Exhibit 10.21
SERVICE AGREEMENT
ENTERED INTO AS OF
DECEMBER 18, 1998
AND EFFECTIVE AS OF
MARCH 31, 1998
BY AND BETWEEN
NEON SYSTEMS, INC
AND
PEREGRINE/BRIDGE TRANSFER CORPORATION
SERVICE AGREEMENT
THIS SERVICE AGREEMENT (the "AGREEMENT"), is entered into by and between
PEREGRINE/BRIDGE TRANSFER CORPORATION, a Delaware corporation ("PBTC"), and NEON
SYSTEMS, INC., a Delaware corporation ("SERVICE MANAGER") on December 18, 1998
and to be effective as of March 31, 1998 (the "EFFECTIVE DATE").
RECITAL
Service Manager has been providing certain services for PBTC, and each of
Service Manager and PBTC desires to evidence and formalize their agreements with
respect to these services.
ARTICLE 1
ENGAGEMENT OF SERVICE MANAGER
SECTION 1.1 GENERAL ENGAGEMENT. PBTC engages Service Manager as an
independent contractor to provide certain services described in this Agreement
relating to the business operations of PBTC, including without limitation with
respect to its management, record-keeping, marketing and development and other
business and operations. PBTC and Service Manager may from time to time agree
to expand or reduce the scope of services to be provided hereunder and either
party, upon request of the other, shall execute a schedule or amend any existing
schedule that evidences the scope of services then being provided hereunder.
Service Manager shall in good faith provide the services set forth in this
Agreement in accordance with normal and prudent practices and shall have the
authority to take all actions necessary or appropriate to fulfill its
obligations.
ARTICLE 2
SERVICE MANAGER DUTIES
SECTION 2.1 SERVICES. Service Manager will provide the following
services for PBTC, as and to the extent requested by PBTC:
(a) SENIOR MANAGEMENT. Provide PBTC with the time and attention of
its senior management as shall be necessary to assist PBTC in the
development and implementation of its product development and
market strategies.
(b) ACCOUNTING SERVICES. Perform all normal and customary
accounting functions for PBTC and maintain all necessary books
and records in connection therewith; and monitor the actual
monthly income and expenses of PBTC, collect revenues and pay
operating expenses, compare actual results to the relevant
operating budgets, and report to PBTC.
(c) RISK MANAGEMENT SERVICES. Assist PBTC in review of the insurable
risks of PBTC and the determination of levels of insurance
coverage; develop, administer and implement a risk management
program for PBTC; procure insurance coverage in accordance with
PBTC's instructions; and subject to
PBTC's guidelines and approval, oversee the investigation and
resolution of all casualty and liability claims brought by or
against PBTC.
(d) TAX SERVICES. Prepare all state and federal income tax returns
for PBTC; prepare all sales tax filings and state unemployment
tax filings; and coordinate with PBTC and oversee any challenges,
disputes and audits of any income, sales or unemployment taxes.
(e) HUMAN RESOURCES. Provide Service Manager's standard human
resource services including implementation and oversight of
interview and hiring guidelines and services; implementation and
oversight of employment policies and procedures; conduct of
periodic employee reviews; and to the extent permitted by
applicable law and governmental regulations, employee benefits in
accordance with Service Manager's standard benefits.
(f) REGULATORY COMPLIANCE REVIEW. Assist PBTC in assuring compliance
with applicable governmental regulations (including without
limitation labor and employment regulations and the Americans
With Disabilities Act); and implementing a program to monitor
continuing compliance with governmental regulations.
(g) FINANCING SERVICES. From time to time, upon PBTC's request and
in accordance with PBTC's business plan, Service Manager shall
act as PBTC's agent in financing or refinancing indebtedness.
Service Manager shall:
(i) monitor existing financing;
(ii) negotiate and finalize existing financing renewals as
required;
(iii) monitor and negotiate any equity partner requirements on
behalf of PBTC;
(iv) negotiate any required refinancing; and
(v) negotiate any required restructuring/workout of existing
financing (debt or equity).
