U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995.
Commission File No. 0-15205
ELCOTEL, INC.
(Exact name of small business issuer in its charter)
Delaware 59-2518405
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6428 Parkland Drive, Sarasota, Florida 34243
--------------------------------------------
(Address of principal executive offices)
(941) 758-0389
---------------------------
(Issuer's telephone number)
Not Applicable
- ---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----- -----
The number of shares of the issuer's Common Stock outstanding as of
November 9, 1995 was 7,879,265.
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
-------------------------------
ELCOTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
September 30, March 31,
1995 1995
------------- -------------
(Unaudited) (See Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and temporary investments $116 $366
Accounts receivable, net 4,541 2,809
Notes receivable 3,640 3,289
Inventories 3,085 2,354
Refundable income taxes 177 177
Deferred tax asset 636 636
Prepaid exp. and other current assets 180 296
------- -------
TOTAL CURRENT ASSETS 12,375 9,927
Property, plant and equipment, net 3,163 3,188
Notes receivable, noncurrent 1,747 2,695
Deferred tax asset 339 339
Other assets 91 76
------- -------
$17,715 $16,225
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $2,903 $2,860
Line of credit 1,405 1,425
Current portion of long-term debt 866 67
------- -------
TOTAL CURRENT LIABILITIES 5,174 4,352
------- -------
LONG TERM DEBT, less current portion 809 782
------- -------
SHAREHOLDERS' EQUITY:
Common Stock 79 77
Additional paid-in capital 10,149 9,966
Retained earnings 1,681 1,225
Less treasury stock (177) (177)
------- -------
11,732 11,091
------- -------
$17,715 $16,225
======= =======
<N>
Note: The balance sheet at March 31, 1995, has been derived from
the audited consolidated financial statements.
1
See Notes to Condensed Consolidated Financial Statments.
</TABLE>
<PAGE>
<TABLE>
ELCOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------ -------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET SALES $5,484 $6,945 $11,304 $12,168
------ ------ ------- -------
COSTS AND EXPENSES:
Cost of sales 3,260 3,981 6,582 6,943
Research and development 543 445 1,064 809
Selling, general and
administrative 1,597 1,662 3,144 2,829
------ ------ ------- -------
TOTAL COSTS AND EXPENSES 5,400 6,088 10,790 10,581
------ ------ ------- -------
PROFIT FROM OPERATIONS 84 857 514 1,587
INTEREST INCOME, net 43 70 188 129
------ ------ ------- -------
PROFIT BEFORE INCOME TAXES 127 927 702 1,716
INCOME TAX PROVISION 44 162 246 351
------ ------ ------- -------
NET PROFIT $83 $765 $456 $1,365
====== ====== ======= =======
NET PROFIT PER COMMON AND COMMON
EQUIVALENT SHARE $0.01 $0.10 $0.06 $0.18
====== ====== ======= =======
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 8,226 7,806 8,219 7,786
====== ====== ======= =======
<FN>
2
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
ELCOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
<CAPTION>
Six Months Ended
September 30,
--------------------------
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit $456 $1,365
Adjustments to reconcile net profit
to net cash used in operations:
Depreciation and amortization 167 127
Provision for doubtful accounts 75 64
Change in operating assets and liabilities:
Accounts receivable (1,807) (1,546)
Notes receivable, trade 597 (383)
Deposits - 9
Inventories (746) (45)
Prepaid expenses and other
current assets 116 408
Accounts payable and accrued expenses 58 (207)
Other, net (15) 22
------- -------
Net cash flow used in operations (1,099) (186)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (142) (189)
------- -------
Net cash flow used in investing activities (142) (189)
<FN>
3
</TABLE>
<PAGE>
<TABLE>
ELCOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
(continued)
<CAPTION>
Six Months Ended
September 30,
--------------------------
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on short-term borrowings (20) (49)
Proceeds from long-term borrowings 826 -
Issuance of common stock 185 64
------- -------
Net cash flow provided by (used in)
financing activities 991 15
------- -------
Net decrease in cash
and temporary investments (250) (360)
Cash and temporary investments at
beginning of year 366 547
------- -------
Cash and temporary investments at
end of quarter $116 $187
======= =======
ADDITIONAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $59 $79
Income taxes 212 329
<FN>
4
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
ELCOTEL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for share amounts)
(Unaudited)
NOTE A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated balance sheet as of September 30, 1995, and the
consolidated statements of operations for the three and six month periods ended
September 30, 1995 and 1994, and the consolidated statements of cash flows for
the six month periods ended September 30, 1995 and 1994, have been prepared
by the Company, without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at
September 30, 1995, and for all periods presented, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Form 10-KSB for the fiscal year ended March 31, 1995. The results of
operations for the three and six month periods ended September 30, 1995, are
not necessarily indicative of the results for the full fiscal year.
NOTE B. INVENTORIES:
Inventories by stage of completion are as follows:
September 30, March 31,
1995 1995
------ ------
Finished products $ 158 $ 407
Work-in-process 726 162
Purchased components 2,201 1,785
------ ------
$3,085 $2,354
====== ======
NOTE C. SHAREHOLDERS' EQUITY:
During the six month period ended September 30, 1995, shareholders' equity
increased as a result of a net profit of $456, and employee and director
exercise of stock options at prices between $.75 per share and $3.50 per
share for a total of $185.
5
<PAGE)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation.
---------------------------------------------
Results of Operations
- ---------------------
(Dollars in thousands)
Quarter ended September 30, 1995, compared to the quarter ended
September 30, 1994:
Net sales for the quarter ended September 30, 1995 ("second quarter 1996"),
decreased from $6,945 to $5,484 for the quarter ended September 30, 1994
("second quarter 1995"), a decrease of $1,461, or approximately 21%,
principally as a result of a decrease in sales of electronic assemblies of
approximately 5% and a decrease in sales of complete payphones of
approximately 39% (substantially all related to a large international
shipment in the second quarter 1995 for approximately $1,500). Unit sales of
electronic assemblies decreased by approximately 26% and unit sales of
complete payphones decreased by approximately 50% (also due to the large
international shipment in the second quarter 1995). Average selling prices
of payphones in the quarter were approximately 23% higher than in the same
quarter last year, and average selling prices of electronic assemblies were
approximately 30% higher than in the same quarter last year. In addition the
Company sold upgrade modules which allow customers who have older versions of
the Company's products to comply with the North American Numbering Plan.
Sales of these upgrade modules are expected to continue throughout the
current fiscal year at decreasing levels toward the latter part of the fiscal
year.
Cost of sales as a percentage of net sales increased from 57% for the second
quarter 1995 to 59% for the second quarter 1996, principally as a result of
decreased production and the resulting reduced manufacturing cost absorption,
offset by the mix of complete payphones sold compared to sales of electronic
assembly products. The Company realizes higher prices but lower margins on
sales of complete payphones than on electronic assembly products because the
cabinets included with the Company's complete telephones are a significant
portion of the total cost of the telephone but are priced only nominally
above cost.
Research and development costs increased by $98, or approximately 22%, from $445
in the second quarter 1995 to $543 in the second quarter 1996 due to the hiring
of additional development staff and increased use of outside contractors.
Selling, general and administrative expenses decreased by $65, or
approximately 4%, from $1,662 in the second quarter 1995 to $1,597 in the
second quarter 1996 principally as a result of decreased sales commissions
related to the Company's lower sales level compared to the prior year, offset
by an increase in the number of employees supporting international sales
efforts. Interest income increased by $14, or approximately 15%, from $91
in second quarter 1995 to $105 in the second quarter 1996 due to an increase
in the Company's note receivable portfolio. Interest expense increased by
$41, or approximately 195%, from $21 in the second quarter 1995 to $62 in
second quarter 1996 due to increased borrowings against the Company's line of
credit facility with its bank.
The tax provision in second quarter 1996 of $44, which represents an effective
tax rate of approximately 35%, is compared against the tax provision in the
second quarter 1995 of $162, which was at an effective tax rate of 17% due to
the Company having not recognized all of its net operating losses in the prior
year.
6
<PAGE>
Six months ended September 30, 1995, compared to the six months ended
September 30, 1994:
Net sales for the six months ended September 30, 1995 ("first-half 1996")
,decreased from $12,168 to $11,304 for the six months ended September 30, 1994
("first-half 1995"), a decrease of $864, or approximately 7%, principally as a
result of an increase in sales of electronic assemblies of approximately 4%
offset by a decrease in sales of complete payphones of approximately 31%
(substantially all related to a large international shipment in the first-half
1995 for approximately $1,500). Unit sales of electronic assemblies increased
by approximately 3% while unit sales of complete payphones decreased by
approximately 39% (also due to the large international shipment in the
first-half 1995). Average selling prices of payphones in the first-half 1996
were approximately 14% higher than in the same period last year, and average
selling prices of electronic assemblies were approximately 3% higher than in
the same period last year. In addition the Company sold upgrade modules which
allow customers who have older versions of the Company's products to comply
with the North American Numbering Plan. Sales of these upgrade modules are
expected to continue throughout the current fiscal year at decreasing levels
toward the latter part of the fiscal year.
