Exhibit 10.3

 

 

DEMAND NOTE

 

$650,000

 

Cary, North Carolina

   

February 13, 2003

 

FOR VALUE RECEIVED, Tangram Enterprise Solutions, Inc., a Pennsylvania
corporation (the “Borrower”), having an office at 11000 Regency Parkway, Suite
301, Cary, North Carolina 27511-8504, hereby promises to pay to the order of
Safeguard Delaware, Inc. (the “Lender”), at the Lender’s address located at c/o
Safeguard Scientifics, Inc., 800 The Safeguard Building, 435 Devon Park Drive,
Wayne, PA 19087 or at such other place in the continental United States as the
Lender may designate in writing, in lawful money of the United States, and in
immediately available funds, the principal sum of Six Hundred Fifty Thousand
Dollars ($650,000), together with interest accruing on the outstanding principal
balance from the date hereof, as provided below:

 

        1. Note Exchange. This Note together with that certain Revolving Note
dated the date hereof made by Borrower in favor of Lender is being issued in
replacement of that certain Second Amended Revolving Note, originally dated
September 11, 1997 as amended by the First Amendment dated as of February 20,
2001, made by the Borrower in favor of Safeguard Scientifics, Inc., as assigned
to the Lender (the “Original Note”). The indebtedness evidenced by the Original
Note (the “Original Indebtedness”) is continuing indebtedness of the Borrower
and all such outstanding Original Indebtedness is hereby transferred to, and
deemed to be outstanding under, this Note, and the Original Note shall be deemed
to have been cancelled as of the date of this Note.

 

        2. Rate of Interest. The amount outstanding under this Note will bear
interest at a rate equal to the announced prime rate of PNC Bank, N.A. (the
“Prime Rate”) plus one percent (1%). Interest will be calculated on the basis of
a year of 360 days for the actual number of days in each interest period.

 

        3. Payment Terms. Accrued interest on this Note shall be due and payable
by the Borrower quarterly in arrears on the first business day of January,
April, July and October of each year.

 

        All outstanding principal and accrued but unpaid interest on this Note
shall be due and payable upon the earlier to occur of the date (the “Maturity
Date”): (i) six months after the date of demand by Lender, which demand shall
not occur early then one (1) year from the date of this Note or (ii) on which
the acquisition of the Borrower by an unaffiliated third party, other than
Safeguard Scientifics, Inc., or any of its wholly-owned subsidiaries, in a bona
fide change of control transaction (i.e. not a recapitalization or
reincorporation for the purpose of changing corporate domicile or other similar
transaction) is consummated, regardless of the form of the transaction (e.g.,
merger, consolidation, sale of assets or sale of stock). In addition, upon the
closing of a sale of debt or equity securities by the Borrower to any third
party, the Borrower shall apply the proceeds (net of underwriting discounts and
commissions) in excess of $2,500,000 first to the repayment of the then
outstanding obligations under that certain Revolving Note, dated February 13,
2003 made by Borrower in favor of Safeguard Delaware, Inc. (“Revolving Note”)
and then to the repayment of the then outstanding obligations under this Note.

 

        Any payments, except payments made on demand of Lender, on this Note
shall be made prorata to that certain Note, dated as of the date hereof made by
Borrower in favor of TBBH Investments Europe AG (“TBBH”). Payments to be made on
demand of Lender shall be prorata only to the extent TBBH has also demanded
payment. Borrower shall notify TBBH of Lender’s demand for payment.

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        Notwithstanding anything in this Note, the interest rate charged hereon
shall not exceed the maximum rate allowable by applicable law. If any stated
interest rate herein exceeds the maximum allowable rate, then the interest rate
shall be reduced to the maximum allowable rate, and any excess payment of
interest made by the Borrower at any time shall be applied to the unpaid balance
of any outstanding principal of this Note.