Although Service Manager shall make recommendations to PBTC concerning terms and
conditions of any financing or refinancing and the lender(s) to provide the same
and shall negotiate the terms thereof and shall assist in consummating the
transactions, PBTC shall have the sole authority to execute the requisite
agreements therefor.
SECTION 2.2 LEGAL SERVICES. Service Manager is authorized to engage
attorneys and other advisors as necessary to provide legal services in
connection with the day-to-day operation of PBTC, including enforcement of
contracts; review of contracts, leases and other documents; and implementing and
defending legal actions.
SECTION 2.3 RETENTION OF THIRD PARTIES. Service Manager is
authorized and empowered, as PBTC's agent, to engage and enter into contracts
with third parties to provide the services referred to
2
in this Article 2, and may delegate performance of its duties to third parties,
including Service Manager's subsidiaries and affiliates. Without limiting the
generality of the foregoing, the services of third parties which may be engaged
include tax services, brokerage services, data processing services, consulting
services and legal services. Service Manager shall not engage or enter into a
contract with an Affiliate (defined below) unless the compensation payable to
the Affiliate for such services does not exceed that which would be payable to a
comparably qualified third party service provider that is not affiliated with
Service Manager. For the purposes of this Agreement, an "AFFILIATE" of any
person shall mean any other person that is directly or indirectly controlling,
controlled by, or under common control with that person, where the term
"control" means the possession, directly or indirectly, of the actual power to
direct the affairs of the controlled person.
SECTION 2.4 BOOKS, RECORDS AND REPORTS.
(a) BOOKS AND RECORDS. Service Manager shall maintain at its
principal place of business, or at such other location as
it may reasonably designate, a complete and accurate set
of files, books and records of all business activities
and operations conducted by Service Manager with respect
to PBTC. All financial records shall be kept in
accordance with sound accounting principles and
practices, with such modifications as PBTC may request or
approve. During the Term (defined below) and during the
one (1) year period following the expiration or
termination of this Agreement, PBTC and its duly
authorized agents may, at reasonable times, examine,
inspect, audit, and copy Service Manager's books,
records, files, and reports pertaining to PBTC.
(b) QUARTERLY REPORTS. Service Manager shall make available
to PBTC, within 45 days after the end of each calendar
quarter, reports detailing the operation of PBTC which
shall be in the format reasonably requested by PBTC.
(c) ANNUAL REPORTS. Service Manager shall, within ninety (90)
days after the end of each calendar year, make available
to PBTC the following reports and statements, having been
prepared in accordance with sound accounting principles
(as modified at PBTC's request and with PBTC's approval):
(i) a balance sheet and statements of income and
expenses as of the end of such year; and
(ii) a cash flow statement for such year.
(d) SPECIAL REPORTS. Service Manager shall also, at PBTC's
expense, provide any other reports, summaries, statements
or schedules reasonably requested by PBTC.
ARTICLE 3
PBTC DUTIES
SECTION 3.1 INFORMATION AND COOPERATION. PBTC shall (i) furnish
Service Manager with all information in PBTC's possession reasonably necessary
to enable Service Manager to
3
perform its duties, and (ii) otherwise cooperate with, and assist Service
Manager in, performance of Service Manager's duties hereunder.
SECTION 3.2 APPROVAL POLICY. PBTC has delivered to Service Manager a
list of those parties empowered to approve matters requiring PBTC's approval
under this Agreement. PBTC may revise such list from time to time by delivering
written notice to Service Manager. PBTC shall cooperate with Service Manager in
granting or withholding approvals required under this Agreement in a timely
manner.
SECTION 3.3 FUNDING. PBTC shall provide all funds required to enable
Service Manager to perform its duties hereunder and for Service Manager's
compensation.