Cost of sales as a percentage of net sales increased from 57% for the
first-half 1995 to 58% for the first-half 1996, principally as a result of
decreased production and the resulting reduced manufacturing cost absorption,
offset by the mix of complete payphones sold compared to sales of electronic
assembly products. The Company realizes higher prices but lower margins on
sales of complete payphones than on electronic assembly products because the
cabinets included with the Company's complete telephones are a significant
portion of the total cost of the telephone but are priced only nominally above
cost.
Research and development costs increased by $255, or approximately 31%, from
$809 in the first-half 1995 to $1,064 in the first-half 1996 due to the hiring
of additional development staff and increased use of outside contractors.
Selling, general and administrative expenses increased by $315, or
approximately 11%, from $2,829 in the first-half 1995 to $3,144 in the
first-half 1996 principally as a result of an increase in the number of
employees supporting international sales efforts and the one-time expense in
connection with the Company's listing on the NASDAQ National Market System,
offset by decreased sales commissions related to the Company's lower sales
level compared to the prior year. Interest income increased by $110, or
approximately 61%, from $180 in the first-half 1995 to $290 in the first-half
1996 due to an increase in the Company's note receivable portfolio. Interest
expense increased by $51, or approximately 100%, from $51 in the first-half
1995 to $102 in the first-half 1996 due to increased borrowings against the
Company's line of credit facility with its bank.
The tax provision in the first-half 1996 of $246, which represents an
effective tax rate of approximately 35%, is compared against the tax provision
in the first-half 1995 of $351, which was at an effective tax rate of 20% due
to the Company having not recognized all of its net operating losses in the
prior year.
7
Liquidity and Capital Resources
- -------------------------------
(Dollars in thousands)
The Company recorded an increase in current assets of $2,448, or approximately
25%, from $9,927 at March 31, 1995 to $12,375 at September 30, 1995,
predominantly from an increase in accounts receivable of $1,732, due to a
significant amount of shipments in the latter part of the quarter and an
increase in inventory of $731. Current liabilities increased by $822, or
approximately 19%, from $4,352 at March 31, 1995 to $5,174 at September 30, 1995
predominantly due to refinancing of the Company's mortgage with its lender to
a shorter term at a lower interest rate resulting in reclassification of $799
from long term debt to current portion of long term debt.
Since August 31, 1994 the Company has had a $2,000 working capital line of
credit secured by the Company's accounts receivable, notes receivable and
inventories. Interest on amounts borrowed on the line of credit was at prime
plus one-half percent. On August 31, 1995 the Company's lender renewed the
line for another year at the bank's floating 30 day libor rate plus 2.75%.
As of September 30, 1995 that rate was 8.63% compared to the former rate of
9.25%. The Company borrows against and repays the line of credit throughout
the year depending upon its working capital needs and cash generated from
operations, with the outstanding amount under the line of credit during fiscal
1996 ranging from $858 to $1,425. The Company believes its lender will renew
the line of credit when it matures on August 31, 1996.
In addition, on August 31, 1995, the Company borrowed $1,000 from the same
lender for a one-year term with interest at the bank's floating 30 day libor
rate plus 2.75%. As of September 30, 1995 that rate was 8.63%. The Company
also refinanced its mortgage note with its lender on the same date. The
Company's former mortgage note, in the original principal amount of $1,000 was
for a 15 year term with a five year balloon with an interest rate of prime
plus one-half percent. The Company had been making its monthly principal
payments based upon a five year amortization schedule. By refinancing the
note, the Company was able to lower its interest rate to a fixed rate of 8.50%
from the floating rate of 9.25% as of the closing date for the remainder of
the original five year term.
The Company believes that its anticipated cash flow from operations will be
sufficient to fund its working capital needs, its capital expenditures and its
short and long term note obligations through September 30, 1996.
8
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
On August 3, 1995, one of the Company's customers, Amtel
Communications, Inc. and four related entities ("Amtel") filed a
voluntary petition for relief under Chapter 11 of the Bankruptcy Code
(In re Amtel Communications, Inc., United States Bankruptcy Court for
the Southern District of California, Case No. 95-08256-M11).
In late 1994 and early 1995, the Company had sold Amtel on credit
approximately 3,500 payphones and related equipment. To secure
Amtel's obligations to pay the Company for the payphones and related
equipment pursuant to five promissory notes, Amtel granted the
Company a security interest in payphones sold to Amtel and a
collateral assignment of agreements between Amtel and the owners of
certain sites where those payphones have been installed (collectively
the "Collateral"). On the date of the bankruptcy filing the Company
was owed approximately $3,200,000 by Amtel. Even though Amtel was in
default on the payment of its obligations to the Company on the date
of Amtel's bankruptcy filing, the Company is prevented by the
automatic bankruptcy stay from exercising its remedies on default
against Amtel or the Collateral.
On October 10, 1995, the Company filed a motion for relief from the
automatic stay and/or adequate protection, Elcotel v. Amtel
Communications, Inc., et al., RS No. 03277 (the "Motion"). Pursuant to
the Motion, the Company is seeking either: (i) relief from the
automatic stay to enable the Company to enforce its rights against the
Collateral and/or (ii) adequate protection of the Company's interests.
Although no responses to the Motion have yet been filed, the Company
anticipates that its position that it has a perfected, first priority
security interest in the Collateral will be challenged. Those
challenges may include, inter alia, that: (i) the Company's security
interest in the Collateral is not fully perfected; and (ii) Amtel sold
some or all of the Collateral free and clear of the security interests
granted to the Company. While the Company believes at this time that
it will prevail in all material respects with regard to these issues,
if those challenges are successful, the Company's ability to obtain
repayment of the entire amount owed by Amtel to the Company would be
significantly impaired.
9
<PAGE>
The Company has granted Amtel and other interested parties extensions
of time to respond to the Motion while the parties have been
negotiating interim arrangements intended to provide adequate
protection of the Company's interests. If such arrangements cannot be
negotiated, the Company intends to proceed to a decision on the
Motion. There can be no assurance as to whether those interim
arrangements can be reached or whether the Company will be successful
in overcoming any challenges to its security interest or in having the
automatic stay lifted with respect to the Collateral.
The Company believes that it is too early in Amtel's bankruptcy case
to determine whether or when Amtel will achieve confirmation of a plan
of reorganization or what the proposed treatment of the Company or
other creditors will be in any plan of reorganization.
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
A. Exhibits:
The Exhibits are listed in the Index to Exhibits on page E-1.
B. Form 8-K:
None
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Elcotel, Inc.
-------------
(Registrant)
Date: November 13, 1995 By: /s/ Ronald M. Tobin
------------------------
Ronald M. Tobin
Vice President
(Principal Financial Officer and
Chief Accounting Officer)
10
<PAGE>
INDEX TO EXHIBITS
Exhibit Incorporated by Page
Number Description Reference to No.
- ------ ---------------------- ----------------- ------
10.1 Amendment to Loan Agreement
and Second Amendment to
Collateral Assignment and
Security Agreement between Elcotel, Inc.
and NationsBank of Florida, N.A.
dated August 31, 1995. Included in this report.
10.2 Renewal Promissory Note between
Elcotel, Inc. and NationsBank of
Florida, N.A. dated August 31, 1995. Included in this report.
10.3 Promissory Note between
Elcotel, Inc. and NationsBank of
Florida, N.A. dated August 31, 1995. Included in this report.
10.4 Mortgage Modification Agreement
between Elcotel, Inc. and NationsBank of
Florida, N.A. dated August 31, 1995. Included in this report.
10.5 Replacement Promissory Note between
Elcotel, Inc. and NationsBank of
Florida, N.A. dated August 31, 1995. Included in this report.
E-1
EXHIBIT 10.1
AMENDMENT TO LOAN AGREEMENT
AND SECOND AMENDMENT
TO COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
THIS AMENDMENT TO LOAN AGREEMENT, COLLATERAL ASSIGNMENT AND
SECURITY AGREEMENT (the "Amendment") is made this 31st day of
August, 1995, by and between ELCOTEL, INC., a Delaware
corporation ("Borrower"), and NATIONSBANK OF FLORIDA, N.A., a
National Banking Association ("Lender").
RECITALS:
WHEREAS, Borrower being indebted to Lender, executed and
delivered to Lender a certain promissory note dated January 20,
1994, in the original principal amount of $1,000,000.00, which
note is secured by accounts receivable, notes receivable and
inventory, as evidenced by, among other loan documents, a
Collateral Assignment dated January 20, 1994, and a Security
Agreement dated January 20, 1994; and
WHEREAS, in connection with an additional $1,000,000 line of
credit loan Borrower executed a $1,000,000 promissory note and a
$2,000,000 Consolidation Promissory Note, both dated August 31,
1994, and executed a Loan Agreement and an Amendment to
Collateral Assignment and Security Agreement both dated August
31, 1994; and
WHEREAS, Borrower has requested Lender to renew the line of
credit loan in the amount of $2,000,000.00, and to make a new
term loan in the amount of $1,000,000.00 (the "Term Loan"); and
WHEREAS, Borrower and Lender desire to amend the terms of
the Loan Agreement, Collateral Assignment and the Security
Agreement to reflect the renewal of the Line of Credit Loan and
making the Term Loan.
NOW THEREFORE, in consideration of the premises and of the
agreements herein contained and the agreement by Lender to make
the Loan, the parties hereto agree as follows:
1. The above recitals are true and correct and are
incorporated herein by this reference.
