Exhibit 10.33
$5,500,000.00 Houston, Texas June 26, 2002
SCALABLE SOFTWARE, INC., a Delaware corporation (hereinafter called
"Maker") jointly and severally, For Value Received, promises and agrees to pay
as herein provided, unto the order of NEON SYSTEMS, INC., a Delaware corporation
(hereinafter called "Payee"), at its offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, in lawful money of the United States of America
the principal sum of FIVE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($5,500,000.00), or so much thereof evidenced hereby and/or advanced hereunder
in multiple advances pursuant to the terms hereof, together with interest on the
unpaid principal balance outstanding from time to time hereon computed from the
"Option Term Expiration Date" (as hereinafter defined) until maturity at a
varying interest rate per annum which is two percent (2%) per annum (hereinafter
called the "Margin Percentage") above the "Prime Rate" (as hereinafter defined),
but in no event to exceed the maximum rate of nonusurious interest allowed from
time to time by law (hereinafter called the "Highest Lawful Rate"), with
adjustments in such varying rate to be made on the same date as any change in
the Prime Rate and adjustments due to changes in the Highest Lawful Rate to be
made on the effective date of any change in the Highest Lawful Rate. Interest
shall be calculated on the basis of a year of 365 or 366 days, as the case may
be, and the actual number of days elapsed (including the first day but excluding
the last day) occurring in the period for which such interest is payable.
Certain capitalized terms used herein as definitions are defined herein
beginning on page three of this note.
ALL PAST due principal and interest shall bear interest until paid at a
varying rate per annum, which is two percent (2%) per annum plus the Margin
Percentage plus the Prime Rate (but in no event to exceed the Highest Lawful
Rate). The amount of interest to accrue at the rate specified in the preceding
sentence, having due consideration for the period during which such rate is in
effect, shall be calculated in accordance with the provisions of the immediately
preceding paragraph of this note, except that for such purpose the references to
the "Margin Percentage" shall be deemed to be references to two percent (2%) per
annum in excess of the Margin Percentage.
PRINCIPAL OF this note has been or shall be advanced to Maker by ▇▇▇▇▇
for the following purposes, upon Maker's satisfaction of each of the "Conditions
for Advance" (as hereinafter defined):
(a) $48,914 of this note shall be advanced to pay unpaid
interest accrued on the Existing Note during the last quarter of 2001;
(b) advances to pay invoices for fees accruing under that
certain Services Agreement dated as of March 31, 2002, between Maker
and Payee;
(c) monthly advances of $450,000 each (or the remaining
principal balance of this note if less than $450,000). Notwithstanding
the foregoing, Maker and Payee agree that the first such monthly
advance may be in an amount greater than $450,000 subject
(Page 1 of 9 Pages)
to, in addition to all Conditions for Advance, approval by the board
of directors of Maker, to cover severance payments and repayment of
certain outstanding indebtedness of Maker to Silicon Valley Bank.
(d) other advances, including the $200,000 advance
requested by Maker for payroll and working capital in April of 2002.
IN NO EVENT shall advances be made under this note that shall cause the
maximum amount of principal outstanding to exceed $5,500,000. Once repaid,
advances may not be reborrowed.
THE UNPAID PRINCIPAL BALANCE of this note at any time shall be the
total amounts lent or advanced hereunder by the holder hereof, less the amount
of payments or prepayments of principal made hereon by or for the account of
Maker. It is contemplated that by reason of prepayments hereon there may be
times when no indebtedness is owning hereunder; but notwithstanding such
occurrences, this note shall remain valid and shall be in full force and effect
as to loans or advances made pursuant to and under the terms of this note
subsequent to each occurrence. All loans or advances and all payments or
prepayments made hereunder on account of principal or interest may be endorsed
by the holder hereof on the Schedule attached hereto and made a part hereof for
all purposes; provided that any failure to make any such endorsement shall not
affect the obligations of Maker under this note. Additional Schedule pages may
be attached hereto from time to time by the holder hereof if more space is
necessary. In the event that the unpaid principal amount hereof at any time, for
any reason, exceeds the maximum amount hereinabove specified, Maker covenants
and agrees to pay the excess principal amount forthwith upon demand; such excess
principal amount shall in all respects be deemed to be included among the loans
or advances made pursuant to the other terms of this note and shall bear
interest at the rates hereinabove stated.