ARTICLE 4
COMPENSATION
SECTION 4.1 SERVICE FEE. For performing its servicing and
administration duties, PBTC shall pay to Service Manager a fee equal to a
reasonable cost allocation of all salaries, cost and overhead of Service Manager
for the time devoted by Service Manager and its agents and employees to
performing the duties and services herein described (the "SERVICE FEE"). Until
otherwise agreed upon by the parties and set forth in an amendment to this
Agreement, the Service Fee shall be $23,995 per month. The Service Fee shall be
payable in arrears on or before the twentieth (20th) day of each calendar month
in respect of the services provided during the preceding month. To the extent
such Service Fee is not timely paid, Service Manager may offset such overdue
amount against amounts owing by it under any other agreement to PBTC.
SECTION 4.2 REIMBURSABLE EXPENSES. Without duplication of the items
included in the allocation determination for the Service Fee, PBTC shall
reimburse Service Manager for all expenses incurred by Service Manager in
performing its duties hereunder, including, without limitation, expenses of
third parties engaged pursuant to this Agreement; travel and other out-of-pocket
expenses; and filing or other fees paid to third parties. Service Manager shall
not be reimbursed for legal fees and expenses relating to the negotiation and
preparation of this Agreement.
SECTION 4.3 ADDITIONAL SERVICES. If PBTC requests Service Manager to
perform services other than those required hereunder, such additional services,
if performed, shall be compensated separately on terms agreed upon by Service
Manager and PBTC prior to the performance of such services, which terms shall
not be (i) less favorable to Service Manager than the terms under which
qualified unaffiliated persons are then performing such services for comparable
organizations, or (ii) less favorable to PBTC than the terms under which PBTC
could obtain such services from qualified unaffiliated third persons.
SECTION 4.4 EMERGENCY EXPENDITURES. In case of an emergency, Service
Manager may make expenditures without PBTC's prior written approval if, in the
reasonable judgment of Service Manager, such expenditures are necessary to
prevent damage or material diminution in value to PBTC or to preserve the health
or safety of any person. Service Manager shall inform PBTC of any such
expenditures as soon as reasonably practicable but in no event later than the
end of the next business day succeeding the date upon which such expenditures
are made.
4
ARTICLE 5
LIABILITY INSURANCE AND RISK ALLOCATION
SECTION 5.1 LIABILITY INSURANCE. Service Manager shall, at PBTC's
expense, maintain comprehensive general liability, automobile liability,
workers' compensation and other insurance to protect the interests of Service
Manager and PBTC as their interests may appear in connection with the
performance of this Agreement in accordance with the coverage, amounts and
deductibles agreed upon by PBTC and Service Manager.
SECTION 5.2 EVIDENCE OF INSURANCE. Upon request, Service Manager
shall provide to PBTC certificates of insurance or other proof evidencing the
insurance coverage required under this Article 5.
SECTION 5.3 MUTUAL WAIVER OF SUBROGATION. Each party waives on behalf
of the insurers of such party's property any and all claims or rights of
subrogation of any such insurer against the other party hereto for loss or
damage to any property so insured.
SECTION 5.4 INDEMNIFICATION.
(a) PARTIES' INDEMNITIES. Subject to Section 5.3, Service
Manager shall indemnify and defend PBTC and PBTC's
directors, officers and employees from and against any
and all loss, cost, damage, liability and expense,
including reasonable counsel fees, incurred by PBTC,
resulting from Service Manager's gross negligence,
willful misconduct, fraud or breach of this Agreement.
Except for the matters against which Service Manager has
afforded PBTC indemnity in accordance with the preceding
sentence and subject to Section 5.3, PBTC shall indemnify
and defend Service Manager and Service Manager's
directors, officers and employees from and against any
and all loss, cost, damage, liability and expense,
including reasonable counsel fees, incurred by Service
Manager and resulting from Service Manager's performance
of its duties and obligations in accordance with this
Agreement, including those which arise from Service
Manager's negligence. The provisions of this
Section 5.4(a) are not in lieu of, but are in addition
to, any other rights and obligations of an indemnified
party.
(b) NOTICE. Upon receipt by any party entitled to
indemnification under Section 5.4(a) (an "INDEMNIFIED
PARTY") of a complaint, claim or other notice of any
loss, damage or liability giving rise to a claim for
indemnification under Section 5.4(a), such Indemnified
Party shall promptly notify the party from whom
indemnification is sought (the "INDEMNIFYING PARTY"), but
failure to provide such notice shall not relieve the
Indemnifying Party from its duty to indemnify unless the
Indemnifying Party is materially prejudiced by such
failure and had no actual knowledge of such complaint,
claim or other notice.