<PAGE>
2. The Note as defined in the Collateral Assignment shall
be deemed to include the Renewal Promissory Note in the amount of
$2,000,000.00 of even date herewith and the Promissory Note in
the amount of $1,000,000.00 of even date herewith. Lender
represents to the best of its knowledge there is not currently a
reserve requirement imposed by the Federal Reserve System for
establishing Lender's Floating Libor Rate, as defined in such
notes, or any other additional costs as defined in Article 2(b)
in each of the above referenced notes.
3. The term "Loan" as defined in the Loan Agreement shall
include the $1,000,000 Term Loan of even date herewith. The
obligations secured by the Loan Agreement, Collateral Assignment
and Security Agreement shall include all debts, obligations,
liabilities and agreements of Borrower to Lender, now or
hereafter existing, including but not limited to the indebtedness
evidenced by the $2,000,000 Renewal Promissory Note and the
$1,000,000 Promissory Note of even date, and all renewals,
extensions or modifications thereof.
4. Paragraph 3 of the Addendum to Security Agreement and
paragraph 2.D. of the Loan Agreement are hereby modified to: (a)
increase the cap on the applicable percentage of Inventory from
$250,000 to $500,000, and (b) reduce the percentage of Eligible
Note Portfolio from 75% to 50%. Further paragraph 3 of the
Addendum to Security Agreement and paragraph 1.I. of the Loan
Agreement are amended to exclude from the definition of eligible
Note Portfolio all promissory notes now existing or hereafter
executed and delivered from Amtel to Borrower, which promissory
notes currently total $3,200,000.00.
5. Paragraph 5.A. of the Loan Agreement is amended to
change the capital expenditures limitation from $520,000 to
$500,000.
6. All references to Loan Agreement in the Security
Agreement and Collateral Assignment shall mean the Loan Agreement
dated August 31, 1994 as amended by Amendment to Loan Agreement
of even date herewith by and between Borrower and Lender.
7. Except as modified herein, all other terms and
conditions of the Loan Agreement, Collateral Assignment and the
Security Agreement shall remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment, and shall be conclusively deemed to have executed such
on the day and year first written above.
NATIONSBANK OF FLORIDA, N.A., ELCOTEL, INC., a Delaware
a National Banking Association corporation
By:/s/ Michael C. Carr By:/s/ Ronald M. Tobin
--------------------- --------------------
Michael C. Carr Ronald M. Tobin
Vice President Vice President and Chief
Financial Officer
Address: 1605 Main Street
Sarasota, FL 34236 Address: 6428 Parkland Drive
Sarasota, FL 34243
(CORPORATE SEAL)
(CORPORATE SEAL)
EXHIBIT 10.2
THIS NOTE RENEWS THAT CONSOLIDATION NOTE DATED AUGUST 31, 1994,
IN THE ORIGINAL PRINCIPAL SUM OF $2,000,000.00, AND DOES NOT
INCREASE THE AMOUNT DUE NOR CHANGE THE ORIGINAL OBLIGOR,
THEREFORE NO DOCUMENTARY STAMPS ARE REQUIRED.
RENEWAL
PROMISSORY NOTE
Effective Date: August 31, 1995
Date of Execution: August 31, 1995
Amount: $2,000,000.00
FOR VALUE RECEIVED, the undersigned ("Borrower") unconditionally
(and jointly and severally, if more than one) promise(s) to pay
to the order of NATIONSBANK OF FLORIDA, N.A. ("Bank"), Sarasota
(Banking Center) without setoff, at its offices at 1605 Main
Street, Suite 101, Sarasota, Florida, 34236 or at such other
place as may be designated by Bank, the principal amount of TWO
MILLION AND NO/100 DOLLARS ($2,000,000.00), or so much thereof as
may be advanced from time to time in immediately available funds,
together with interest computed daily on the outstanding
principal balance hereunder, at an annual interest rate, and in
accordance with the payment schedule, indicated below.
Rate
The Rate shall be the Bank's FLOATING LIBOR RATE as follows:
1. As used herein "FLOATING LIBOR RATE INDEX"
shall mean the fluctuating interest rate per annum published
in the Wall Street Journal at which deposits in U.S. dollars
are offered in the London interbank market on the date for
which the Bank's FLOATING LIBOR RATE is being calculated in
an amount equal to the outstanding amount of the loan and
with a term equal to thirty (30) days.
2. The Bank's FLOATING LIBOR RATE shall be
determined in accordance with the following:
(a) "Bank's FLOATING LIBOR RATE" shall be
equal to (A) the quotient (rounded up to
the nearest 1/16 of 1%) of (1) the
Floating Libor Rate Index, divided by
<PAGE>
(2) an amount equal to one (1) minus the
appropriate reserve requirement imposed
on Bank by the Federal Reserve System,
if any, plus (B) the 2.75%. With each
change in the FLOATING LIBOR RATE INDEX
the Bank's FLOATING LIBOR RATE shall
change effective on the date the
FLOATING LIBOR RATE INDEX changes.
(b) The Borrower shall pay to Bank, from
time to time and on demand, any sum(s)
required to compensate the Bank for any
additional cost (such as, but not
limited to, a reserve requirement)
incurred by the Bank at any time which
(i) is attributable to the Bank's
obtaining a deposit or deposits to cover
the outstanding principal balance for
which the Borrower has elected to pay or
Bank's FLOATING LIBOR RATE, (ii)
decreases the effective spread or yield
represented by the 2.75% Floating Libor
Rate component, that would be earned by
the Bank but for such cost, and (iii) is
caused or occasioned by any presently
existing or subsequently introduced law,
rule, regulations or other requirement
(or by any change therein, changed
effect or interpretation thereof or
change in the Bank's cost of complying
therewith) imposed, interpreted,
administered or enforced by any federal,
state or other governmental or monetary
authority, which is imposed on or
applied to the Bank or any assets held
by, deposits or accounts in or with, or
credits extended by the Bank. The Bank
shall notify the Borrower from time to
time of any such additional cost and
such notice shall be binding and
conclusive evidence of the Borrower's
obligation to pay the stated sum upon
receipt of the notice.
<PAGE>
(c) The Bank's reference to and use of the
FLOATING LIBOR RATE INDEX to define and
determine the Bank's FLOATING LIBOR
RATE, shall not obligate the Bank to
obtain funds from any particular source
in order to charge interest at the
Bank's FLOATING LIBOR RATE.
Notwithstanding any other provision contained in this Note,
Bank does not intend to charge and Borrower shall not be
required to pay any amount of interest or other fees or
charges that is in excess of the maximum permitted by
applicable law. Any payment in excess of such maximum shall
be refunded to Borrower or credited against principal, at
the option of Bank.
Accrual Method
Interest at the Rate set forth above, unless otherwise
indicated, will be calculated on the basis of the 365/360
method, which computes a daily amount of interest for a
hypothetical year of 360 days, then multiplies such amount
by the actual number of days elapsed in an interest
calculation period.
Rate Change Date
Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the
date that the index or base rate changes.
Payment Schedule
All payments received hereunder shall be applied first to
the payment of any expense or charges payable hereunder or
under any other documents executed in connection with this
Note ("Loan Documents"), then to interest due and payable,
with the balance being applied to principal, or in such
other order as Bank shall determine at its option.
<PAGE>
Single Principal Payment/Interest Only/Zero Balance:
Principal shall be paid in full in a single payment on
August 31, 1996. Interest thereon shall be paid:
monthly, commencing on September 30, 1995, and
continuing on the last day of each successive month
thereafter, with a final payment of all unpaid interest
at the stated maturity of this Note.
Except for the portion of the line of credit reserved
for Letters of Credit pursuant to the Loan Agreement
between Bank and Borrower dated August 31, 1994, the
principal balance of this Note shall be paid to zero
for 30 consecutive days during the term of this Note.
Revolving Feature
Borrower may borrow, repay and reborrow hereunder at
any time, up to a maximum aggregate amount outstanding
at any one time equal to the principal amount of this
Note; provided, however, that Borrower is not in
default under any provision of this Note, any Loan
Document, or any other obligation of Borrower to Bank,
and provided that the borrowings hereunder do not
exceed any borrowing base or other limitations on
borrowings by Borrower. Bank shall have no liability
for its refusal to advance funds based upon its
determination that any conditions of such further
advances have not been met. Bank records of the
amounts borrowed from time to time shall be conclusive
proof thereof.
Automatic Payment
Borrower has elected to authorize Bank to effect
payment of sums due under this Note by means of
debiting Borrower's account number
____________________________________. This
authorization shall not affect the obligation of
Borrower to pay such sums when due, without notice, if
there are insufficient funds in such account to make
such payment in full on the due date thereof, or if
Bank fails to debit the account.
<PAGE>
Borrower represents to Bank that the proceeds of this loan
are to be used primarily for business, commercial or
agricultural purposes. Borrower acknowledges having read
and understood, and agrees to be bound by all terms and
conditions of this Note, including the Additional Terms and
Conditions set forth in the Addendum attached hereto and
made a part hereof, and hereby executes this Note under
seal.
BORROWER:
Elcotel, Inc., a Delaware
corporation
By:/s/ Ronald M. Tobin
------------------------
Ronald M. Tobin
Vice President
(CORPORATE SEAL)
Documentary stamps securing
the original indebtedness
have been affixed to the
Mortgage at the time of
recordation of the Mortgage,
which has been recorded in
O.R. Book 1425, page 6787,
Public Records of Manatee
County, Florida, and that
certain $1,000,000 Note dated
August 31, 1994.
