EXHIBIT 10.31
NONRECOURSE LOAN AGREEMENT
THIS NONRECOURSE LOAN AGREEMENT (the "Agreement") is made and entered
into as of the 16th day of September, 1992, by and between THE SYSTEM WORKS,
INC., a Georgia corporation ("Lender"), and XXXX X. BLEND, III, a Georgia
resident ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower desires to borrow from Lender, and Lender has agreed to
loan to Borrower, the sum of TWO HUNDRED THIRTY THOUSAND AND NO/100 DOLLARS
($230,000.00) upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premise, the mutual
promises, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
I. GENERAL TERMS
SECTION 1.1 LOAN. Subject to the terms and conditions contained in
this Agreement, Lender agrees to loan to Borrower Two Hundred Thirty Thousand
and No/100 Dollars ($230,000.00) (the "Loan"). The Loan shall be evidenced
by a Nonrecourse Promissory Note from Borrower in the form of EXHIBIT "A"
attached hereto and incorporated herein by reference (the "Note").
SECTION 1.2 REPAYMENT OF PRINCIPAL; PREPAYMENTS.
(a) REPAYMENT OF PRINCIPAL. The principal amount of the Loan shall, if
not voluntarily or mandatorily prepaid sooner pursuant to the terms of
subparagraphs (b) or (c) of this Section 1.2, be due and payable on December
31, 1998.
(b) VOLUNTARY PREPAYMENTS. Borrower may, at any time and from time to
time, without the consent of Lender and without paying any penalty or premium
therefor, prepay all or any portion of the outstanding principal of the Loan;
provided, however, that Borrower first pay any and all accrued interest on
the principal of the Loan.
(c) MANDATORY PREPAYMENT. Notwithstanding anything herein to the
contrary, the outstanding principal balance of the Loan and all accrued
interest thereon shall be immediately due and payable: (i) upon any sale or
disposition of any of the "Shares" or any exercise of any of the "Options"
(as such terms are defined in Section 1.4(a) hereof); or (ii) on the date
which is ninety (90) days following the date of any termination of Borrower's
employment with Lender for any reason.
SECTION 1.3 APPLICABLE INTEREST RATE; PAYMENT TERMS.
(a) INTEREST RATE. The outstanding principal balance of the Loan shall
bear interest from the date of advance of the Loan at the rate of Five and
98/100 percent (5.98%) per annum, expressed in simple interest terms and
computed on a three hundred sixty-five (365)-day year.
(b) PAYMENT DATES. Interest on the Loan shall be payable: (i) annually
on December 31 of each year during the term of this Agreement, commencing
December 31, 1992, or on such earlier date(s) during any such year at the
time any "Excess Compensation" (as defined below) is paid to Borrower; and
(ii) at maturity of the Loan, whether by reason of acceleration, payment,
prepayment or otherwise (the "Maturity Date").
(c) PAYMENT OF INTEREST. Lender shall deduct all interest payments as
and when due under subsection (b) of this Section 1.3 from any cash
compensation paid to Borrower by Lender during any calendar year in excess of
his base salary, as reflected in Lender's books and records and as determined
by Lender, in its sole discretion, from time to time ("Excess Compensation");
provided, however, if in any calendar year Lender does not pay Borrower any
Excess Compensation, or if the amount of any such Excess Compensation is less
than the amount of the annual interest payment then due, Borrower shall
either: (i) pay such interest payment (or the unpaid portion thereof)
directly to Lender from his other available sources of income; or (ii) permit
such interest payment (or the unpaid portion thereof) to accrue in an
"Interest Deficit Account" with Lender. Any Excess Compensation subsequently
paid to Borrower must first be applied to the repayment of any then existing
deficit in the Interest Deficit Account before being applied to the offset of
any current interest payments. At the Maturity Date, Borrower shall be
responsible for the payment in full of any then existing deficit in the
Interest Deficit Account.
SECTION 1.4 SECURITY FOR THE LOAN.
(a) SECURITY DOCUMENTS. Borrower's obligations and indebtedness to Lender
under this Agreement and under the Note (collectively, the "Obligations") shall
be secured at all times by:
(i) that certain Stock Pledge Agreement of even date herewith (the
"Pledge Agreement") pursuant to which Borrower granted to Lender
a continuing first priority security interest in and to
Thirty-Three Thousand Three Hundred Thirty-Three (33,333) shares
(the "Shares") of Lender's One Cent ($.01) par value Class A
common stock (the "Common Stock"); and
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(ii) that certain Collateral Assignment and Agreement of even date
herewith (the "Assignment") pursuant to which Borrower
collaterally assigned and granted to Lender a continuing first
priority security interest in and to Borrower's rights to
purchase One Hundred Twelve Thousand Four Hundred Thirty
(112,430) shares of Common Stock (the "Options") under that
certain Nonqualified Stock Option Agreement, dated as of July 29,
1988, by and between Borrower and Lender.
