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EXHIBIT 10.18
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
NOVISTAR, INC.
SENIOR SUBORDINATED PROMISSORY NOTE
$10,000,000 Houston, Texas
February 18, 2000
1. Principal and Interest
NOVISTAR, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to the order of Oracle Corporation or holder
("Payee") in lawful money of the United States at the address of Payee set forth
below, the principal amount of Ten Million United States Dollars ($10,000,000),
plus such additional amounts added to the principal thereof, as provided in
Section 5.3 of the Asset Purchase Agreement (as defined below), plus interest
from the date hereof (in the case of the initial principal amount thereof) and
from the date such amounts are added as provided in the Asset Purchase Agreement
on the whole amount of said principal sum remaining from time to time unpaid at
the following rate per annum, or at a lower rate required under applicable law:
nine percent (9.0%) from February 18, 2000 to February 17, 2001, ten percent
(10%) from February 18, 2001 to February 17, 2002, twelve percent (12%) from
February 18, 2002 to February 17, 2003, fifteen percent (15%) from February 18,
2003 to February 17, 2004, and seventeen percent (17%) from February 18, 2004 to
February 17, 2005. This Note shall be due and payable in lawful money of the
United States in immediately available funds upon the earlier of: (a) February
18, 2005, (b) upon a Major Event (as defined below), or (c) when such amounts
are due and payable upon or after the occurrence of and Event of Default (as
defined below) in accordance with Section 4 below. Interest shall be payable
quarterly in arrears on February 17, May 17, August 17 and November 17 of each
year, beginning on May 17, 2000.
This Note is issued pursuant to and is entitled to the benefits of that
certain Asset Purchase Agreement, dated February 16, 2000 between the Company
and Oracle Corporation (the "Asset Purchase Agreement"). Upon payment in full of
all principal and interest payable hereunder, this Note shall be surrendered to
the Company for cancellation.
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2. Subordination
(a) "Senior Indebtedness" means (i) all present and future indebtedness,
obligations, and liabilities of every kind and character of the Company which
may be from time to time directly or indirectly incurred by the Company to
commercial banks or other financial institutions under secured or unsecured
credit facilities (including, without limitation, interest accrued subsequent to
the filing of any petition under any bankruptcy, insolvency or similar law and
interest that would have accrued and been payable but for the commencement of an
insolvency proceeding), whether due and owing or to become due and owing,
howsoever created or arising or evidenced, whether joint or several, or joint
and several, whether absolute or contingent, and all renewals, extensions,
increases, and rearrangements of such indebtedness, obligations or liabilities,
including, without limitation, any and all amounts of principal, interest,
attorneys' fees, costs of collection and other amounts thereunder, and (ii) all
present and future advances, accounts payable and other amounts owed by the
Company to clients of the Company pursuant to written agreements under which the
Company provides services to such clients.
(b) The Company agrees and the holder of the Note, by acceptance
thereof, agrees, expressly for the benefit of the present and future holders of
Senior Indebtedness, that, except as otherwise provided herein, upon (i) an
event of default under any Senior Indebtedness, or (ii) any dissolution, winding
up, or liquidation of the Company, whether or not in bankruptcy, insolvency or
receivership proceedings, the Company shall not pay, and the holder of the Note
shall not be entitled to receive, any amount in respect of the principal and
interest of the Note unless and until the Senior Indebtedness shall have been
fully paid in cash and any and all obligations of the holders of Senior
Indebtedness to extend credit or other financing arrangements (including,
without limitation, any obligation to make advances under lines of credit or to
honor drawings under letters of credit) to or on behalf of the Company shall
have been terminated. Upon (1) an event of default under any Senior
Indebtedness, or (2) any dissolution, winding up or liquidation of the Company,
any payment or distribution (whether in cash, securities or other property or
assets of the Company), which the holder of this Note would be entitled to
receive but for the provisions hereof, shall be paid by the liquidating trustee
or agent or other person making such payment or distribution directly to the
holders of Senior Indebtedness ratably according to the aggregate amounts
remaining unpaid on Senior Indebtedness after giving effect to any concurrent
payment or distribution to the holders of Senior Indebtedness. Subject to the
payment in full of the Senior Indebtedness in full in cash and the termination
of any and all obligations of the holders of Senior Indebtedness to extend
credit or other financing arrangements (including, without limitation, any
obligation to make advances under lines of credit or to honor drawings under
letters of credit) to or on behalf of the Company shall have been terminated and
until this Note is paid in full, the holder of this Note shall be subrogated to
the rights of the holders of the Senior Indebtedness (to the extent of payments
or distributions previously made to the holders of Senior Indebtedness pursuant
to this
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Section 2(b)) to receive payments or distributions of assets of the Company
applicable to the Senior Indebtedness.