 

        4. Prepayment. Unless there amounts outstanding under Revolving Note,
the outstanding principal amount of this Note may be prepaid in whole or in part
by the Borrower upon notice to the Lender at any time or from time to time
without any prepayment penalty or premium; provided, that upon such payment any
interest due to the date of such prepayment on such prepaid amount shall also be
paid.

 

        5. Default. For purposes of this Note, an “Event of Default” shall
consist of:

 

  a.   a default in the payment by the Borrower to the Lender of principal or
interest under this Note as and when the same shall become due and payable;

 

  b.   an event of default by the Borrower under any other obligation,
instrument, note or agreement for borrowed money, that remains uncured beyond
any applicable notice and/or grace period;

 

  c.   institution of any proceeding by or against the Borrower under any
present or future bankruptcy or insolvency statute or similar law and, if
involuntary, if such proceeding is not stayed or dismissed within sixty (60)
days, or the Borrower’s assignment for the benefit of creditors or the
appointment of a receiver, trustee, conservator or other judicial representative
for the Borrower or the Borrower’s property or the Borrower’s being adjudicated
bankrupt or insolvent; or

 

  d.   the liquidation, dissolution or winding up of the Borrower; provided
that, solely for the purposes of this Section 7, a liquidation, dissolution or
winding up of the Borrower shall include (i) the Borrower’s sale of all or
substantially all of its assets, or (ii) any acquisition of the Borrower or a
change of control of the Borrower by another entity by means of any transaction
or series of related transactions (including, without limitation, any stock
sale, merger, consolidation or other corporate reorganization, but excluding any
merger effected primarily for the purpose of changing the domicile of the
Borrower) that results in the transfer of 50% or more of the outstanding voting
power of the Corporation.

 

        Upon the occurrence of any Event of Default, interest shall accrue on
the outstanding balance of this Note at the Prime Rate plus three percent (3%),
the entire unpaid principal amount of this Note and all unpaid interest accrued
thereon shall, at the sole option of the Lender, without notice, become
immediately due and payable, and the Lender shall thereupon have all the rights
and remedies provided hereunder or now or hereafter available at law or in
equity.

 

        6. Legal Proceedings; Arbitration. Any action, suit or proceeding where
the amount in controversy as to at least one party, exclusive of interest and
costs, exceeds $1,000,000 (“Summary Proceeding”), arising out of or relating to
this Note, or the breach, termination or validity thereof, shall be litigated
exclusively in the Superior Court of the State of Delaware (the “Delaware
Superior Court”) as a

 

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summary proceeding pursuant to Rules 124-131 of the Delaware Superior Court, or
any successor rules (the “Summary Proceeding Rules”). Each of the parties hereto
hereby irrevocably and unconditionally (i) submits to the jurisdiction of the
Delaware Superior Court for any Summary Proceeding, (ii) agrees not to commence
any Summary Proceeding except in the Delaware Superior Court, (iii) waives, and
agrees not to plead or to make, any objection to the venue of any Summary
Proceeding in the Delaware Superior Court, (iv) waives, and agrees not to plead
or to make, any claim that any Summary Proceeding brought in the Delaware
Superior Court has been brought in an improper or otherwise inconvenient forum,
(v) waives, and agrees not to plead or to make, any claim that the Delaware
Superior Court lacks personal jurisdiction over it, (vi) waives its right to
remove any Summary Proceeding to the federal courts except where such courts are
vested with sole and exclusive jurisdiction by statute, and (vii) understands
and agrees that it shall not seek a jury trial or punitive damages in any
Summary Proceeding based upon or arising out of or otherwise related to this
Agreement waives any and all rights to any such jury trial or to seek punitive
damages.

 

        In the event any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, does not
exceed $1,000,000 (a “Proceeding”), arising out of or relating to this Note or
the breach, termination or validity thereof is brought, the parties to such
Proceeding agree to make application to the Delaware Superior Court to proceed
under the Summary Proceeding Rules. Until such time as such application is
rejected, such Proceeding shall be treated as a Summary Proceeding and all of
the foregoing provisions of this Section relating to Summary Proceedings shall
apply to such Proceeding.