The Pledge Agreement and the Assignment are sometimes hereinafter referred to
together as the "Security Documents," and the Shares and the Options are
sometimes hereinafter referred to collectively as the "Collateral."
(b) USE OF SECURITY BY BORROWER. At the Maturity Date, Borrower may, at
his option, transfer to Lender, in full satisfaction of the then outstanding
principal balance of the Loan, a portion of the Shares and/or the Options
equal in value to such outstanding principal balance of the Loan. The value
attributable to each Share shall be the per share price of Common Stock most
recently established for such purpose in good faith by Lender's board of
directors; provided, however, if at the Maturity Date the Common Stock is
publicly traded on an established market, then the value attributable to each
Share shall be the average reported market price per share of Common Stock
for the thirty (30) consecutive trading days ending on the trading day
immediately preceding the Maturity Date. The value attributable to each
Option shall be the per share value of Common Stock (determined in accordance
with the immediately preceding sentence) less the per share exercise price of
the Option. At such time, Borrower must pay in full any and all accrued
interest on the principal of the Loan, including any then existing deficit in
the Interest Deficit Account.
SECTION 1.5 DISBURSEMENT OF LOAN; CLOSING. The closing shall be held
on the date hereof at the office of Lender's counsel. At closing, the Loan
proceeds will be disbursed to Vinings Bank & Trust Company ("VBTC") on behalf
of Borrower to reduce certain indebtedness owed by Borrower to VBTC. At
closing, Borrower shall execute and deliver to Lender the Note and the
Security Documents, together with any other documents required or
contemplated by the terms thereof, including, without limitation, such
documents as Lender may reasonably request in order to create, perfect or
maintain a first priority security interest in the Collateral.
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II. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants to Lender (which representations
and warranties shall survive the delivery of the Note and the making of the
Loan) that:
SECTION 2.1 INDIVIDUAL CAPACITY. Borrower has the power and capacity
to execute, deliver and perform his obligations under this Agreement, the
Note and the Security Documents.
SECTION 2.2 GOOD TITLE. Borrower is the lawful owner of full and
marketable title to the Shares and the Options, and the Shares and the
Options are free and clear from all liens, pledges, hypothecations, claims,
security interests and encumbrances of any kind whatsoever.
III. COVENANTS
SECTION 3.1 NOTICE OF DEFAULT. Borrower shall promptly notify Lender
in writing upon the occurrence of any Event of Default hereunder.
SECTION 3.2 FURTHER ASSURANCES. Borrower shall, from time to time
hereafter, execute and deliver such additional instruments, certificates and
documents, and take all such actions, as Lender shall reasonably request for
the purpose of implementing or effectuating the provisions of this Agreement,
the Note or the Security Documents.
SECTION 3.3 SALE AND LIENS. Borrower shall not, directly or
indirectly, without the prior written consent of Lender: (i) exercise,
transfer or assign any of the Options; (ii) sell, transfer or assign any of
the Shares; or (iii) create, assume or permit to exist any lien, pledge,
hypothecation, claim, security interest or encumbrance of any kind whatsoever
on the Shares or the Options.
SECTION 3.4 INDEBTEDNESS. Borrower shall not, directly or indirectly,
without the prior written consent of Lender, incur, create, assume, become or
be liable in any manner with respect to indebtedness for borrowed money in
excess of the aggregate amount of $575,000.00 at any time outstanding,
including the amount outstanding under the Note.
IV. DEFAULT
SECTION 4.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following shall constitute an "Event of Default" hereunder:
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(a) Borrower's failure to make any payment of principal or interest when
due under the Note or hereunder, subject to the provisions of Section
1.3(c) of this Agreement;
(b) a breach by Borrower of any provision of this Agreement;
(c) an "Event of Default" under the Pledge Agreement or the Assignment;
(d) the entry of a decree or order for relief by a court having
jurisdiction over Borrower in an involuntary case under federal
bankruptcy law, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
law, and the continuance of any such decree or order unstayed and in
effect for a period of sixty (60) consecutive days;
(e) the commencement by Borrower of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
law;
(f) Borrower becomes insolvent or admits in writing his inability to pay
his debts as they mature; or
(g) Ninety (90) days following the date of any termination of Borrower's
employment with Lender for any reason.
