THIS PROMISSORY NOTE SUPERCEDES AND RENDERS NULL AND VOID: (1) A PROMISSORY
NOTE, DATED MAY 12, 1999, IN THE PRINCIPAL AMOUNT OF $300,000 MADE BY WASHOE
TECHNOLOGY CORPORATION WITH NETWORK CONSULTING GROUP, INC. AS HOLDER; AND (2) A
PROMISSORY NOTE, DATED JUNE 14, 2000, IN THE PRINCIPAL AMOUNT OF $100,000 MADE
BY RARE TELEPHONY, INC., A NEVADA CORPORATION WITH NETWORK CONSULTING GROUP,
INC. AS HOLDER.
PROMISSORY NOTE
---------------
$100,000 June 23, 2000
Greenwich, Connecticut
FOR VALUE RECEIVED, RARE TELEPHONY, INC. A DELAWARE CORPORATION ("Maker"),
promises to pay to the order of NETWORK CONSULTING GROUP, INC. a New Jersey
Corporation ("Holder"), which term shall include any subsequent holder of this
Note, at 101 Route 46 East, Pine Brook, NJ 07058 (or at such other place as
Holder shall designate in writing) in lawful money of the United States of
America, the aggregate principal sum of One Hundred Thousand Dollars ($100,000),
with interest thereon at the rate (the "Interest Rate") described below.
1. Interest Rate. The Interest Rate shall be eight percent (8%) per
---------------
annum. Interest shall be computed at the Interest Rate on the
basis of the actual number of days which the Outstanding Principal
Balance (as defined herein) is outstanding divided by three
hundred sixty (360), which shall, for the purposes of this Note,
be considered one (1) year.
2. Outstanding Principal Balance. All references to the "Outstanding
-------------------------------
Principal Balance" shall mean the amount of One Hundred Thousand
Dollars ($100,000), less any principal repaid.
3. Installment Payments. This Note shall be payable in thirty six
----------------------
(36) equal installments ("Installments") of principal and interest
in the amount of $3,133.64, which installments shall commence on
December 1, 2000 and continue thereafter on the 1st day of each
successive calendar month until November 1, 2003 (the "Maturity
Date") when the entire Outstanding Principal Balance, and any
accrued but unpaid interest, shall be due and payable.
4. Application of Payments. All payments on this Note shall be
--------------------------
applied first to the payment of accrued and unpaid interest, and
then to the reduction of the Outstanding Principal Balance.
5. Prepayment Right. Maker shall have the right to prepay at any
------------------
time, in whole or in part, the Outstanding Principal Balance of
this Note, without premium or penalty.
6. Accelerated Maturity. Notwithstanding anything in this Note to
----------------------
the contrary and irrespective of the Maturity Date, the entire
Outstanding Principal Balance and accrued interest shall become
immediately due and payable upon the earliest to occur of the
following (the "Accelerated Maturity Date") after June 23, 2000:
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(a) the sale of all or substantially all of the assets of the
Maker or the common stock of the Maker to a third party
(provided, however, that this provision shall not take effect or
be applicable if the sale of all or substantially all of the
assets of the Maker or the common stock of the Maker is to a
subsidiary, controlling corporation or affiliate of the Maker);
or (b) the issuance of the securities of Maker on the Public
Market.
7. Modifications. From time to time, without affecting the obligation
--------------
of Maker to pay the Outstanding Principal Balance or to observe
the covenants of Maker contained herein, and without giving notice
to or obtaining the consent of Maker, Holder may, at the option of
Holder, extend the time for payment of the Outstanding Principal
Balance or any part thereof, reduce the payments hereunder,
release any person liable hereunder, accept a renewal or extension
of this Note, join in any extension or subordination agreement,
release any security given herefor, take or release security, or
agree in writing with Maker to modify the Interest Rate or any
other provision of this Note.
