Demand Note dated Feb. 13, 2003



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. 







 
        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    


	  	  	  Name: Norman L. Phelps

	  	  	  Title: President and CEO



 

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