SECTION 4.2 REMEDIES ON DEFAULT. Upon the occurrence of an Event of
Default, Lender may: (i) terminate all obligations of Lender to Borrower;
(ii) declare the Note, including, without limitation, the outstanding
principal amount and all accrued interest thereon, to be immediately due and
payable; (iii) exercise any and all of the rights and remedies available to a
secured creditor under the Uniform Commercial Code or other applicable law,
including, without limitation, the right to sell or otherwise dispose of all
or any portion of the Collateral at a public or private sale upon ten (10)
days prior notice to Borrower as Lender may deem advisable; and (iv) pursue
any remedy available to it under this Agreement, the Note or the Security
Documents, or available at law or in equity, all of which shall be
cumulative. Notwithstanding anything to the contrary herein or in the Note
or the Security Documents, Lender hereby expressly agrees: (i) that Borrower
shall be liable for the outstanding principal balance of the Loan only to the
full extent of Borrower's interest in and to the Collateral; and (ii) that
Lender's remedies following a default in the payment of principal of the Loan
shall be limited to the preservation, enforcement and foreclosure of Lender's
security interests in the Collateral. With respect to a default in the
payment of any accrued interest
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on the principal of the Loan, Lender shall be entitled to seek and obtain all
available remedies and damages, whether existing in law, in equity, hereunder
or under the Note or the Security Documents.
V. MISCELLANEOUS
SECTION 5.1 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia.
SECTION 5.2 WAIVER. Neither the failure nor any delay on the part of
any party in exercising any right, power, or privilege granted pursuant to
this Agreement, the Note or the Security Documents shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise or the exercise of any other right, power or privilege.
SECTION 5.3 MODIFICATION. No modification, amendment or waiver of any
provision of this Agreement, the Note or the Security Documents shall be
effective unless in writing and signed by the party against whom enforcement
of such modification, amendment or waiver is sought.
SECTION 5.4 NOTICES. All notices and other communications required or
authorized to be given under this Agreement shall be in writing and shall be
deemed to have been given or submitted: (i) when delivered by hand; or (ii)
three (3) days after the date deposited in the mail in registered or
certified form, first class, postage prepaid, addressed to a party at the
following address, or at such other address as each party may hereafter
specify from time to time by notice to the other party.
If to Borrower: Xxxx X. Blend, III
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
with a copy to: Xxxxxxxx X. Gold, Esquire
Xxxx, Xxxxxxxxx & Xxxx, X.X.
Xxxxx 0000 - Xxxxx Xxxxxxx
000 Xxxxxxxxx Xxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxx 00000
If to Lender: The System Works, Inc.
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxxx 00, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: President
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with a copy to: Xxxxxx X. Xxxxx, Esq.
Xxxxxxxx Xxxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
SECTION 5.5 CAPTIONS. The captions of the Sections and other
subdivisions of this Agreement are inserted only as a matter of convenience
for the parties and shall have no effect on the meaning of the provisions
hereof.
SECTION 5.6 ENTIRETY OF AGREEMENT. This Agreement comprises the entire
agreement between the parties hereto with respect to the subject matter
hereof, and there are no agreements, understandings, covenants, conditions or
undertakings, oral or written, express or implied, between the parties
concerning such subject matter that are not merged herein or superseded
hereby, other than the Note and the Security Documents.
SECTION 5.7 SEVERABILITY. If any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been included.
SECTION 5.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
shall constitute the same agreement; and any signature page from any such
counterpart or any electronic facsimile thereof may be attached or appended
to any other counterpart to complete a fully executed counterpart of this
Agreement, and any telecopy or other facsimile transmission of any signature
shall be deemed an original and shall bind such party.
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IN WITNESS WHEREOF, the parties hereto have executed, or caused their
duly authorized representatives to execute, this Agreement under seal as of
the day and year first above written.