(c) This Section 2 is not intended to impair, as between the Company,
its creditors (other than the holders of Senior Indebtedness) and the holder of
this Note, the unconditional and absolute obligation of the Company under the
Note or affect the relative rights of the holder of this Note and the other
creditors of the Company, other than the holders of Senior Indebtedness.
Nothing in this Note shall prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law after the occurrence and during
the continuation of an Event of Default under the Note, subject to the rights,
if any, of the holders of Senior Indebtedness in respect to cash, property or
securities of the Company received upon the exercise of any such remedy.
3. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. Company shall fail to pay (i) when due any
principal of or, within ten (10) days of the due date, any interest on this Note
or (ii) any other payment required under the terms of this Note on the date due
and such payment shall not have been made within thirty (30) days of Company's
receipt of Payee's written notice to Company of such failure to pay; or
(b) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall
(i) apply for or consent to the appointment of a receiver, trustee, liquidator
or custodian of itself or of all or a substantial part of its property, (ii) be
unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated in full or in part, (v) become
insolvent (as such term may be defined or interpreted under any applicable
statute), (vi) commence a voluntary case or other 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 consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it, or (vii) take any action for the purpose of effecting any
of the foregoing;
(c) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for
the appointment of a receiver, trustee, liquidator or custodian of Company or of
all or a substantial part of the property thereof, or an involuntary case or
other proceedings seeking liquidation, reorganization or other relief with
respect to Company or the debts thereof under any bankruptcy, insolvency or
other similar law currently or hereafter in effect shall be commenced and an
order for relief entered or such proceeding shall not be dismissed or discharged
within thirty (30) days of commencement.
4. Rights of Payee Upon Default. Upon the occurrence or existence of any
Event of Default and at any time thereafter during the continuance of such Event
of
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Default, Payee may declare all outstanding Obligations payable by Company
hereunder to be immediately due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived;
provided that if an event described in Section 3(b) or (c) shall occur, the
result which otherwise would occur only on the giving of notice by the Payee
shall occur automatically without the giving of such notice. In addition to the
foregoing remedies, upon the occurrence or existence of any Event of Default,
Payee may exercise any other right, power or remedy granted to it or otherwise
permitted to it by law, either by suit in equity or by action at law, or both
and all remedies hereunder or thereunder shall be cumulative.
5. Prepayment. This Note may be prepaid in whole or in part without
penalty at any time.
6. Major Event. Any of the following shall constitute a Major Event under
this Note: (a) an initial public offering of the Company, (b) a sale of all or
substantially all of the assets of the Company, or (c) any transaction or series
of related transactions, including without limitation, any reorganization,
merger or consolidation, that results in the transfer of fifty percent (50%) or
more of the outstanding voting power of the Company.
7. Attorneys' Fees. If the indebtedness represented by this Note or any
part thereof is collected in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for collection
after and during the continuation of an Event of Default, Company agrees to pay,
in addition to the principal and interest payable hereunder, reasonable
attorneys' fees and costs incurred by Payee.
8. Notices. Any notice, other communication or payment required or
permitted hereunder shall be in writing and shall be deemed to have been given
upon delivery if personally delivered or transmitted by facsimile or 2 business
days after deposit if deposited in the United States mail for mailing by
certified mail postage prepaid, and addressed as follows:
if to Payee: Oracle Corporation
500 Oracle Parkway
Redwood City, California 94065
Attention: General Counsel
if to Company: Novistar, Inc.
1331 Lamar, Suite 1650
Houston, Texas 77010
Attention: Roland E. Sledge, General Counsel
Each of the above addressees may change its address for purposes of this Section
by giving to the other addressee notice of such new address in conformance with
this Section.
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9. Waivers, etc. Company hereby waives presentment, demand for
performance, notice of nonperformance, protest, notice of protest, notice of
dishonor and all other demands and notices in connection with the delivery,
acceptance, performance or enforcement of this Note. No delay on the part of
Payee in exercising any right hereunder shall operate as a waiver of such right
or any other right. This Note shall be construed in accordance with the laws of
the State of California.
NOVISTAR, INC.
By: /s/ Thomas M. Ray III
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Name: Thomas M. Ray III
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Title: President and CEO
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