<PAGE>
ADDENDUM
OF
ADDITIONAL TERMS AND CONDITIONS
1. Waivers, Consents and Covenants. Borrower, any
indorser, or guarantor hereof or any other party hereto
(collectively "Obligors") and each of them jointly and
severally: (a) waive presentment, demand, notice of
demand, notice of intent to accelerate, and notice of
acceleration of maturity, protest, notice of protest,
notice of non-payment, notice of dishonor, and any
other notice required to be given under the law to any
of Obligors, in connection with the delivery,
acceptance, performance, default or enforcement of this
Note, of any indorsement or guaranty of this Note or of
any Loan Documents; (b) consent to any and all delays,
extensions, renewals or other modifications of this
Note or the Loan Documents, or waivers of any term
hereof or of the Loan Documents, or releases or
discharge by Bank of any of Obligors or release,
substitution, or exchange of any security for the
payment hereof, or the failure to act on the part of
Bank or any indulgence shown by Bank, from time to time
and in one or more instances (without notice to or
further assent from any of Obligors) and agree that no
such action, failure to act or failure to exercise any
right or remedy on the part of Bank shall in any way
affect or impair the obligations of any Obligors or be
construed as a waiver by Bank of, or otherwise affect,
any of Bank's rights under this Note, under any
indorsement or guaranty of this Note or under any of
the Loan Documents; and (c) agree to pay, on demand,
all costs and expenses of collection of this Note or of
any indorsement or guaranty hereof and/or the
enforcement of Bank's rights with respect to, or the
administration, supervision, preservation, protection
of, or realization upon, any property securing payment
hereof, including without limitation, reasonable
attorneys' fees, including fees related to any trial,
arbitration, bankruptcy, appeal or other proceeding.
<PAGE>
2. Indemnification. Obligors agree to promptly pay,
indemnify and hold Bank harmless from all state and
federal taxes of any kind and other liabilities with
respect to or resulting from advances made pursuant to
this Note. If this Note has a revolving feature and is
secured by a mortgage, Obligors expressly consent to
the deduction of any applicable taxes from each taxable
advance extended by Bank.
3. Prepayments. Prepayment may be made in whole or in part
at any time. All prepayments of principal shall be
applied in the inverse order of maturity, or in such
other order as Bank shall determine in its sole
discretion.
4. Events of Default. The following are events of default
hereunder: (a) the failure to make any payment due
under this Note within ten (10) days after the due date
or the failure to pay or perform any obligation,
liability or indebtedness of any Obligor to Bank, or to
any affiliate of Bank, whether under this Note or any
other agreement, note or instrument now or hereafter
existing, as and when due (whether upon demand, at
maturity or by acceleration); (b) the failure to pay or
perform any other obligation, liability or indebtedness
of any of Obligors whether to Bank or some other party,
the security for which constitutes an encumbrance on
the security for this Note; (c) death of any Obligor
(if an individual), or a proceeding being filed or
commenced against any Obligor for dissolution or
liquidation, or any Obligor voluntarily or
involuntarily terminating or dissolving or being
terminated or dissolved; (d) insolvency of, business
failure of, the appointment of a custodian, trustee,
liquidator or receiver for or for any other property
of, or an assignment for the benefit of creditors by,
or the filing of a petition under bankruptcy,
insolvency or debtor's relief law or for any adjustment
of indebtedness, composition or extension by or against
any Obligor; (e) any lien or additional security
interest being placed upon any of the property which is
security for this Note; (f) acquisition at any time or
from time to time of title to the whole of or any part
<PAGE>
of the property which is security for this Note by any
person, partnership, corporation or other entity; (g)
Bank determining that any representation or warranty
made by any Obligor in any Loan Documents or otherwise
to Bank is, or was, untrue or materially misleading;
(h) failure of any Obligor to timely deliver such
financial statements, including tax returns, and other
statements of condition or other information as Bank
shall request from time to time;(i) any default under
any Loan Documents; (j) entry of a judgment against any
Obligor which Bank deems to be of a material nature, in
Bank's sole discretion; (k) the seizure or forfeiture
of, or the issuance of any writ of possession,
garnishment or attachment, or any turnover order for
any property of any Obligor; (l) the determination by
Bank that a material adverse change has occurred in the
financial condition of any Obligor; or, (m) the failure
to comply with any law or regulation regulating the
operation of Borrower's business.
5. Remedies Upon Default. Whenever there is a default
under this Note, (a) the entire balance outstanding and
all other obligations of Obligor to Bank (however
acquired or evidenced) shall, at the option of Bank,
become immediately due and payable, and/or (b) to the
extent permitted by law, the Rate of interest on the
unpaid principal shall, at the option of Bank, be
increased at Bank's discretion up to the maximum rate
allowed by law, or if none, twenty-five percent (25%)
per annum (the "Default Rate"); and/or (c) to the
extent permitted by law, a delinquency charge may be
imposed in an amount not to exceed five percent (5%) of
any payment in default for more than fifteen (15) days.
The provisions herein for a Default Rate or a
delinquency charge shall not be deemed to extend the
time for any payment hereunder or to constitute a
"grace period" giving the Obligors a right to cure any
default. At Bank's option, any accrued and unpaid
interest, fees or charges may, for purposes of
computing and accruing interest on a daily basis after
the due date of the Note or any installment thereof, be
deemed to be a part of the principal balance, and
interest shall accrue on a daily compounded basis after
<PAGE>
such date at the rate provided in this Note until the
entire outstanding balance of principal and interest is
paid in full. Bank is hereby authorized at any time to
setoff and charge against any deposit accounts of any
Obligor, as well as any other property of such party at
or under the control of Bank, without notice or demand,
any and all obligations due hereunder.
6. Non-waiver. The failure at any time of Bank to
exercise any of its options or any other rights
hereunder shall not constitute a waiver thereof, nor
shall it be a bar to the exercise of any of its options
or rights at a later date. All rights and remedies of
Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The
acceptance by Bank of any partial payment shall not
constitute a waiver of any default or of any of Bank's
rights under this Note. No waiver of any of its rights
hereunder, and no modification or amendment of this
Note, shall be deemed to be made by Bank unless the
same shall be in writing, duly signed on behalf of
Bank; and each such wavier, if any, shall apply only
with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the
obligations of Obligor to Bank in any other respect at
any other time.
7. Applicable Law. This Note shall be construed under the
internal laws and judicial decisions of the State of
Florida, and the laws of the United States as the same
may be applicable.
8. Partial Invalidity. The unenforceability or invalidity
of any provision of this Note shall not affect the
enforceability or the validity of any other provision
herein and the invalidity or unenforceability of any
provision of this Note or of the Loan Documents to any
person or circumstance shall not affect the
enforceability or validity of such provision as it may
apply to other persons or circumstances.
<PAGE>
9. Jurisdiction and Venue. In any litigation in
connection with or to enforce this Note or any
indorsement or guaranty of this Note or any Loan
Documents, Obligors, and each of them, irrevocably
consent to and confer personal jurisdiction on the
courts of the State of Florida or the United States
courts located within the State of Florida, and
expressly waive any objections as to venue in any such
courts, and agree that service of process may be made
on Obligors by mailing a copy of the summons and
complaint by registered or certified mail, return
receipt requested, to their respective addresses.
Nothing contained herein shall, however, prevent Bank
from bringing any action or exercising any rights
within any other state or jurisdiction or from
obtaining personal jurisdiction by any other means
available by applicable law.
10. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG
THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE
ARISING OUT OF OR RELATING TO THIS NOTE OR ANY RELATED
NOTES OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR
ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL
ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE
STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE
ARBITRATION OF COMMERCIAL DISPUTES OR JUDICIAL
ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.) AND
THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF
ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL.
JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN
ANY COURT HAVING JURISDICTION. ANY PARTY TO THE NOTICE
MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS NOTE APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
<PAGE>
a. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED
IN THE CITY OF BRADENTON, FLORIDA AND ADMINISTERED BY
J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS
UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION
WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN NINETY (90) DAYS OF THE DEMAND FOR ARBITRATION;
FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF
CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH
HEARING FOR AN ADDITIONAL SIXTY (60) DAYS.
b. RESERVATION OF RIGHTS. NOTHING IN THIS NOTE SHALL
BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATIONS OR REPOSE
AND ANY WAIVERS CONTAINED IN THIS NOTE; OR (II) BE A
WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY
12 U.S.C. SECTION 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE
LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSURE AGAINST ANY REAL OR
PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A
COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT
NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION
OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSURE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONALLY OR ANCILLARY
REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS NOTE.
NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE
INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE
OR PROVISIONALLY OR ANCILLARY REMEDIES SHALL CONSTITUTE
A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE
CLAIMANT IN SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
11. Binding Effect. This Note shall be binding upon and
inure to the benefit of Borrower, Obligors and Bank and
their respective successors, assigns, heirs and
personal representatives; provided, however, that no
obligations of the Borrower or the Obligor hereunder
can be assigned without prior written consent of Bank.
