PROMISSORY NOTE
$90,000 JUNE 26, 2003
For valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned Vertical Computer Systems, Inc. ("Promissor"),
promises to pay to the order of Robert Mokhtarian ("Promissee"), in lawful money
of the United States of America the principal amount of Ninety Thousand Dollars
($90,000.00 U.S.), together with interest on the amount of such principal
outstanding from time to time at the rate of ten (10%) per annum, calculated on
the basis of a three hundred sixty (360) day year containing twelve (12) months
of thirty (30) days each (the "Basic Interest Rate"), at the times and in the
manner provided herein. "Loan Documents" shall include any related agreements
referencing this promissory note (the "Note"), including any security
agreements.
1. Payment of Principal and Interest. Principal and interest shall be paid as
follows: The principal, and all interest, fees, charges, and other amounts owing
hereunder and then unpaid shall be due and payable on March 28, 2004 (the
"Maturity Date"). Promissor shall pay all amounts owing under this Note in
immediately available funds to Promissee at Promissee's address as set forth
herein, or at such other place as may be specified in writing by Promissee. Each
payment, when made, shall be credited first to interest then due, and then at
the option of Promissee to principal, late charges, and other fees and expenses
outstanding hereunder in such order as Promissee may determine.
2. Collateral as Security. This Note is secured by certain collateral, which
encumbers, among other things, the interest of in certain assets, as more
particularly described therein (the "Collateral"). This Note and the Collateral
Pledge Agreement of even date herewith, between Promissee and Pledgor(s), and
any other documents or instruments given or to be given to Promissee 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 Basic Interest Rate.
4 Default; Remedies. Each of the following occurrences and conditions shall
constitute an Event of Default upon written notice by Promissee to Promissor:
a. failure by Promissor to pay within five (5) business days of the date
when due any money, whether principal, interest, or otherwise, under this Note,
or the breach or default of any obligation to pay money under or secured by the
CollateralAgreement; 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 Promissee to Promissor; or
c. Vertical pledge any of its ownership interest in Now Solutions to
another party as collateral for any loan without pledging the same interest to
Promissee on an equal basis. .
Notwithstanding anything to the contrary herein or any Loan Document, if 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 Promissee and providing that
Promissor has not cured the Event of Default within seven (7) business days
after written notice from Promissee, the entire amount of principal then
outstanding under this Note and all interest, fees, charges, and other amounts
owing and then unpaid hereunder shall become immediately due and payable, and
Promissee may exercise any and all rights that it may have under the Loan
Documents, at law, in equity, and otherwise.
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5. Attorneys' Fees. Promissor shall pay to Promissee upon demand all costs and
expenses incurred by Promissee in connection with determination, protection, or
enforcement of any and all of Promissee'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 .
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 .
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 Promissee: Robert Mokhtarian
3436 Verdugo Road, Suite 250
Glendale, CA 91208
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.
8. Exercise of Rights. No single or partial exercise of any of Promissee's
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. Promissee 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 Promissee may elect without waiving any
rights with respect to any other portion of such security. Each and all rights
and remedies of Promissee hereunder and under the Loan Documents are cumulative
and in addition to each and all other such rights and remedies. No exercise of
any right or remedy shall preclude exercise of any other right or remedy.
9. No Waiver. No failure of Promissee 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.
10. Assignment; Successors and Assigns. Promissee 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 Promissee,
Promissor shall render full and complete performance hereunder as and when due
to the transferee so designated by Promissee. 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.
11. Modification. This Note shall not be modified, amended, or terminated,
except by written agreement duly executed and delivered by both Promissee and
Promissor.
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12. Conflicts. In the event of any conflict between any provision of this Note
and any provision of the Stock Pledge Agreements or the Loan Documents, 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.
13. 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.
14. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of California and subject to the jurisdiction and
venue of the state and federal courts of Los Angeles, 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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