(c) INDEMNIFICATION RIGHTS. With respect to any claim made
or threatened against any party for which such party is
or may be entitled to indemnification hereunder, the
Indemnifying Party shall have the right, upon reasonable
prior notice, in its sole discretion and at its sole
expense, but
5
subject to the right of any insurance company having an
interest in the outcome of such claim to exercise any
rights it may have under any applicable insurance
coverage, to (i) participate in the investigation,
defense and settlement of such claims and (ii) control
the defense of such claim, including the right to
designate counsel and to control all negotiations,
litigation, arbitration, settlements, compromises and
appeals of any such claim, provided that the Indemnifying
Party shall have advised the Indemnified Party that such
party is entitled to be fully indemnified with respect
to' such claim. The Indemnified Party and the
Indemnifying Party shall cooperate and act in good faith
in the conduct of the defense of any claims to be
indemnified hereunder.
(d) SURVIVAL. The terms and provisions of this Section 5.4
shall survive the expiration or termination of this
Agreement.
ARTICLE 6
TERM
SECTION 6.1 TERM. This Agreement shall commence on the Effective
Date and continue unless terminated by either party giving written notice of
termination to the other at least thirty (30) days prior to the effective
termination date, unless otherwise agreed upon by the parties (the "TERM"). The
Term is subject to earlier termination as provided below.
SECTION 6.2 DUTIES ON TERMINATION OR EXPIRATION.
(a) SERVICE MANAGER'S DUTIES. Upon termination or expiration
of this Agreement, Service Manager shall within fifteen
(15) days thereafter deliver to PBTC complete copies of
all books and records of PBTC and all funds in possession
of Service Manager belonging to PBTC. Service Manager
shall also be available for a period of not less than
thirty (30) days following termination or expiration to
consult with PBTC concerning the services provided by
Service Manager under this Agreement; Service Manager
shall not receive a fee for such consultation, but shall
be reimbursed for all costs incurred in connection
therewith.
(b) PBTC'S DUTIES. PBTC shall, within five (5) days
following the end of the Term compensate Service Manager
for all fees and reimbursements due hereunder through the
date of termination or expiration.
6
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 ASSIGNMENT: CHANGE OF OWNERSHIP INTEREST. Service
Manager may not, without the prior written consent of PBTC, assign this
Agreement. Service Manager may, however, from time to time delegate its duties
to Affiliates. Subject to the foregoing, this Agreement shall be binding upon,
and inure to the benefit of, Service Manager and PBTC and their respective
successors and assigns, and all references in this Agreement to "Service
Manager" and "PBTC" shall include the respective successors and assigns of such
parties permitted under this Agreement.
SECTION 7.2 NOTICES. Any notice provided for permitted to be given
hereunder shall be in writing and may be given by (i) depositing in the U.S.
Mail, first class postage prepaid and certified with return receipt requested;
(ii) reputable delivery service; or (iii) facsimile transmission with
confirmation of receipt. Notice shall be effective upon the earlier of refusal
of receipt by addressee or actual receipt at the address of the intended
addressee. The addresses of the parties, until changed by notice given as
provided herein, shall be as follows:
PBTC: Peregrine/Bridge Transfer Corporation
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Service Manager: NEON Systems, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 7.3 SEVERABILITY. If any term or provision of this Agreement
or the application thereof to any person or circumstance shall be illegal,
invalid or unenforceable to any extent, the remainder of this Agreement, or the
application of that term or provision to persons or circumstances other than
those as to which it is held illegal, invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be legal,
valid and enforceable to the fullest extent permitted by law.