8. Events of Default. Time is of the essence hereof. Upon the
--------------------
occurrence of any of the following events (the "Events of
Default"), payment of the entire Outstanding Principal Balance and
accrued interest of this Note shall, at the option of the Holder,
be accelerated and shall be immediately due and payable without
notice or demand:
(a) Failure of Maker to pay any Installment within ten (10)
days after the due date thereof; or
(b) Failure of Maker to pay the Outstanding Principal
Balance and accrued interest in full on the Maturity
Date or the Accelerated Maturity Date; or
(c) All or the majority of the value of the assets of Maker
is seized or levied upon by writ of attachment,
garnishment, execution or otherwise, and such seizure
or levy is not released within thirty (30) days
thereafter; or
(d) Maker executes a general assignment for the benefit of
its creditors, convenes any meeting of its creditors,
becomes insolvent, admits in writings its insolvency or
inability to pay its debts, or is unable to pay or is
generally not paying its debts as they become due; or
(e) A receiver, trustee, custodian or agent is appointed to
take possession of all or any substantial portion of
Maker's assets; or
(f) Any case or proceeding is voluntarily commenced by
Maker under any provision of the federal Bankruptcy
Code or any other federal or state law relating to
debtor rehabilitation, insolvency, bankruptcy,
liquidation or reorganization, or any such case or
proceeding is involuntarily commenced against Maker and
not dismissed within thirty (30) days thereafter; or
(g) Any representation made by Maker in this Note or in any
of the other documents delivered in connection
therewith, shall have been untrue or incorrect in any
material respect when made.
9. Default Rate. In the event that Maker (a) fails to pay any
--------------
Installment within ten (10) days after the due date thereof, or
(b) fails to pay the Outstanding Principal Balance and all
accrued interest in full on the Maturity Date or the Accelerated
Maturity Date, the amount past due (including any acceleration of
the Outstanding Principal Balance), and unpaid shall bear
interest at an annual rate equal to the lesser of (I) the then
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<PAGE>
applicable Interest Rate plus five percent (5%), or (ii) the
maximum amount permitted by law (the "Default Rate"), computed
from the date on which said amount was due and payable until
paid. The charging or collecting of interest at the Default Rate
shall not limit any of Holder's other rights or remedies under
this Note.
10. Governing Law. Maker, and each endorser and cosigner of this Note,
--------------
acknowledges and agrees that this Note is made and is intended to
be paid and performed in the State of New Jersey and the
provisions hereof will be construed in accordance with the laws of
the State of New Jersey and, to the extent that federal law may
preempt the applicability of state laws, federal law. Maker, and
each endorser and cosigner of this Note further agree that upon
the occurrence of an Event of Default, this Note may be enforced
in any court of competent jurisdiction in the State of New Jersey,
and they do hereby submit to the jurisdiction of such courts
regardless of their residence.
11. Remedies Cumulative: Waiver. The remedies of Holder as provided
------------------------------
herein shall be cumulative and concurrent, and may be pursued
singularly, successively or together, in the sole discretion of
Holder, and may be exercised as often as occasion therefor shall
arise. No act of omission or commission of Holder, including
specifically any failure to exercise any right, remedy or
recourse, shall be deemed to be a waiver or release of the same;
such waiver or release to be affected only through a written
document executed by Holder and then only to the extent
specifically recited therein. Without limiting the generality of
the preceding sentence, acceptance by Holder of any payment with
knowledge of the occurrence of an Event of Default by Maker shall
not be deemed a waiver of such Event of Default, and acceptance
by Holder of any payment in an amount less than the amount then
due hereunder shall be an acceptance on account only and shall
not in any way affect the existence of an Event of Default
hereunder. A waiver or release with reference to any one event
shall not be construed as continuing, as a bar to, or as a waiver
or release of, any subsequent right, remedy or recourse as to a
subsequent event.
12. No Usury Intended. This Note is expressly limited so that in no
-------------------
contingency or event whatsoever, whether by reason of: error of
fact or law; payment, prepayment or advancement of the proceeds
hereof; acceleration of maturity of the Outstanding Principal
Balance, or otherwise, shall the amount paid or agreed to be paid
to Holder hereof for the use, forbearance or retention of the
money to be advanced hereunder, including any charges collected
or made in connection with the indebtedness evidenced by this
Note which may be treated as interest under applicable law, if
any, exceed the maximum legal limit (if any such limit is
applicable) under United States federal law or state law (to the
extent not preempted by federal law, if any), now or hereafter
governing the interest payable in connection with this Note. If,
from any circumstances whatsoever, fulfillment of any provision
hereof at the time performance of such provision shall be due
shall involve transcending the limit of validity (if any)
prescribed by law which a court of competent jurisdiction may
deem applicable hereto, then ipso facto, the obligation to be
fulfilled shall be ---------- reduced to the limit of such
validity, and if from any circumstances, Holder shall ever
receive as interest an amount which would exceed the maximum
legal limit (if any such limit is applicable), such amount which
would be excessive interest shall be applied to the reduction of
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<PAGE>
the Outstanding Principal Balance due hereunder and not to the
payment of interest or, if necessary, rebated to Maker.
13. Guaranty. (intentionally deleted)
---------
14. Purpose of Loan. Maker certifies that the loan evidenced by this
----------------
Note is obtained for business or commercial purposes and that the
proceeds thereof shall not be used for personal, family,
household, or agricultural purposes.