<PAGE>
12. NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY
NOTE AND ANY OTHER DOCUMENTS EXECUTED IN CONNECTION
HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
BORROWER:
Elcotel, Inc., a Delaware
corporation
By:/s/ Ronald M. Tobin
---------------------
Ronald M. Tobin
Vice President
(CORPORATE SEAL)
EXHIBIT 10.3
PROMISSORY NOTE
Date: August 31, 1995
Amount: $1,000,000.00
FOR VALUE RECEIVED, the undersigned ("Borrower")
unconditionally (and jointly and severally, if more than
one) promise(s) to pay to the order of NATIONSBANK OF
FLORIDA, N.A. ("Bank"), Sarasota (Banking Center) without
setoff, at its offices at 1605 Main Street, Suite 101,
Sarasota, Florida, 34236, or at such other place as may be
designated by Bank, the principal amount of ONE MILLION AND
NO/100 DOLLARS ($1,000,000.00), or so much thereof as may be
advanced from time to time in immediately available funds,
together with interest computed daily on the outstanding
principal balance hereunder, at an annual interest rate, and
in accordance with the payment schedule, indicated below.
Rate
The Rate shall be the Bank's FLOATING LIBOR RATE as
follows:
1. As used herein "FLOATING LIBOR RATE INDEX"
shall mean the fluctuating interest rate per annum published
in the Wall Street Journal at which deposits in U.S. dollars
are offered in the London interbank market on the date for
which the Bank's FLOATING LIBOR RATE is being calculated in
an amount equal to the outstanding amount of the loan and
with a term equal to thirty (30) days.
2. The Bank's FLOATING LIBOR RATE shall be
determined in accordance with the following:
(a) "Bank's FLOATING LIBOR RATE" shall be
equal to (A) the quotient (rounded up to
the nearest 1/16 of 1%) of (1) the
Floating Libor Rate Index, divided by
<PAGE>
(2) an amount equal to one (1) minus the
appropriate reserve requirement imposed
on Bank by the Federal Reserve System,
if any, plus (B) the 2.75%. With each
change in the FLOATING LIBOR RATE INDEX
the Bank's FLOATING LIBOR RATE shall
change effective on the date the
FLOATING LIBOR RATE INDEX changes.
(b) The Borrower shall pay to Bank, from
time to time and on demand, any sum(s)
required to compensate the Bank for any
additional cost (such as, but not
limited to, a reserve requirement)
incurred by the Bank at any time which
(i) is attributable to the Bank's
obtaining a deposit or deposits to cover
the outstanding principal balance for
which the Borrower has elected to pay or
Bank's FLOATING LIBOR RATE, (ii)
decreases the effective spread or yield
represented by the 2.75% Floating Libor
Rate component, that would be earned by
the Bank but for such cost, and (iii) is
caused or occasioned by any presently
existing or subsequently introduced law,
rule, regulations or other requirement
(or by any change therein, changed
effect or interpretation thereof or
change in the Bank's cost of complying
therewith) imposed, interpreted,
administered or enforced by any federal,
state or other governmental or monetary
authority, which is imposed on or
applied to the Bank or any assets held
by, deposits or accounts in or with, or
credits extended by the Bank. The Bank
shall notify the Borrower from time to
time of any such additional cost and
such notice shall be binding and
conclusive evidence of the Borrower's
obligation to pay the stated sum upon
receipt of the notice.
<PAGE>
(c) The Bank's reference to and use of the
FLOATING LIBOR RATE INDEX to define and
determine the Bank's FLOATING LIBOR
RATE, shall not obligate the Bank to
obtain funds from any particular source
in order to charge interest at the
Bank's FLOATING LIBOR RATE.
Notwithstanding any other provision contained in this Note,
Bank does not intend to charge and Borrower shall not be
required to pay any amount of interest or other fees or
charges that is in excess of the maximum permitted by
applicable law. Any payment in excess of such maximum shall
be refunded to Borrower or credited against principal, at
the option of Bank.
Accrual Method
Interest at the Rate set forth above, unless otherwise
indicated, will be calculated on the basis of the 365/360
method, which computes a daily amount of interest for a
hypothetical year of 360 days, then multiplies such amount
by the actual number of days elapsed in an interest
calculation period.
Rate Change Date
Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the
date that the index or base rate changes.
Payment Schedule
All payments received hereunder shall be applied first to
the payment of any expense or charges payable hereunder or
under any other documents executed in connection with this
Note ("Loan Documents"), then to interest due and payable,
with the balance being applied to principal, or in such
other order as Bank shall determine at its option.
<PAGE>
Principal Plus Interest:
Commencing September 30, 1995 and on the last day of
each month thereafter until maturity as set forth below,
Borrower shall make equal monthly principal installments in
the amount of Fifty-Five Thousand Five Hundred Fifty-Five
and 56/100 ($55,555.56). In addition, interest payments for
all accrued and unpaid interest shall be made monthly
commencing September 30, 1995, and on the last day of each
month thereafter until maturity as set forth below.
Maturity:
On February 28,1997, the maturity date of this Note, the
remaining unpaid principal balance and accrued and unpaid
interest shall be due and payable in full.
Automatic Payment
Borrower has elected to authorize Bank to effect
payment of sums due under this Note by means of
debiting Borrower's account number
____________________________________. This
authorization shall not affect the obligation of
Borrower to pay such sums when due, without notice, if
there are insufficient funds in such account to make
such payment in full on the due date thereof, or if
Bank fails to debit the account.
<PAGE>
Borrower represents to Bank that the proceeds of this loan
are to be used primarily for business, commercial or
agricultural purposes. Borrower acknowledges having read
and understood, and agrees to be bound by all terms and
conditions of this Note, including the Additional Terms and
Conditions set forth in the Addendum attached hereto and
made a part hereof, and hereby executes this Note under
seal.
BORROWER:
Elcotel, Inc., a Delaware
corporation
By:/s/ Ronald M. Tobin
-----------------------
Ronald M. Tobin
Vice President
(CORPORATE SEAL)
<PAGE>
ADDENDUM
OF
ADDITIONAL TERMS AND CONDITIONS
13. Waivers, Consents and Covenants. Borrower, any
indorser, or guarantor hereof or any other party hereto
(collectively "Obligors") and each of them jointly and
severally: (a) waive presentment, demand, notice of
demand, notice of intent to accelerate, and notice of
acceleration of maturity, protest, notice of protest,
notice of non-payment, notice of dishonor, and any
other notice required to be given under the law to any
of Obligors, in connection with the delivery,
acceptance, performance, default or enforcement of this
Note, of any indorsement or guaranty of this Note or of
any Loan Documents; (b) consent to any and all delays,
extensions, renewals or other modifications of this
Note or the Loan Documents, or waivers of any term
hereof or of the Loan Documents, or releases or
discharge by Bank of any of Obligors or release,
substitution, or exchange of any security for the
payment hereof, or the failure to act on the part of
Bank or any indulgence shown by Bank, from time to time
and in one or more instances (without notice to or
further assent from any of Obligors) and agree that no
such action, failure to act or failure to exercise any
right or remedy on the part of Bank shall in any way
affect or impair the obligations of any Obligors or be
construed as a waiver by Bank of, or otherwise affect,
any of Bank's rights under this Note, under any
indorsement or guaranty of this Note or under any of
the Loan Documents; and (c) agree to pay, on demand,
all costs and expenses of collection of this Note or of
any indorsement or guaranty hereof and/or the
enforcement of Bank's rights with respect to, or the
administration, supervision, preservation, protection
of, or realization upon, any property securing payment
hereof, including without limitation, reasonable
attorneys' fees, including fees related to any trial,
arbitration, bankruptcy, appeal or other proceeding.
<PAGE>
14. Indemnification. Obligors agree to promptly pay,
indemnify and hold Bank harmless from all state and
federal taxes of any kind and other liabilities with
respect to or resulting from advances made pursuant to
this Note. If this Note has a revolving feature and is
secured by a mortgage, Obligors expressly consent to
the deduction of any applicable taxes from each taxable
advance extended by Bank.
15. Prepayments. Prepayment may be made in whole or in part
at any time. All prepayments of principal shall be
applied in the inverse order of maturity, or in such
other order as Bank shall determine in its sole
discretion.
16. Events of Default. The following are events of default
hereunder: (a) the failure to make any payment due
under this Note within ten (10) days after the due date
or the failure to pay or perform any obligation,
liability or indebtedness of any Obligor to Bank, or to
any affiliate of Bank, whether under this Note or any
other agreement, note or instrument now or hereafter
existing, as and when due (whether upon demand, at
maturity or by acceleration); (b) the failure to pay or
perform any other obligation, liability or indebtedness
of any of Obligors whether to Bank or some other party,
the security for which constitutes an encumbrance on
the security for this Note; (c) death of any Obligor
(if an individual), or a proceeding being filed or
commenced against any Obligor for dissolution or
liquidation, or any Obligor voluntarily or
involuntarily terminating or dissolving or being
terminated or dissolved; (d) insolvency of, business
failure of, the appointment of a custodian, trustee,
liquidator or receiver for or for any other property
of, or an assignment for the benefit of creditors by,
or the filing of a petition under bankruptcy,
insolvency or debtor's relief law or for any adjustment
of indebtedness, composition or extension by or against
any Obligor; (e) any lien or additional security
interest being placed upon any of the property which is
security for this Note; (f) acquisition at any time or
from time to time of title to the whole of or any part
<PAGE>
of the property which is security for this Note by any
person, partnership, corporation or other entity; (g)
Bank determining that any representation or warranty
made by any Obligor in any Loan Documents or otherwise
to Bank is, or was, untrue or materially misleading;
(h) failure of any Obligor to timely deliver such
financial statements, including tax returns, and other
statements of condition or other information as Bank
shall request from time to time;(i) any default under
any Loan Documents; (j) entry of a judgment against any
Obligor which Bank deems to be of a material nature, in
Bank's sole discretion; (k) the seizure or forfeiture
of, or the issuance of any writ of possession,
garnishment or attachment, or any turnover order for
any property of any Obligor; (l) the determination by
Bank that a material adverse change has occurred in the
financial condition of any Obligor; or, (m) the failure
to comply with any law or regulation regulating the
operation of Borrower's business.