SECTION 7.4 NO WAIVER OF DEFAULT. The failure by PBTC or Service
Manager to insist upon the strict performance of any one of the terms or
conditions of this Agreement or to exercise any right, remedy or election herein
contained or permitted by law shall not constitute or be construed as waiver or
relinquishment for the future of that term, condition, right, remedy or
election, which shall continue and remain in full force and effect. All rights
and remedies that PBTC or Service Manager may have at law, in equity or
otherwise for any breach of any term or condition of this Agreement shall be
distinct, separate and cumulative rights and remedies and no one of them shall
be deemed to be in exclusion of any other right or remedy of PBTC or Service
Manager.
SECTION 7.5 ENTIRE AGREEMENT AND MODIFICATION. This Agreement
constitutes the entire agreement between the parties with respect to the matters
herein contained and any agreement hereafter made shall be ineffective unless
made in writing and signed by the parties hereto. No
7
provision of this Agreement shall be modified, waived or terminated except by an
instrument in writing signed by the party against whom such modification, waiver
or termination is to be enforced.
SECTION 7.6 GOVERNING LAW. This Agreement shall be governed by and
constructed in accordance with the laws of the State of Texas.
SECTION 7.7 ATTORNEYS' FEES. Should either party employ attorneys to
enforce the provisions hereof or to recover damages for the breach of this
Agreement, the non-prevailing party in any such action agrees to pay the
prevailing party all reasonable costs, damages and expenses, including
reasonable attorneys' fees, expended or incurred by the prevailing party in
connection therewith.
SECTION 7.8 RELATIONSHIP OF THE PARTIES. The relationship of PBTC
and Service Manager shall be that of principal and agent, and nothing contained
in this Agreement, nor any acts of the parties shall create the relationship of
a partnership or a joint venture, or cause the Service Manager to be responsible
in any way for the debts or obligations of PBTC or any other party.
SECTION 7.9 REPRESENTATIONS AND WARRANTIES.
(a) SERVICE MANAGER. Service Manager represents and warrants
to PBTC that (i) Service Manager is a corporation duly
organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite
power and authority to carry on its business as now
conducted and to execute, deliver and perform this
Agreement; (ii) the execution, delivery and performance
by Service Manager of this Agreement is within its power,
has been authorized by all necessary corporate action and
does not contravene any provision of its organizational
documents; (iii) this Agreement has been duly executed
and delivered by a person authorized to do so on Service
Manager's behalf, and (iv) this Agreement constitutes the
valid and binding obligation of Service Manager.
(b) PBTC. PBTC represents and warrants to Service Manager
that (i) PBTC is a corporation, duly organized and
validly existing under the laws of the State of Delaware,
and has all requisite power and authority to carry on its
business as now conducted and to execute, deliver and
perform this Agreement; (ii) the execution, delivery and
performance by PBTC of this Agreement is within its
power, has been authorized by all necessary partnership
action and does not contravene any provision of its
organizational documents; (iii) this Agreement has been
duly executed and delivered by a person authorized to do
so on PBTC's behalf, and (iv) this Agreement constitutes
the valid and binding obligations of PBTC.
SECTION 7.10 CONFIDENTIALITY. PBTC and Service Manager shall keep
confidential all information obtained by one from the other in connection with
this Agreement. The parties shall not disclose such information to any person
(other than their respective agents, representatives and legal counsel), unless
specifically authorized in writing by the other party or if disclosure is
required by subpoena, court order, judicial decree or law, or is otherwise
required to enable Service Manager to perform its duties. This confidentiality
obligation shall not be binding on any party with respect
8
to information in the public domain or information that enters the public domain
through no fault of that party. The provisions of this Section 7.10 shall
survive the expiration or termination of this Agreement.
SECTION 7.11 COUNTERPARTS. This Agreement may be executed in a number
of counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same Agreement.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
9
Executed as of the day and year first above written and to be effective as
of March 31, 1998.
PBTC: PEREGRINE/BRIDGE TRANSFER CORPORATION,
A DELAWARE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
-------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
---------------------
SERVICE MANAGER: NEON SYSTEMS, INC.,
A DELAWARE CORPORATION
By: /S/ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------
Name: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------
Title: President and Chief Executive Officer
--------------------------------------
10
