PROMISSORY NOTE
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$50,000 JUNE 3, 2002
For valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned Daniel Benjamin, a Delaware corporation
("Promissor"), promises to pay to the order of Daniel Benjamin, LP ("Lender"),
in lawful money of the United States of America the principal amount of Fifty
Thousand Dollars and No Cents ($50,000.00 U.S.), together with no interest, at
the times and in the manner provided herein.
1. PAYMENT OF PRINCIPAL. The principal shall be paid as follows:
a. The principal, and all fees, charges, and other amounts owing hereunder
and then unpaid shall be due and payable on January 3, 2003 (the "Maturity
Date").
b. Promissor shall pay all amounts owing under this Note in immediately
available funds to Lender at Lender's address as set forth herein, or at such
other place as may be specified in writing by Lender. Each payment, when made,
shall be credited first to the principal then due, and then at the option of
Lender to late charges, and other fees and expenses outstanding hereunder in
such order as Lender may determine. Payments received after 1:00 p.m. on any
banking day or at any time on any Saturday, Sunday, or holiday shall be deemed
received on the next banking day.
2. COLLATERAL AS SECURITY. This Note is secured by certain collateral (the
"Collateral"), which encumbers, among other things, the interest of in certain
assets, as more particularly described in the Collateral Pledge Agreement. This
Note and the Collateral Pledge Agreement of even date herewith, between Lender
and Pledgor of even date herewith, and any other documents or instruments given
or to be given to Lender to secure the indebtedness evidenced by this Note are
collectively referred to herein as the "Loan Documents". The Company under no
circumstances will cancel the stock being held as Collateral unless required to
do so by a state or federal regulatory body.
3. INTEREST RATE UPON DEFAULT. Should Promissor fail to pay any amount owing
hereunder as and when due, whether the same is due regularly as scheduled or by
reason of acceleration following default or otherwise, then interest shall
accrue on the past due amount at the rate of ten (10%). Such interest shall be
due and payable upon the earlier of demand or the first day of the calendar
month following the month in which the same shall have accrued.
4. DEFAULT; REMEDIES. Each of the following occurrences and conditions shall
constitute an Event of Default:
a. failure of Promissor to pay as and when due any money, whether
principal or otherwise, under this Note, or the breach or default of any
obligation to pay money under or secured by the Stock Pledge Agreement; or
b. failure of Promissor to perform any obligation other than an obligation
to pay money, as and when performance of such obligation is due under this Note
or Loan Documents which failure continues for fifteen (15) days after notice
thereof from Lender to Promissor; or
c. failure by Promissor to comply with any of the terms, provisions,
covenants, conditions or restrictions now or hereafter affecting the Collateral
or any part thereof or contained in any agreement related or pertaining to the
Collateral, which failure continues for fifteen (15) days after notice thereof
from Lender to Promissor; or
d. Promissor's making or at any time having made any representation,
warranty or disclosure to Lender that is or was materially false or misleading
on the date as of which made, whether or not that representation or disclosure
appears in the Loan Documents; or
e. the sale, transfer, conveyance, or lease of all or any portion of the
Collateral or of any of Promissor's rights therein, whether voluntarily,
involuntarily, or otherwise, or Promissor's entering into an agreement to do any
of the foregoing, in each case except as expressly permitted in the Stock Pledge
Agreement; or
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At any time following the occurrence of any Event of Default, or following the
occurrence of any event as a consequence of which the obligations evidenced
hereby may be accelerated, then at the election of Lender and notwithstanding
anything to the contrary herein or elsewhere, the entire amount of principal
then outstanding under this Note and all fees, charges, and other amounts owing
and then unpaid hereunder shall become immediately due and payable, and Lender
may exercise any and all rights that it may have under the Loan Documents, at
law, in equity, and otherwise. In the event of a default on the Promissory Note
where (a) the stock is sold pursuant to the Stock Pledge Agreements by MRC and
Valdetaro and (b) the proceeds of these sales of stock are is insufficient to
cover the principle and any interest then owed pursuant to the Note, Vertical
acknowledges and agrees that it will be liable for any then outstanding amounts.
5. ATTORNEYS' FEES. Promissor shall pay to Lender upon demand all costs and
expenses incurred by Lender in connection with determination, protection, or
enforcement of any and all of Lender's rights hereunder or under any of the Loan
Documents, including enforcement of any and all obligations of Promissor
hereunder and thereunder and protection, enhancement, or maintenance of the
security interests securing such obligations or the priority of the same. Such
costs and expenses shall be payable whether or not any suit is instituted, and
the same shall include without limitation attorneys' fees, expert witness fees,
costs of investigation, and all of such costs incurred in connection with any
trial, appellate proceeding, or any case or proceeding under Chapters 7, 11, or
13 of the Bankruptcy Code or any successor thereto.