ALL PRINCIPAL and accrued and unpaid interest on this note shall be due
and payable on June 26, 2005.
PAYMENT of this note before maturity may be made at any time or from
time to time, in whole or in part, without penalty or premium. Any such payment
shall be applied first to accrued interest and secondly to principal.
IF ANY PAYMENT of principal or interest on this note shall become due
on a day that is not a day on which commercial banks are open for business in
the State of Texas, such payment shall be made on the next succeeding day on
which commercial banks are open for business in the State of Texas, unless the
effect of such extension would be to carry the payment over to the next calendar
month, in which event such payment shall be due on the preceding day on which
commercial banks are open for business in the State of Texas, and any such
extension or reduction of time shall in such case be included in computing
interest in connection with such payment.
(Page 2 of 9 Pages)
IF AN EVENT OF DEFAULT (as hereinafter defined) occurs which is
continuing, the owner and holder of this note may, without notice or demand
(both of which are expressly waived by Maker), declare all sums owing hereon at
once due and payable. If default is made in the payment of this note at maturity
(regardless of how its maturity may be brought about), and the same is placed in
the hands of an attorney for collection, or suit is filed hereon, or proceedings
are had in bankruptcy, probate, receivership or other judicial proceedings for
the establishment or collection of any amount called for hereunder, or any
amount payable or to be payable hereunder is collected through any such
proceedings, Maker agrees and is also to pay to the owner and holder of this
note a reasonable amount as attorney's or collection fees.
MAKER REPRESENTS and warrants to Payee that (a) the execution, delivery
and performance of this note, the Security Agreement (as hereinafter defined)
and any other instrument or document executed in connection with or as security
for this note, are within Maker's powers, and will not contravene any law or any
agreement or undertaking to which it is a party or by which it is bound, (b)
this note is a legal, binding obligation of Maker, enforceable against Maker in
accordance with its terms, (c) there are no claims pending, or to Maker's
knowledge threatened, which, if adversely determined, would have a material
adverse effect on the financial condition of Maker, and (d) no authorization or
consent of, and no filing or registration with, any court, governmental
authority or third party is or will be necessary for the execution, delivery or
performance by Maker of this note, the Security Agreement and any other
instrument or document executed in connection with or as security for this note.
MAKER AGREES with Payee that, so long as any amount, whether principal
or interest, remains unpaid on this note, Maker (a) will not sell, lease,
assign, transfer or otherwise dispose of all or substantially all of its assets,
or enter into any agreement (verbal or written) to do so, other than as
contemplated by the Agreement and Plan or Merger or in any other agreement
permitted in the Agreement and Plan of Merger; (b) will deliver to Payee the
Budget (hereinafter defined) for each quarter during the term of this note
within the first five days of such quarter; (c) will deliver to Payee (i) as
soon as available and in any event within 30 days after the end of each calendar
month (or with the delivery of each Request for Advance if sooner) the income
statement of Maker for the immediately preceding calendar month and for the
period from the beginning of the respective calendar year to the end of such
month, and (ii) the balance sheet of Maker as of the end of the immediately
preceding calendar month, (d) will deliver to Payee a duly executed and
completed original counterpart of the Security Agreement, and (e) shall perform,
observe and comply with all covenants, agreements and terms contained in the
Agreement and Plan of Merger required to be performed, observed or complied with
by it.