15. Miscellaneous Provisions.
-------------------------
(a) Maker, and each endorser and cosigner of this Note expressly
grants to Holder the right to release or to agree not to sue
any other person, or to suspend the right to enforce this Note
against such other person or to otherwise discharge such
person; and Maker, and each endorser and cosigner agrees that
the exercise of such rights by Holder will have no effect on
this liability of any other person, primarily or secondarily
liable hereunder. Maker, and each endorser and cosigner of
this Note waives, to the fullest extent permitted by law,
demand for payment, presentment for payment, protest, notice
of protest, notice of dishonor, notice of nonpayment, notice
of acceleration of maturity, diligence in taking any action to
collect sums owing hereunder, any duty or obligation of Holder
to effect, protect, perfect, retain or enforce any security
for the payment of this Note or to proceed against any
collateral before otherwise enforcing this Note, and the right
to plead as a defense to the payment hereof any statute of
limitations.
(b) This Note and each payment of principal and interest hereunder
shall be paid when due without deduction or setoff of any kind
or nature whatsoever.
(c) Maker agrees to reimburse Holder for all costs, including,
without limitation, reasonable attorneys' fees, incurred to
collect this Note if this Note is not paid when due,
including, but not limited to, attorneys' fees incurred in
connection with any bankruptcy proceedings instituted by or
against Maker (including relief from stay litigation).
(d) If any provision hereof is for any reason and to any extent,
invalid or unenforceable, then neither the remainder of the
document in which such provision is contained, nor the
application of the provision to other persons, entities or
circumstances shall be affected thereby, but instead shall be
enforceable to the maximum extent permitted by law.
(e) This Note shall be a joint and several obligation of Maker,
and of all endorsers and cosigners hereof and shall be binding
upon them and their respective heirs, personal
representatives, successors and assigns.
(f) This Note may not be modified or amended orally, but only by a
modification or amendment in writing signed by Holder and
Maker.
(g) When the context and construction so require, all words used
in the singular herein shall be deemed to have been used in
the plural and the masculine shall include the feminine and
neuter and vice versa. The word "person" as used herein shall
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<PAGE>
include any individual, company, firm, association,
partnership, corporation, trust or other legal entity of any
kind whatsoever.
(h) The headings of the paragraphs and sections of this Note are
for convenience or reference only, are not to be considered a
part hereof and shall not limit to otherwise affect any of the
terms hereof.
(i) In the event that at any time any payment received by Holder
hereunder shall be deemed by final order of a court of
competent jurisdiction to have been a voidable preference or
fraudulent conveyance under the bankruptcy or insolvency laws
of the United States, or shall otherwise be deemed to be due
to any party other than Holder, then, in any such event, the
obligation to make such payment shall survive any cancellation
of this Note and/or return thereof to Maker and shall not be
discharged or satisfied by any prior payment thereof and/or
cancellation of this Note, but shall remain a valid and
binding obligation enforceable in accordance with the terms
and provisions hereof, and the amount of such payment shall
bear interest at the Default Rate from the date of such final
order until repaid hereunder.
(j) THIS NOTE SUPERSEDES AND RENDERS NULL AND VOID: (1) A
PROMISSORY NOTE, DATED MAY 12, 1999, IN THE PRINCIPAL AMOUNT
OF $300,000 MADE BY WASHOE TECHNOLOGY CORPORATION WITH NETWORK
CONSULTING GROUP, INC. AS HOLDER (THE "FIRST NOTE"); AND (2) A
PROMISSORY NOTE, DATED JUNE 14, 2000, IN THE PRINCIPAL AMOUNT
OF $100,000 MADE BY RARE TELEPHONY, INC., A NEVADA CORPORATION
WITH NETWORK CONSULTING GROUP, INC. AS HOLDER (THE "SECOND
NOTE"). For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Holder hereby
forever releases, discharges, and agrees to hold harmless,
Maker and its predecessors, successors, and affiliates from
any and all claims, demands, or actions arising out of or
related to the First Note or the Second Note.
(k) This Note may be signed by the undersigned in counterparts.
This Note may also be executed and delivered by Holder by
facsimile signature. This Note may not be executed and
delivered by Maker by facsimile signature.
IN WITNESS WHEREOF Maker has executed this Promissory Note as of the
day and year first above written.
Accepted by "Holder" "Maker"
Network Consulting Group, Inc. Rare Telephony, Inc.
By /s/ Peter J. Salzano By /s/ Frederick A. Moran
----------------------- -------------------------
Peter J. Salzano, President Frederick A. Moran, CEO
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