6. WAIVER OF NOTICE. Promissor and each endorser, guarantor and surety of
this Note hereby waive diligence, demand, presentment for payment, notice of
discharge, notice of nonpayment, protest and notice of protest, and specifically
consent to and waive notice of any renewals or extensions of this Note, whether
made to or in favor of Promissor or any other person or persons. Promissor and
each endorser, guarantor and surety of this Note further waive and renounce all
rights to the benefits of all statutes of limitation and any moratorium,
appraisement, by any federal exception and homestead now or hereafter provided
or state law or statute, including but not limited to exemptions provided by or
allowed under the Bankruptcy Code, both as to each of themselves personally and
as to all of their property, whether real or personal, against the enforcement
and collection of the obligations evidenced by this Note and any and all
extensions, renewals and modifications thereof.
7. NOTICES. All notices required hereunder or pertaining hereto shall be in
writing and shall be deemed delivered and effective upon the earlier of (i)
actual receipt, or (ii) the date of delivery or refusal of the addressee to
accept delivery if such notice is sent by express courier service or United
States mail, postage prepaid, certified or registered, return receipt requested,
in either case to the applicable address as follows:
To Lender: Daniel Benjamin
1644 Bears Den Road
Diamond Bar, California 91765
To Promissor: Vertical Computer Systems, Inc.
6336 Wilshire Boulevard
Los Angeles, CA 90048
Attn: President
Notwithstanding the foregoing, any notice under or pertaining to the Loan
Documents or the obligations secured thereby given and effective in accordance
with applicable law shall be effective for purposes hereof. Either party may
change the address at which it is to receive notices hereunder to another
business address within the United States (but not a post office box or similar
mail receptacle) by giving notice of such change of address in accordance
herewith.
9. EXERCISE OF RIGHTS. No single or partial exercise of any of Lenders rights
or powers under this Note or any of the other Loan Documents shall preclude any
other or further exercise thereof or the exercise of any other right or power.
Lender at all times shall have the right to proceed against any portion of the
security which secures payment of the indebtedness evidenced hereby in such
order and manner as Lender may elect without waiving any rights with respect to
any other portion of such security. Each and all rights and remedies of Lender
hereunder and under the Loan Documents are cumulative and in addition to each
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and all other such rights and remedies. No exercise of any right or remedy shall
preclude exercise of any other right or remedy.
10. NO WAIVER. No failure of Lender to insist upon strict performance of any
obligation of Promissor or to exercise any right or remedy hereunder or under
the Loan Documents, whether before or after any default, shall constitute or
give rise to a waiver thereof, and no waiver of any default shall constitute a
waiver of any future default or of any other default. No failure to accelerate
the debt evidenced hereby by reason of default hereunder or otherwise, and no
acceptance of any past due payment hereunder or acceptance of any amount less
than the amount then due, and no other indulgence that may be granted by Lender
from time to time shall (a) preclude the exercise of any right that Lender may
have at law, in equity, by contract or agreement or otherwise, or (b) constitute
or give rise to (i) a waiver of such right of acceleration or any other right,
or (ii) a novation of this Note or a reinstatement of the debt evidenced hereby,
or (iii) any waiver of Lender's rights to demand and receive from Promissor full
and prompt payment and performance thereafter, to impose late charges
retroactively, or to declare a default. Promissor and each endorser, guarantor,
and surety of this Note hereby expressly waive the benefit of any statute or
rule of law or equity which would produce any result contrary to or otherwise in
conflict with any of the foregoing.
11. ASSIGNMENT; SUCCESSORS AND ASSIGNS. Lender may assign or otherwise
transfer all or any part of its interest herein. Promptly following written
notice of such assignment or other transfer, duly executed by Lender, Promissor
shall render full and complete performance hereunder as and when due to the
transferee so designated by Lender. Promissor shall not assign or transfer all
or any of its interests or obligations hereunder, and any attempted or purported
assignment or transfer by Promissor shall be void and of no force or effect,
except to the extent that the same may be expressly permitted under the Stock
Pledge Agreements. Subject to the foregoing, the terms of this Note shall apply
to, be binding upon, and inure to the benefit of ail parties hereto and their
successors and assigns.
12. MODIFICATION. This Note shall not be modified, amended, or terminated,
except by written agreement duly executed and delivered by both Lender and
Promissor.
13. CONFLICTS. In the event of any conflict between any provision of this Note
and any provision of the Stock Pledge Agreements, which conflict cannot
reasonably be resolved in such a way as to give effect to all provisions herein
and therein contained, this Note shall govern.
14. SEVERABILITY. If any provision of this Note or any payments pursuant to
the terms hereof shall be invalid or unenforceable to any extent, the remainder
of this Note and any other payments hereunder shall not be affected thereby and
shall be enforceable to the greatest extent permitted by law.
15. GOVERNING LAW. This Note shall be governed by and construed in accordance
with the laws of the State of California.
IN WITNESS WHEREOF, Promissor has executed and delivered this Note as of
the date first written above.
VERTICAL COMPUTER SYSTEMS, INC.
By __________________________
Richard Wade, President
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