MAKER, co-makers, signers, sureties, endorsers and guarantors, and each
of them, expressly waive demand and presentment for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, notice of intent to
accelerate the maturity hereof, notice of the acceleration of the maturity
hereof, bringing of suit and diligence in taking any action to collect amounts
called for hereunder and in the handling of securities at any time existing in
connection herewith; and are and shall be jointly, severally, directly and
primarily liable for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or
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omission as or with respect to the collection of any amount called for hereunder
or in connection with any right, lien, interest or property at any and all times
had or existing as security for any amount called for hereunder.
IT IS the intention of Maker and Payee to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of Texas
and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary herein or in any agreement entered into
in connection with or as security for this note, it is agreed as follows: (i)
the aggregate of all consideration which constitutes interest under applicable
law that is taken, reserved, contracted for, charged or received under this note
or under any of the other aforesaid agreements or otherwise in connection with
this note shall under no circumstances exceed the maximum amount of interest
allowed by applicable law, and any excess shall be cancelled automatically and,
if theretofore paid, shall be credited on the note by the holder hereof (or, to
the extent that this note shall have been or would thereby be paid in full,
refunded to the Maker); and (ii) in the event that maturity of this note is
accelerated by reason of an election by the holder hereof resulting from any
default hereunder or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest may never include
more than the maximum amount allowed by applicable law, and excess interest, if
any, provided for in this note or otherwise shall be cancelled automatically as
of the date of such acceleration or prepayment and, if theretofore paid, shall
be credited on this note (or, to the extent that this note shall have been or
would thereby be paid in full, refunded to the Maker).
AS USED in this note, the following terms shall have the respective
meanings indicated below:
"Agreement and Plan of Merger" means that certain Agreement
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and Plan of Merger dated June 26, 2002, between Maker, Payee and
certain stockholders of Maker, as the same may be amended, supplemented
or modified from time to time.
"Budget" means the Maker's quarterly estimated revenue,
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expenses, head count and any other such items to which the parties to
this note shall agree.
"Change of Control" means any change in the ownership of 50%
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or more of the shares of stock of Maker or voting power of such stock
(other than among the current shareholders of Maker on the date
hereof).
"Conditions for Advance" means, for each advance of principal
----------------------
under this note, the following conditions precedent, each of which
shall be in form and substance satisfactory to Maker:
(a) no Event of Default shall have occurred that is
continuing;
(b) receipt by ▇▇▇▇▇ of a duly completed and executed
Request for Advance;
(Page 4 of 9 Pages)
(c) Payee shall have approved the use of proceeds from
such advance; and
(d) With respect to advances made pursuant to clause (d)
of the third full paragraph of this note, Maker shall have certified to
Payee that at the time of the request for such advance, the balance of
uncommitted receivables owed to Maker and pledged to Payee is equal to
or greater than the amount of such requested advance.
"Event of Default" each of the following shall constitute and
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be deemed an "Event of Default":
(a) Maker shall fail to pay this note, whether principal
or interest, when due.
(b) Any representation or warranty made or deemed made by
Maker or any of its respective officers in any certificate, report,
notice, or financial statement furnished at any time in connection
with this note, the Security Agreement or any other instrument or
document executed in connection with or as security for this note
shall be false, misleading, or erroneous in any material respect when
made or deemed to have been made.
(c) Maker shall fail to perform, observe, or comply with
any covenant, agreement or term contained in this note, for a period
of five (5) days following the date on which Payee gives Make notice
of such failure.
(d) Maker shall commence a voluntary proceeding seeking
liquidation, reorganization, or other relief with respect to itself or
its debts under any bankruptcy, insolvency, or other similar law now
or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian, or other similar official of it or a
substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it or shall
make a general assignment for the benefit of creditors or shall take
any corporate action to authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against
Maker seeking liquidation, reorganization, or other relief with
respect to it or its debts under any bankruptcy, insolvency, or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for
it or a substantial part of its property, and such involuntary
proceeding shall remain undismissed and unstayed for a period of
thirty (30) days.