 

        If a Summary Proceeding is not available to resolve any dispute
hereunder, the controversy or claim shall be settled by arbitration conducted on
a confidential basis, under the U.S. Arbitration Act, if applicable, and the
then current Commercial Arbitration Rules of the American Arbitration
Association (the “Association”) strictly in accordance with the terms of this
Note and the substantive law of the State of Delaware. The arbitration shall be
conducted at the Association’s regional office located closest to the Lender’s
principal place of business by three arbitrators, at least one of whom shall be
knowledgeable in general business matters and one of whom shall be an attorney.
Judgment upon the arbitrators’ award may be entered and enforced in any court of
competent jurisdiction. Neither party shall institute a proceeding hereunder
unless at least 60 days prior thereto such party shall have given written notice
to the other party of its intent to do so.

 

        Neither party shall be precluded hereby from securing equitable remedies
in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but such remedies shall not be sought as a means to avoid or stay
arbitration or a Summary Proceeding.

 

        7. Demand Waiver; Offset. The Borrower hereby waives presentment,
demand, protest and notice of dishonor and protest, and also waives all other
exemptions; and agrees that extension or extensions of the time of payment of
this Note or any installment or part thereof may be made before, at or after
maturity by agreement by the Lender. Upon default hereunder, the Lender shall
have the right to offset the amount owed by the Borrower against any amounts
owed by the Lender in any capacity to the Borrower, whether or not due, and the
Lender shall be deemed to have exercised such right of offset and to have made a
charge against any such account or amounts immediately upon the occurrence of an
Event of Default even though such charge is made or entered on the books of the
Lender subsequent thereto.

 

        8. Attorneys Fees; Costs and Expenses. The Borrower shall pay to the
Lender, upon demand, all costs and expenses, including, without limitation,
attorneys’ fees and legal expenses that may be incurred by the Lender in
connection with the enforcement of this Note. Borrower will bear the attorney’s
fees and legal expenses of Lender in connection with this Note, not to exceed
$25,000.

 

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        9. Notices. Notices required to be given hereunder shall be deemed
validly given (i) three business days after sent, postage prepaid, by certified
mail, return receipt requested, (ii) one business day after sent, charges paid
by the sender, by next day delivery or other guaranteed delivery service, (iii)
when sent by facsimile transmission, or (iv) when delivered by hand:

 

If to the Lender:

  

Safeguard Delaware, Inc.

C/o Safeguard Scientifics, Inc.

800 The Safeguard Building

435 Devon Park Drive

Wayne, PA 19087

Attn: Chief Financial Officer

If to the Borrower:

  

Tangram Enterprise Solutions, Inc.

11000 Regency Parkway

Suite 301

Cary, North Carolina 27511-8504

Attn: Chief Financial Officer

 

or to such other address, or in care of such other person, as the holder or the
Borrower shall hereafter specify to the other from time to time by due notice.

 

        10. Miscellaneous. Any failure by the Lender to exercise any right
hereunder shall not be construed as a waiver of the right to exercise the same
or any other right at any time. No amendment to or modification of this Note
shall be binding upon the Lender unless in writing and signed by it. Any
provision hereof found to be illegal, invalid or unenforceable for any reason
whatsoever shall not affect the validity, legality or enforceability of the
remainder hereof. This Note shall apply to and bind the successors of the
Borrower and shall inure to the benefit of the Lender, its successors and
assigns.

 

        11. Governing Law. This Note shall be governed by and interpreted in
accordance with the laws of the State of Delaware.

 

        IN WITNESS WHEREOF, the Borrower, by its duly authorized officer
intending to be legally bound hereby, has duly executed this Note as of the date
first written above.

 

TANGRAM ENTERPRISE SOLUTIONS, INC.

By:

 

/s/ Norman L. Phelps    

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Name: Norman L. Phelps

   

Title: President and CEO

 

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