costs and expenses actually incurred by the Company and Vendors in:

     (a)  the preparation of this letter agreement;

     (b)  in connection with its due diligence review of the Purchaser;

     (c)  in connection with the preparation of the confidential memorandum of
          information;

     (d)  in the preparation of any long form agreement replacing this letter
          agreement; and

     (e)  in connection with all other activities associated with this
          transaction.

     In addition, in such circumstances the Purchaser agrees:

     (a)  to pay $500,000 to the Vendors, to be divided pro-rata among them in
          proportion to the shareholdings discussed previously herein; and

     (b)  to validly issue and deliver all of the Preferred Stock to the
          Vendors, being 500,000 shares of the said Preferred Stock with the
          attributes described herein and on any schedules attached, to be
          divided pro-rata among them in proportion to the shareholdings
          discussed previously herein; and

     (c)  that Murray Smith shall be irrevocably assigned the exclusive right to
          acquire any of the companies or rights acquired or contracts to be
          acquired pursuant to the Business Plan.

The aforementioned provisions of this Section 14 supercede the break-up fee
provision in Section 6 of the Confidentiality Agreement between the Purchaser
and the Company dated July 5, 2000.

15.  Entire Agreement. This agreement, including any Schedules attached hereto,
     together with the agreements and other documents to be delivered pursuant
     hereto, constitute the entire agreement between the parties pertaining to
     the subject matter hereof and supersede all prior agreements,
     understandings, negotiations and discussions, whether oral or written, of
     the parties and there are no warranties, representations or other

                                       10
<PAGE>

          agreements between the parties in connection with the subject matter
          hereof except as specifically set forth herein and therein. This
          agreement may not be amended or modified in any respect except by
          written instrument signed by all parties.

16.  Time of the Essence. Time shall be of the essence of this agreement and
     each and every part hereof.

17.  Further Assurances. The parties hereto shall with reasonable diligence do
     all such things and provide all such reasonable assurances as may be
     required to consummate the transactions contemplated hereby, and each party
     shall execute and deliver such other documents, instruments, papers and
     information as may be reasonably requested by the other party hereto in
     order to carry out the purpose and intent of this agreement. The Purchaser
     agrees not to solicit, seek and provide information to or respond
     favourably to any solicitation from, or otherwise enter into any
     negotiations or reach any agreement with, any person or entity regarding
     the sale, merger, consolidation or transfer of any of the assets, stock or
     rights of the Purchaser.

18.  Law and Jurisdiction. This agreement shall be governed by and construed in
     accordance with the laws of the State of Florida and the laws of the United
     States of America applicable therein. The parties hereby attorn to the
     exclusive jurisdiction of the Courts of Brevard County in the State of
     Florida in any dispute that may arise hereunder.

19.  Enurement. This Agreement shall be binding upon and shall inure to the
     benefit of and be enforceable by the heirs, administrators, executors,
     estate, successors and permitted assigns of the parties hereto.

                                       11
<PAGE>

Please sign and date this letter agreement in the spaces provided below to
confirm our mutual agreement to the terms set out above and return a fully
signed copy to the undersigned along with the 500,000 Preferred Stock.

                                      Yours truly,

                                      AMERICAN MOTORCYCLE COMPANY

                                      Per: /s/ Murray Smith
                                      ------------------------------------------
                                      MURRAY SMITH, PRESIDENT

                                      /s/ Murray Smith
                                      ------------------------------------------
                                      MURRAY SMITH, ON BEHALF OF ALL THE VENDORS

     ACKNOWLEDGED AND AGREED TO this 18th day of August, 2000.

                                      AMERICAN QUANTUM CYCLES, INC.

                                      Per: /s/ Richard K. Hagen
                                      ------------------------------------------
                                      RICHARD K. HAGEN, PRESIDENT

                                       12
<PAGE>

                                STATE OF FLORIDA

                               Department of State

I certify the attached is a true and correct copy of the Articles of Amendment,
filed on August 16, 2000, to Articles of Incorporation for AMERICAN QUANTUM
CYCLES, INC., a Florida corporation, as shown by the records of this office.