(f) Maker shall fail to pay when due any amount owing on
any of its other debt (including, without limitation, debt under the
Subordinated Note), or the maturity of any such debt shall have been
accelerated, or any such debt shall have been required to be prepaid
prior to the stated maturity thereof, or any event shall have occurred
that permits (or, with the giving of notice or lapse of time or both,
would permit) any holder or
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holders of such debt or any person acting on behalf of such holder or
holders to accelerate the maturity thereof or require any such
prepayment.
(g) This note, the Security Agreement, or any other
instrument or document executed by Maker in connection with or as
security for this note shall at any time and for any reason cease to
be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
Maker, or Maker shall deny that it has any further liability or
obligation hereunder prior to payment in full of all obligations
hereunder, or the security interest created by the Security Agreement
shall cease to be a first priority security interest, or a default
shall have occurred under the Security Agreement, subject to
applicable grace periods.
(h) A Change of Control shall occur.
(i) One of the following shall occur: 1) the Maker shall
approve or resolve to approve any Acquisition Proposal; or 2) the
consummation of any Acquisition Proposal.
"Option" means the option granted by Maker to Payee under the
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terms and conditions of the Agreement and Plan of Merger.
"Option Term Expiration Date" means the date which is two (2)
---------------------------
years after the date of the Agreement and Plan of Merger.
"Prime Rate" means the variable rate of interest per annum
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established by JPMorgan Chase Bank from time to time as its prime rate
which shall vary from time to time. Such rate is set by JPMorgan Chase
Bank as a general reference rate of interest, taking into account such
factors as JPMorgan Chase Bank may deem appropriate, it being
understood that many of JPMorgan Chase Bank's commercial or other loans
are priced in relation to such rate, that it is not necessarily the
lowest or best rate charged to any customer and that JPMorgan Chase
Bank may make various commercial or other loans at rates of interest
having no relationship to such rate.
"Request for Advance" means, for each advance hereunder, an
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advance written notice to Payee, which in each case shall be
irrevocable from Maker, to be received by Payee no later that 11:00
a.m. Houston, Texas time _____ Business Days prior to the date such
advance is to be made, substantially in the form of Exhibit A attached
hereto and completed to Payee's reasonable satisfaction.
"Security Agreement" means the Security Agreement dated of
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even date herewith, executed by Maker for the benefit of Payee,
covering all of Maker's intellectual property, including, without
limitation, all of Maker's rights, titles and interests in and to the
software product known as "Survey," and a portion of Maker's
uncommitted receivables equal at all times equal in value to the
aggregate principal amount of all outstanding advances under this note
made pursuant to clause (d) of the third full
(Page 6 of 9 Pages)
paragraph of this note, as the same may be amended, supplemented or
modified from time to time.
"Subordinated Note" means that certain promissory note dated
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of even date herewith, in the original principal amount of $3,500,000
executed by Maker and payable to the order of Payee as therein
provided, together with any and all renewals, extensions for any
period, rearrangements or modifications thereof.
THIS NOTE AND THE SECURITY AGREEMENT EMBODY THE FINAL, ENTIRE AGREEMENT
BETWEEN MAKER AND PAYEE WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF
AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF MAKER AND
PAYEE. THERE ARE NOT ORAL AGREEMENT BETWEEN MAKER AND PAYEE.
MAKER: SCALABLE SOFTWARE, INC.
By: __________________________________________
Name: __________________________________________
Title: __________________________________________
PAYEE: NEON SYSTEMS, INC.
By: __________________________________________
Name: __________________________________________
Title: __________________________________________
(Page 7 of 9 Pages)
EXHIBIT A
(Page 8 of 9 Pages)
SCHEDULE
OF
ADVANCES AND PAYMENTS OF PRINCIPAL AND INTEREST
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Unpaid
Amount of Principal
Amount of Principal Paid Amount of Balance Notation
Date Advance or Prepaid Interest Paid of Loan Made By
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(Page 9 of 9 Pages)