17. Remedies Upon Default. Whenever there is a default
under this Note, (a) the entire balance outstanding and
all other obligations of Obligor to Bank (however
acquired or evidenced) shall, at the option of Bank,
become immediately due and payable, and/or (b) to the
extent permitted by law, the Rate of interest on the
unpaid principal shall, at the option of Bank, be
increased at Bank's discretion up to the maximum rate
allowed by law, or if none, twenty-five percent (25%)
per annum (the "Default Rate"); and/or (c) to the
extent permitted by law, a delinquency charge may be
imposed in an amount not to exceed five percent (5%) of
any payment in default for more than fifteen (15) days.
The provisions herein for a Default Rate or a
delinquency charge shall not be deemed to extend the
time for any payment hereunder or to constitute a
"grace period" giving the Obligors a right to cure any
default. At Bank's option, any accrued and unpaid
interest, fees or charges may, for purposes of
computing and accruing interest on a daily basis after
the due date of the Note or any installment thereof, be
deemed to be a part of the principal balance, and
interest shall accrue on a daily compounded basis after
<PAGE>
such date at the rate provided in this Note until the
entire outstanding balance of principal and interest is
paid in full. Bank is hereby authorized at any time to
setoff and charge against any deposit accounts of any
Obligor, as well as any other property of such party at
or under the control of Bank, without notice or demand,
any and all obligations due hereunder.
18. Non-waiver. The failure at any time of Bank to
exercise any of its options or any other rights
hereunder shall not constitute a waiver thereof, nor
shall it be a bar to the exercise of any of its options
or rights at a later date. All rights and remedies of
Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The
acceptance by Bank of any partial payment shall not
constitute a waiver of any default or of any of Bank's
rights under this Note. No waiver of any of its rights
hereunder, and no modification or amendment of this
Note, shall be deemed to be made by Bank unless the
same shall be in writing, duly signed on behalf of
Bank; and each such wavier, if any, shall apply only
with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the
obligations of Obligor to Bank in any other respect at
any other time.
19. Applicable Law. This Note shall be construed under the
internal laws and judicial decisions of the State of
Florida, and the laws of the United States as the same
may be applicable.
20. Partial Invalidity. The unenforceability or invalidity
of any provision of this Note shall not affect the
enforceability or the validity of any other provision
herein and the invalidity or unenforceability of any
provision of this Note or of the Loan Documents to any
person or circumstance shall not affect the
enforceability or validity of such provision as it may
apply to other persons or circumstances.
21. Jurisdiction and Venue. In any litigation in
connection with or to enforce this Note or any
<PAGE>
indorsement or guaranty of this Note or any Loan
Documents, Obligors, and each of them, irrevocably
consent to and confer personal jurisdiction on the
courts of the State of Florida or the United States
courts located within the State of Florida, and
expressly waive any objections as to venue in any such
courts, and agree that service of process may be made
on Obligors by mailing a copy of the summons and
complaint by registered or certified mail, return
receipt requested, to their respective addresses.
Nothing contained herein shall, however, prevent Bank
from bringing any action or exercising any rights
within any other state or jurisdiction or from
obtaining personal jurisdiction by any other means
available by applicable law.
22. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG
THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE
ARISING OUT OF OR RELATING TO THIS NOTE OR ANY RELATED
NOTES OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR
ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL
ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE
STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE
ARBITRATION OF COMMERCIAL DISPUTES OR JUDICIAL
ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.) AND
THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF
ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL.
JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN
ANY COURT HAVING JURISDICTION. ANY PARTY TO THE NOTICE
MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS NOTE APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
<PAGE>
a. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED
IN THE CITY OF BRADENTON, FLORIDA AND ADMINISTERED BY
J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS
UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION
WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN NINETY (90) DAYS OF THE DEMAND FOR ARBITRATION;
FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF
CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH
HEARING FOR AN ADDITIONAL SIXTY (60) DAYS.
b. RESERVATION OF RIGHTS. NOTHING IN THIS NOTE SHALL
BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATIONS OR REPOSE
AND ANY WAIVERS CONTAINED IN THIS NOTE; OR (II) BE A
WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY
12 U.S.C. SECTION 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE
LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSURE AGAINST ANY REAL OR
PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A
COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT
NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION
OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSURE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONALLY OR ANCILLARY
REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS NOTE.
NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE
INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE
OR PROVISIONALLY OR ANCILLARY REMEDIES SHALL CONSTITUTE
A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE
CLAIMANT IN SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
23. Binding Effect. This Note shall be binding upon and
inure to the benefit of Borrower, Obligors and Bank and
their respective successors, assigns, heirs and
personal representatives; provided, however, that no
obligations of the Borrower or the Obligor hereunder
can be assigned without prior written consent of Bank.
<PAGE>
24. NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY
NOTE AND ANY OTHER DOCUMENTS EXECUTED IN CONNECTION
HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
BORROWER:
Elcotel, Inc., a Delaware
corporation
By:/s/ Ronald M. Tobin
-----------------------
Ronald M. Tobin
Vice President
(CORPORATE SEAL)
EXHIBIT 10.4
Prepared By & Return To:
Timothy S. Shaw, Esq. (bh)
KIRK PINKERTON
720 S. Orange Avenue
Sarasota, Florida 34236
MORTGAGE MODIFICATION AGREEMENT
THIS AGREEMENT, executed this 31st day of August,
1995, by and between NATIONSBANK OF FLORIDA, N.A., a
National Banking Association, herein called "MORTGAGEE", and
ELCOTEL, INC., a Delaware corporation, herein called
"MORTGAGOR".
W I T N E S S E T H:
WHEREAS, Mortgagor being indebted to Carl G.
Santangelo, as Trustee of THE ELCOTEL MORTGAGE TRUST, under
Declaration of Trust dated September 27, 1993 (herein called
"ASSIGNOR") executed and delivered to the Mortgagee a
certain note dated September 28, 1993, as evidence of said
debt, and also executed and delivered a Mortgage as security
therefor of like date, said Mortgage being recorded in
Official Records Book 1416, Page 5745, Public Records of
Manatee County, Florida (the "Mortgage") which Mortgage
secures that certain promissory note dated September 28,
1993, in the original principal amount of ONE MILLION AND
NO/100 DOLLARS ($1,000,000.00) (the "Note"), and encumbers
the property (the "Property") more particularly described as
follows:
Lots 9 and 10, Phase II, PARKLAND CENTER,
according to the plat thereof recorded in
Plat Book 22, Pages 77 through 79, Public
Records of Manatee County, Florida.
and
WHEREAS, Assignor has assigned the Note and Mortgage to
Mortgagee by Assignment of Mortgage dated May 20, 1994, recorded
in Official Records Book 1435, Page 4451, of the Public Records
of Manatee County, Florida; and
<PAGE>
WHEREAS, the Mortgage was modified by Mortgage Modification
Agreement dated May 23, 1994, and recorded in Official Records
Book 1435, Page 4456, of the Public Records of Manatee County,
Florida; and
WHEREAS, Mortgagor has requested Mortgagee to modify the
terms of the Note and Mortgage and Mortgagee has agreed to modify
the Note and Mortgage in accordance herewith, provided that the
Mortgage and the Second Mortgage are cross-defaulted.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00)
paid by each party to the other, and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, and the mutual covenants hereinafter set forth, the
parties jointly and severally hereby agree as follows:
1. The Mortgage evidences and secures an unpaid principal
indebtedness of SEVEN HUNDRED SIXTY FOUR THOUSAND AND NO/100
DOLLARS ($764,000.00) on the date of execution of this Agreement.
Mortgagor acknowledges and certifies that Mortgagor has no claim,
demand or setoff whatsoever against Mortgagee and that Mortgagor
is justly indebted to Mortgagee for the sums set forth above.
2. The maturity date of the Mortgage and the indebtedness
secured thereby is confirmed as May 23, 1999, as evidenced by
that certain Renewal Note dated of even date herewith in the
amount of SEVEN HUNDRED SIXTY FOUR THOUSAND AND NO/100 DOLLARS
($764,000.00) (the "Renewal Note"), which Renewal Note is secured
by the Mortgage. The required documentary stamps on the
obligation evidenced by the Renewal Note have been affixed to the
Mortgage securing the original indebtedness renewed hereby,
recorded in Official Records Book 1416, Page 5745, Public Records
of Manatee County, Florida.