I further certify the document was electronically received under FAX audit
number H00000043132. This certificate is issued in accordance with section
15.16, Florida Statutes, and authenticated by the code noted below.

The document number of this corporation is J05073.

        Given under my hand and the
        Great Seal of the State of Florida,
        at Tallahassee, the Capital, this the
        Seventeenth day of August, 2000

Authentication Code: 600A00044211-081700-J05073    -1/1

                                                      /s/ Katherine Harris
                                                      --------------------
[SEAL]                                                Katherine Harris
                                                      Secretary of State

<PAGE>

                           FLORIDA DEPARTMENT OF STATE
                                Katherine Harris
                               Secretary of State

August 17, 2000

AMERICAN QUANTUM CYCLES, INC.
711-731 WASHBURN RD.
MELBOURNE, FL 32934

Re: Document Number J05073

The Articles of Amendment to the Articles of Incorporation for AMERICAN QUANTUM
CYCLES, INC., a Florida corporation, were filed on August 16, 2000.

The certification requested is enclosed. To be official, the certification for a
certified copy must be attached to the original document that was electronically
submitted and filed under FAX audit number H00000043132.

Should you have any question regarding this matter, please telephone (850)
487-6050, the Amendment Filing Section.

Darlene Connell
Corporate Specialist
Division of Corporation                      Letter Number: 600A00044211

      Division of Corporations - P.O. Box 6327 - Tallahassee, Florida 32314

<PAGE>

                              ARTICLES OF AMENDMENT
                        TO THE ARTICLES OF INCORPORATION
                                       OF
                          AMERICAN QUANTUM CYCLES, INC.

     AMERICAN QUANTUM CYCLES, INC., a corporation organized and existing under
the laws of the State of Florida (the "Company "), hereby certifies that the
following resolutions were adopted by the Board of Directors of the Company
pursuant to the authority of the Board of Directors as required by Section
602.0602 of the Florida Business Corporation Act.

     RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Company (the "Board of Directors" or the "Board") in
accordance with the provisions of its Articles of Incorporation and Bylaws, each
as amended through the date hereof, the Board of Directors hereby authorizes a
series of the Company's previously authorized Preferred Stock, par value $.001
per share (the "Preferred Stock"), and hereby states the designation and number
of shares, and fixes the relative rights, preferences, privileges, powers and
restrictions thereof as follows:

                                   ARTICLE I

                    DESIGNATION AND STATED AMOUNT; DIVIDENDS

     The designation of this series, which consists of 600,000 shares of
Preferred Stock, is the Series B Convertible Preferred Stock (the "Series B
Preferred Stock") and the stated value shall be $42.16 per share (the "Stated
Value"). The Series B Preferred Stock will bear no dividends, and the holders of
the Series B Preferred Stock will not be entitled to receive dividends on the
Series B Preferred Stock.

                                   ARTICLE II

                         DISTRIBUTIONS UPON LIQUIDATION,
                            DISSOLUTION OR WINDING UP

     In the event of any voluntary or involuntary liquidation, dissolution or
other winding up of the affairs of the Company, but before any distribution or
payment shall be made to the holders of Junior Securities (as hereinafter
defined), the holders of the Series B Preferred Stock shall be entitled to be

JAMES M. SCHNEIDER, ESQ., FLA BAR # 214338
Atlas, Pearlman, Trop & Borkson, P.A.
350 East Las Olas Boulevard, Suite 1700
Fort Lauderdale, Florida 33301
Phone No.: (954) 763-1200

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paid the Stated Value per share of all outstanding shares of Series B Preferred
Stock as of the date of such liquidation or dissolution or such other winding up
of the affairs of the Company either in cash or in property taken at its fair
value as determined by the Board of Directors, or both, at the election of the
Board of Directors. If such payment shall have been made in full to the holders
of the Series B Preferred Stock, the remaining assets and funds of the Company
shall be distributed among the holders of Junior Securities, according to their
respective shares and priorities. If, upon any such liquidation, dissolution or
other winding up of the affairs of the Company, the net assets of the Company
distributable among the holders of all outstanding shares of the Series B
Preferred Stock shall be insufficient to permit the payment in full to such
holders of the preferential amounts to which they are entitled, then the entire
net assets of the Company shall be distributed among the holders of the Series B
Preferred Stock ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.