"Borrower"
/s/ Xxxx X. Blend, III (SEAL)
--------------------------
Xxxx X. Blend, III
"Lender"
THE SYSTEM WORKS, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------
Its: President
Attest: /s/ Xxxxx X. Xxxxxx
--------------------------
Its: Secretary
[CORPORATE SEAL]
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EXHIBIT "A"
NONRECOURSE PROMISSORY NOTE
$230,000.00 September 16, 0000
Xxxxxxx, Xxxxxxx
FOR VALUE RECEIVED, on or before December 31, 1998 (the "Maturity
Date"), the undersigned, XXXX X. BLEND, III, a Georgia resident ("Obligor"),
promises to pay to the order of THE SYSTEM WORKS, INC., a Georgia corporation
(together with any subsequent holder or transferee hereof, "Holder"), at 640
Powers Ferry Road, Building Eleven, Xxxxx 000, Xxxxxxxx, Xxxxxxx 00000, or at
such other place as Holder may from time to time designate in writing, the
principal sum of TWO HUNDRED THIRTY THOUSAND AND NO/100 DOLLARS
($230,000.00), together with accrued interest on so much thereof as from time
to time shall be outstanding and unpaid, accruing on and after the date
hereof at the rate of Five and 98/100 percent (5.98%) per annum, expressed in
simple interest terms and computed on a three hundred sixty-five (365)-day
year.
Interest payments hereunder shall be due and payable annually on
December 31 of each year, commencing December 31, 1992, or on such earlier
date(s) during any such year as provided in Section 1.3(b) of that certain
Nonrecourse Loan Agreement of even date herewith by and between Obligor and
Holder (the "Loan Agreement"), in accordance with the terms and conditions
set forth in Section 1.3(c) of the Loan Agreement. Notwithstanding anything
to the contrary herein or in the Loan Agreement, the outstanding principal
balance hereof and all accrued interest thereon must be paid in full no later
than the Maturity Date.
Obligor may be required to prepay the outstanding principal balance
hereof, together with all accrued interest thereon, in accordance with the
terms and conditions set forth in Section 1.2(c) of the Loan Agreement.
Obligor shall also be entitled, at any time and from time to time, without
the consent of Holder and without paying any penalty or premium therefor, to
prepay all or any portion of the outstanding principal balance hereof,
together with all accrued interest thereon.
As collateral security for its payment obligations hereunder and under
the Loan Agreement, Obligor has: (i) pledged Thirty-Three Thousand Three
Hundred Thirty-Three (33,333) shares (the "Shares") of Holder's One Cent
($.01) par value Class A common stock (the "Common Stock") pursuant to that
certain Stock Pledge Agreement of even date herewith by and between Obligor
and Holder, a copy of which is attached hereto as EXHIBIT "A" and
incorporated herein by reference (the "Pledge Agreement"); and (ii) assigned
his rights, arising under that certain Nonqualified Stock Option Agreement,
dated as of July 29, 1988, by and between Obligor and Holder, to acquire One
Hundred Twelve Thousand Four Hundred Thirty (112,430) shares of Common Stock
(the "Options") pursuant to that certain Collateral Assignment and Agreement
of even date herewith by and between Obligor and Holder, a copy of
which is attached hereto as EXHIBIT "B" and incorporated herein by reference
(the "Assignment").
Upon the occurrence of an "Event of Default" under the Loan Agreement,
the Pledge Agreement or the Assignment, Holder shall have the right to
declare the entire outstanding principal balance hereof and all accrued
interest thereon to be immediately due and payable. Notwithstanding anything
to the contrary herein or in the Loan Agreement, the Pledge Agreement or the
Assignment, Holder hereby expressly agrees: (i) that Obligor shall be liable
for the outstanding principal balance hereof only to the full extent of
Obligor's interest in and to the Shares and the Options; and (ii) that
Holder's remedies for a default in the payment of principal hereunder shall
be limited to the preservation, enforcement and foreclosure of Holder's
security interests in the Shares and the Options. With respect to a default
in the payment of any accrued interest hereunder, Holder shall be entitled to
seek and obtain all available remedies and damages, whether existing in law,
in equity, hereunder or under the Loan Agreement, the Pledge Agreement or the
Assignment.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right under
this Note. Waiver of any right or remedy on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
This Note shall be governed by and construed in accordance with the laws
of the State of Georgia and shall be binding upon Obligor, and inure to the
benefit of Holder, and their permitted heirs, successors and assignees.
Time is of the essence in the payment and performance of this Note.
Obligor waives presentment, demand for payment, notice of dishonor, notice of
protest, protest, and all other notices or demands in connection with the
delivery, acceptance, performance or default of this Note.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the day and year first above written.
"Obligor"
(SEAL)
--------------------------
Xxxx X. Blend, III
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