3. Mortgagor agrees that a default by Mortgagor on any
note, mortgage or other evidence of indebtedness held by
Mortgagee, shall at the option of Mortgagee also constitute a
default on any other note, mortgage or other evidence of
indebtedness held by Mortgagee.
4. It is the intent of the parties that this instrument
shall not constitute a novation and shall in no way adversely
affect the lien priority of the Mortgage or any other loan
<PAGE>
documents delivered by Mortgagor to Mortgagee (collectively, the
"Loan Documents"). In the event that this Agreement, or any part
hereof, shall be construed by a court of competent jurisdiction
as operating to affect the lien priority of the Loan Documents
over the claims which would otherwise be subordinate thereto,
then to the extent that third persons acquiring an interest in
such property between the time of execution of the Loan Documents
and the execution hereof, are prejudiced thereby, this Agreement
or such portion hereof as shall be so construed, shall be void
and of no force and effect and this Agreement shall constitute,
as to that portion, a subordinate lien on the collateral,
incorporating by reference the terms of the Loan Documents, and
which Loan Documents then shall be enforced pursuant to the terms
therein contained, independent of this Agreement; provided,
however, that notwithstanding the foregoing, the parties hereto,
as between themselves, shall be bound by all terms and conditions
hereof until all indebtedness owing from the Mortgagor to the
Mortgagee shall have been paid in full.
5. In consideration of the Mortgagee renewing the
indebtedness set forth above, evidenced by the Renewal Note,
Mortgagor hereby waives any and all claims, causes of action
and/or defenses against Mortgagee arising prior to the execution
of this Agreement and agrees to hold Mortgagee, its employees,
officers and agents harmless from all matters, claims and
liabilities existing or arising prior to the date hereof.
Mortgagor acknowledges, represents and warrants to Mortgagee that
Mortgagor has no offset or defenses to this Agreement, the
indebtedness evidenced by the Renewal Note or the Loan Documents.
6. All references in the Mortgage to the "Note" shall be
deemed to include the Note and the Renewal Note. All terms,
covenants, and conditions of said Mortgage remain unchanged
except as specified above. This Agreement shall not waive any
right or remedy afforded Mortgagee under said Mortgage. This
Agreement shall be binding on the parties, their heirs, personal
representatives, successors and assigns.
7. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG
THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT
OF OR RELATING TO THE MORTGAGE OR THIS MODIFICATION AGREEMENT OR
ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED
ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
<PAGE>
BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW). THE RULES
OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL
DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
(J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE
EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL.
JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY PARTY TO THIS MODIFICATION AGREEMENT
MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING,
TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
MODIFICATION AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION
OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED
IN BRADENTON, FLORIDA, AND ADMINISTERED BY ENDISPUTE, INC., D/B/A
J.A.M.S/ENDISPUTE WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S./ENDISPUTE IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE
COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER,
THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED
TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN
ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THE MORTGAGE OR
THIS MODIFICATION AGREEMENT SHALL BE DEEMED TO (I) LIMIT THE
APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION
OR REPOSE AND ANY WAIVERS CONTAINED IN THIS MODIFICATION
AGREEMENT; OR (II) BE A WAIVER BY THE MORTGAGEE OF THE PROTECTION
AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE MORTGAGEE
HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT
LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR
PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. THE MORTGAGEE MAY EXERCISE SUCH SELF HELP RIGHTS,
FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THE MORTGAGE OR THIS
MODIFICATION AGREEMENT. NEITHER THIS EXERCISE OF SELF HELP
REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR
FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE
<PAGE>
A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY
SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OF CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
IN WITNESS WHEREOF, the parties hereto have set their hands
and seals effective as of the day and year first above written.
Signed, sealed and delivered NATIONSBANK OF FLORIDA, N.A.,
in the presence of: a National Banking Association
/s/ Daniel Pardue By: /s/ Michael C. Carr
- ------------------------ -----------------------
* Daniel Pardue Michael C. Carr
*(Print Name of Witness) Vice President
Address: 1605 Main Street
Sarasota, FL 34236
/s/ Timothy S. Shaw
- ------------------------
* Timothy S. Shaw (CORPORATE SEAL)
*(Print Name of Witness)
MORTGAGEE
ELCOTEL, INC., a Delaware
corporation
/s/ Timothy S. Shaw By: /s/ Ronald M. Tobin
- ------------------------ -----------------------
* Timothy S. Shaw Ronald M. Tobin,
*(Print Name of Witness) As: Vice President and Chief
Financial Officer
Address: 6428 Parkland Drive
Sarasota, FL 34243
/s/ Michael C. Carr
- ------------------------
* Michael C. Carr (CORPORATE SEAL)
*(Print Name of Witness)
MORTGAGOR
<PAGE>
STATE OF FLORIDA
COUNTY OF SARASOTA
The foregoing instrument was acknowledged before me this
31st day of August, 1995, by MICHAEL C. CARR, as Vice President
of NATIONSBANK OF FLORIDA, N.A., a National Banking Association,
on behalf of said corporation. He is personally known to me and
did not take an oath.
/s/ Rebecca L. Spencer
----------------------------
* Rebecca L. Spencer
(NOTARIAL SEAL) *(Print Name of Notary Public)
Notary Public - State of Florida
My commission expires 5/27/99
Commission Number CC 460875
STATE OF FLORIDA
COUNTY OF SARASOTA
The foregoing instrument was acknowledged before me this
31st day of August, 1995, by RONALD M. TOBIN, as Vice President
and Chief Financial Officer of ELCOTEL, INC., a Delaware
corporation, on behalf of said corporation. He is personally
known to me and did not take an oath.
/s/ Rebecca L. Spencer
----------------------------
* Rebecca L. Spencer
(NOTARIAL SEAL) *(Print Name of Notary Public)
Notary Public - State of Florida
My commission expires 5/27/99
Commission Number CC 460875
EXHIBIT 10.5
THIS NOTE REPLACES THAT NOTE DATED MAY 23, 1994, IN THE ORIGINAL
PRINCIPAL SUM OF $1,000,000.00, AND DOES NOT INCREASE THE AMOUNT
DUE, NOR CHANGE THE ORIGINAL OBLIGOR, THEREFORE NO DOCUMENTARY
STAMPS ARE REQUIRED.
REPLACEMENT
PROMISSORY NOTE
Effective Date: August 31, 1995
Date of Execution: August 31, 1995
Amount: $764,000.00
FOR VALUE RECEIVED, the undersigned ("Borrower") unconditionally
(and jointly and severally, if more than one) promise(s) to pay
to the order of NATIONSBANK OF FLORIDA, N.A. ("Bank"), Sarasota
(Banking Center) without setoff, at its offices at 1605 Main
Street, Suite 101, Sarasota, Florida, 34236 or at such other
place as may be designated by Bank, the principal amount of SEVEN
HUNDRED SIXTY-FOUR THOUSAND AND NO/100 DOLLARS ($764,000.00), or
so much thereof as may be advanced from time to time in
immediately available funds, together with interest computed
daily on the outstanding principal balance hereunder, at an
annual interest rate, and in accordance with the payment
schedule, indicated below.
Fixed Rate. The Rate shall be fixed at eight and one half
percent (8.5%), per annum.
Notwithstanding any other provision contained in this Note, Bank
does not intend to charge and Borrower shall not be required to
pay any amount of interest or other fees or charges that is in
excess of the maximum permitted by applicable law. Any payment
in excess of such maximum shall be refunded to Borrower or
credited against principal, at the option of Bank.
<PAGE>
Accrual Method
Interest at the Rate set forth above, unless otherwise indicated,
will be calculated on the basis of the 365/360 method, which
computes a daily amount of interest for a hypothetical year of
360 days, then multiplies such amount by the actual number of
days elapsed in an interest calculation period.
Payment Schedule
All payments received hereunder shall be applied first to the
payment of any expense or charges payable hereunder or under any
other documents executed in connection with this Note ("Loan
Documents"), then to interest due and payable, with the balance
being applied to principal, or in such other order as Bank shall
determine at its option.
Principal Plus Interest:
Principal shall be paid in forty-five (45) equal monthly
installments of $16,608.70 each, commencing on August 31,
1995, together with accrued interest thereon and continuing
on the last day of each successive month thereafter, with a
final payment of all unpaid principal and interest thereon
on May 23, 1999.
Automatic Payment
Borrower has elected to authorize Bank to effect payment of
sums due under this Note by means of debiting Borrower's
account number ____________________________________. This
authorization shall not affect the obligation of Borrower to
pay such sums when due, without notice, if there are
insufficient funds in such account to make such payment in
full on the due date thereof, or if Bank fails to debit the
account.
<PAGE>
Borrower represents to Bank that the proceeds of this loan are to
be used primarily for business, commercial or agricultural
purposes. Borrower acknowledges having read and understood, and
agrees to be bound by all terms and conditions of this Note,
including the Additional Terms and Conditions set forth in the
Addendum attached hereto and made a part hereof, and hereby
executes this Note under seal.
Elcotel, Inc.,
a Delaware corporation
By:/s/Ronald M. Tobin
---------------------
Ronald M. Tobin
Vice President
(CORPORATE SEAL)
Documentary stamps securing
the debt have been affixed
to the Mortgage recorded in
O.R. Book 1416, Page 5745,
Public Records of Manatee
County, Florida.