                                   ARTICLE III

                                CONVERSION RIGHTS

     Each outstanding share of Series B Preferred Stock shall automatically be
converted, without any further act of the Company or any of its shareholders,
into fully paid and non-assessable shares of Common Stock of the Company
immediately ipso facto upon the filing by the Company of its Articles of
Amendment to its Articles of Incorporation increasing the number of authorized
Common Stock to the minimum amount necessary and sufficient to permit the full
conversion of the Series B Preferred Stock. Immediately upon the filing of this
Amendment, the Company shall proceed as expeditiously as possible to perform all
acts necessary to effect Articles of Amendment to its Articles of Incorporation
in order to increase its authorized Common Stock in order to permit this
conversion of the Series B Preferred Stock. The Company will effectuate the
Articles of Amendment pursuant to general authorization by the shareholders of
the Company at a duly called meeting of the shareholders. The holders of the
Series B Preferred Stock, upon conversion, will receive 38.39 shares of Common
Stock of the Company for each share of Series B Preferred Stock of the Company.

     No fractional share or scrip representing a fractional share will be issued
upon conversion of the Series B Preferred Stock, which shall be rounded to the
nearest whole share of Common Stock. In the event of any reclassification,
merger, consolidation or change of shares of the Series B Preferred Stock and/or
the Common Stock of the Company, the Company shall make adjustments to the
conversion ratio which shall be nearly as equivalent to that stated above as may
be practical.

     Upon the filing of Articles of Amendment increasing the number of
authorized Common Stock to the minimum sufficient to effect the conversion
described in paragraph one of this Article III, the outstanding shares of Series
B Preferred Stock shall be converted automatically without any further action by

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the holders of such shares and whether or not the certificates representing such
shares are surrendered to the Company or its transfer agent; provided that the
Company shall not be obligated to issue to any such holder certificates
evidencing the shares of Common Stock issuable upon such conversion unless
certificates evidencing the ownership by such holder of shares of Series B
Preferred Stock are either delivered to the Company or any transfer agent of the
Company. Conversion shall be deemed to have been effected on the date of filing
of the Articles of Amendment and such date is referred to herein as the
"Conversion Date." As promptly as practicable thereafter (and after surrender of
the certificate or certificates representing shares of Series B Preferred Stock
to the transfer agent of the Company), the Company shall issue and deliver to or
upon the written order of such holder a certificate or certificates for the
number of full shares of Common Stock to which such holder is entitled. The
person in whose name the certificate or certificates for Common Stock are to be
issued shall be deemed to have become a holder of record of such Common Stock on
the Conversion Date. The issuance of certificate for shares of Common Stock upon
conversion shall be made without charge to the holders of such Series B
Preferred Stock for any issuance in respect of the shares of Common Stock or
other costs incurred by the Company in connection with such conversion and the
related issuances of shares of Common Stock.

     The number of shares of Common Stock subject to conversion of each share of
Series B Preferred Stock shall be subject to proportionate adjustments in
certain events, including (i) the issuances of capital stock as a dividend or
distribution on Common Stock, and (ii) subdivisions, combinations, forward and
reverse stock splits and reclassifications of the Common Stock. The holders of
Series B Preferred Stock shall receive written notice at least ten (10) days
prior to the fixing of a record date for the issuance to all holders of Common
Stock of rights or warrants entitling them (for a period expiring within 30 days
of such record date) to subscribe for Common Stock, and (ii) the fixing of a
record date for the distribution to all holders of Common Stock of evidence of
indebtedness or assets (other than cash dividends) of the Company or
subscription rights or warrants (other than those referred to above).
Immediately upon any adjustment in the number of shares subject to conversion,
the Company shall give written notice of such adjustment to all holders of
Series B Preferred Stock setting forth in reasonable detail the calculation of
such adjustment.

     The Company shall not close its books against the transfer of Series B
Preferred or of Common Stock issued or issuable upon conversion of Series B
Preferred in any manner which interferes with the timely conversion of Series B
Preferred.

     Following the amendment to its Articles of Incorporation to increase its
authorized Common Stock to permit conversion of the Series B Preferred Stock,
the Company shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of issuance upon the
conversion of the Series B Preferred, such number of shares of Common Stock as
are issuable upon the conversion of all outstanding Series B Preferred.

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<PAGE>

     All shares of Common Stock which are so issuable shall, when issued be duly
and validly issued, outstanding, fully paid and nonassessable and free from all
taxes, liens and charges.

                                   ARTICLE IV

                                  VOTING RIGHTS

     The holders of Series B Preferred Stock will be entitled to vote on matters
submitted generally to the shareholders of the Company on the basis of 38.39
votes for each share of Series B Preferred Stock held by such holder. Unless the
vote or consent of the holders of a greater number of shares is required by law,
the consent of the holders of at least a majority in interest of Series B
Preferred Stock at the time outstanding shall be necessary to change, alter or
revoke the rights and preferences conferred upon the Series B Preferred Stock by
the Articles of Incorporation or this Amendment, as amended from time to time,
or for issuance of further shares of this series or another class of preferred
stock which shall be senior to the Series B Preferred Stock.

     To the extent that under the Florida Business Corporation Act the vote of
the holders of the Series B Preferred Stock, voting separately as a class or
series, as applicable, is required to authorize a given action of the Company,
the affirmative vote or consent of the holders of at least a majority of the
then outstanding shares of the Series B Preferred Stock represented at a duly
held meeting at which a quorum is present or by written consent of the holders
of at least a majority of the then outstanding shares of Series B Preferred
Stock (except as otherwise may be required under the Florida Business
Corporation Act) shall constitute the approval of such action by the class.

                                    ARTICLE V

                              PROTECTION PROVISIONS

     So long as any shares of Series B Preferred Stock are outstanding, the
Company shall not, without first obtaining the approval of a majority in
interest of the Holders of the then outstanding shares of Series B Preferred
Stock:

          1. alter or change the rights, preferences or privileges of the Series
B Preferred Stock or issue more than 500,000 shares of Series B Preferred Stock;

          2. alter or change the rights, preferences or privileges of any
previously issued shares of capital stock of the Company so as to affect
adversely the Series B Preferred Stock;

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<PAGE>

          3. create any new class or series of capital stock having a preference
over the Series B Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Company;

          4. create any new class or series of capital stock ranking pari passu
with the Series B Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Company;

          5. increase the authorized number of shares of Series B Preferred
Stock;

          6. issue any shares of Series A Preferred Stock other than pursuant to
the Letter Agreement dated March 27, 2000;

          7. redeem, or declare or pay any cash dividend or distribution on, any
junior securities; or

          8. issue any additional shares of capital stock, common or preferred,
for any purpose other than as employee benefits or for acquisitions of companies
or assets.

                                   ARTICLE VI

                                      RANK

     The Series B Preferred Stock shall rank (i) prior to the Company's Common
Stock; (ii) prior to any class or series of capital stock of the Company
hereafter created that, by its terms, ranks junior to the Series B Preferred
Stock ("Junior Securities"); (iii) junior to the Company's Series A Convertible
Preferred Stock; (iv) junior to any class or series of capital stock of the
Company hereafter created with the consent of the holders of Series B Preferred
Stock specifically ranking, by its terms, senior to the Series B Preferred
Stock; and (v) pari passu with any class or series of capital stock of the
Company hereafter created with the consent of the Holders of Series B Preferred
Stock specifically ranking by its terms on parity with the Series B Preferred
Stock, in each case as to distribution of assets upon liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary.

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<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Amendment of Designations,
Preferences and Rights to be executed by its duly authorized officer.

                                            AMERICAN QUANTUM CYCLES, INC.

                                            By: /s/ Richard K. Hagen
                                            ------------------------------------
                                            Name: R.K. Hagen
                                            ------------------------------------
                                            Its:  CEO
                                            ------------------------------------

DATED: August 16, 2000

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