<PAGE>
ADDENDUM
OF
ADDITIONAL TERMS AND CONDITIONS
25. Waivers, Consents and Covenants. Borrower, any indorser, or
guarantor hereof or any other party hereto (collectively
"Obligors") and each of them jointly and severally: (a)
waive presentment, demand, notice of demand, notice of
intent to accelerate, and notice of acceleration of
maturity, protest, notice of protest, notice of non-payment,
notice of dishonor, and any other notice required to be
given under the law to any of Obligors, in connection with
the delivery, acceptance, performance, default or enforce-
ment of this Note, of any indorsement or guaranty of this
Note or of any Loan Documents; (b) consent to any and all
delays, extensions, renewals or other modifications of this
Note or the Loan Documents, or waivers of any term hereof or
of the Loan Documents, or releases or discharge by Bank of
any of Obligors or release, substitution, or exchange of any
security for the payment hereof, or the failure to act on
the part of Bank or any indulgence shown by Bank, from time
to time and in one or more instances (without notice to or
further assent from any of Obligors) and agree that no such
action, failure to act or failure to exercise any right or
remedy on the part of Bank shall in any way affect or impair
the obligations of any Obligors or be construed as a waiver
by Bank of, or otherwise affect, any of Bank's rights under
this Note, under any indorsement or guaranty of this Note or
under any of the Loan Documents; and (c) agree to pay, on
demand, all costs and expenses of collection of this Note or
of any indorsement or guaranty hereof and/or the enforcement
of Bank's rights with respect to, or the administration,
supervision, preservation, protection of, or realization
upon, any property securing payment hereof, including
without limitation, reasonable attorneys' fees, including
fees related to any trial, arbitration, bankruptcy, appeal
or other proceeding.
26. Indemnification. Obligors agree to promptly pay, indemnify
and hold Bank harmless from all state and federal taxes of
any kind and other liabilities with respect to or resulting
<PAGE>
from advances made pursuant to this Note. If this Note has
a revolving feature and is secured by a mortgage, Obligors
expressly consent to the deduction of any applicable taxes
from each taxable advance extended by Bank.
27. Prepayments. Prepayments may be made in whole or in part at
any time. All prepayments of principal shall be applied in
the inverse order of maturity, or in such other order as
Bank shall determine in its sole discretion.
28. Events of Default. The following are events of default
hereunder: (a) the failure to make any payment due under
the Note within ten (10) days after the due date or the
failure to pay or perform any obligation, liability or
indebtedness of any Obligor to Bank, or to any affiliate of
Bank, whether under this Note or any other agreement, note
or instrument now or hereafter existing, as and when due
(whether upon demand, at maturity or by acceleration); (b)
the failure to pay or perform any other obligation,
liability or indebtedness of any of Obligors whether to Bank
or some other party, the security for which constitutes an
encumbrance on the security for this Note; (c) death of any
Obligor (if an individual), or a proceeding being filed or
commenced against any Obligor for dissolution or
liquidation, or any Obligor voluntarily or involuntarily
terminating or dissolving or being terminated or dissolved;
(d) insolvency of, business failure of, the appointment of a
custodian, trustee, liquidator or receiver for or for any
other property of, or an assignment for the benefit of
creditors by, or the filing of a petition under bankruptcy,
insolvency or debtor's relief law or for any adjustment of
indebtedness, composition or extension by or against any
Obligor; (e) any lien or additional security interest being
placed upon any of the property which is security for this
Note; (f) acquisition at any time or from time to time of
title to the whole of or any part of the property which is
security for this Note by any person, partnership, corpora-
tion or other entity; (g) Bank determining that any
representation or warranty made by any Obligor in any Loan
Documents or otherwise to Bank is, or was, untrue or
materially misleading; (h) failure of any Obligor to timely
deliver such financial statements, including tax returns,
and other statements of condition or other information as
<PAGE>
Bank shall request from time to time;(i) any default under
any Loan Documents; (j) entry of a judgment against any
Obligor which Bank deems to be of a material nature, in
Bank's sole discretion; (k) the seizure or forfeiture of, or
the issuance of any writ of possession, garnishment or
attachment, or any turnover order for any property of any
Obligor; (l) the determination by Bank that a material
adverse change has occurred in the financial condition of
any Obligor; or, (m) the failure to comply with any law or
regulation regulating the operation of Borrower's business.
29. Remedies Upon Default. Whenever there is a default under
this Note, (a) the entire balance outstanding and all other
obligations of Obligor to Bank (however acquired or
evidenced) shall, at the option of Bank, become immediately
due and payable, and/or (b) to the extent permitted by law,
the Rate of interest on the unpaid principal shall, at the
option of Bank, be increased at Bank's discretion up to the
maximum rate allowed by law, or if none, twenty-five percent
(25%) per annum (the "Default Rate"); and/or (c) to the
extent permitted by law, a delinquency charge may be imposed
in an amount not to exceed five percent (5%) of any payment
in default for more than fifteen (15) days. The provisions
herein for a Default Rate or a delinquency charge shall not
be deemed to extend the time for any payment hereunder or to
constitute a "grace period" giving the Obligors a right to
cure any default. At Bank's option, any accrued and unpaid
interest, fees or charges may, for purposes of computing and
accruing interest on a daily basis after the due date of the
Note or any installment thereof, be deemed to be a part of
the principal balance, and interest shall accrue on a daily
compounded basis after such date at the rate provided in
this Note until the entire outstanding balance of principal
and interest is paid in full. Bank is hereby authorized at
any time to setoff and charge against any deposit accounts
of any Obligor, as well as any other property of such party
at or under the control of Bank, without notice or demand,
any and all obligations due hereunder.
30. Non-waiver. The failure at any time of Bank to exercise any
of its options or any other rights hereunder shall not
constitute a waiver thereof, nor shall it be a bar to the
exercise of any of its options or rights at a later date.
<PAGE>
All rights and remedies of Bank shall be cumulative and may
be pursued singly, successively or together, at the option
of Bank. The acceptance by Bank of any partial payment
shall not constitute a waiver of any default or of any of
Bank's rights under this Note. No waiver of any of its
rights hereunder, and no modification or amendment of this
Note, shall be deemed to be made by Bank unless the same
shall be in writing, duly signed on behalf of Bank; and each
such wavier, if any, shall apply only with respect to the
specific instance involved, and shall in no way impair the
rights of Bank or the obligations of Obligor to Bank in any
other respect at any other time.
31. Applicable Law. This Note shall be construed under the
internal laws and judicial decisions of the State of
Florida, and the laws of the United States as the same may
be applicable.
32. Partial Invalidity. The unenforceability or invalidity of
any provision of this Note shall not affect the enforceabil-
ity or the validity of any other provision herein and the
invalidity or unenforceability of any provision of this Note
or of the Loan Documents to any person or circumstance shall
not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
33. Jurisdiction and Venue. In any litigation in connection
with or to enforce this Note or any indorsement or guaranty
of this Note or any Loan Documents, Obligors, and each of
them, irrevocably consent to and confer personal jurisdic-
tion on the courts of the State of Florida or the United
States courts located within the State of Florida, and
expressly waive any objections as to venue in any such
courts, and agree that service of process may be made on
Obligors by mailing a copy of the summons and complaint by
registered or certified mail, return receipt requested, to
their respective addresses. Nothing contained herein shall,
however, prevent Bank from bringing any action or exercising
any rights within any other state or jurisdiction or from
obtaining personal jurisdiction by any other means available
by applicable law.
<PAGE>
34. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING
OUT OF OR RELATING TO THIS NOTE OR ANY RELATED NOTES OR
INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN
ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN
ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE
AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OR
JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.)
AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF
ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDG-
MENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY PARTY TO THE NOTICE MAY BRING AN
ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
NOTE APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
a. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
THE CITY OF BRADENTON, FLORIDA AND ADMINISTERED BY J.A.M.S.
WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR
LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN NINETY (90)
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR
SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND
THE COMMENCEMENT OF SUCH HEARING FOR AN ADDITIONAL SIXTY
(60) DAYS.
b. RESERVATION OF RIGHTS. NOTHING IN THIS NOTE SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATIONS OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS NOTE; OR (II) BE A WAIVER BY THE BANK OF
THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SECTION 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT
OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH
AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSURE
AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSES-
SION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSURE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONALLY OR ANCILLARY REMEDIES
BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
<PAGE>
PROCEEDING BROUGHT PURSUANT TO THIS NOTE. NEITHER THE
EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONALLY OR
ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF
ANY PARTY, INCLUDING THE CLAIMANT IN SUCH ACTION, TO ARBI-
TRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
35. Binding Effect. This Note shall be binding upon and inure
to the benefit of Borrower, Obligors and Bank and their
respective successors, assigns, heirs and personal repre-
sentatives; provided, however, that no obligations of the
Borrower or the Obligor hereunder can be assigned without
prior written consent of Bank.
36. NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE AND
ANY OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRE-
SENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Elcotel, Inc.
a Delaware corporation
By:/s/Ronald M. Tobin
---------------------
Ronald M. Tobin
Vice President
(CORPORATE SEAL)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 116
<SECURITIES> 0
<RECEIVABLES> 4,541
<ALLOWANCES> 0
<INVENTORY> 3,085
<CURRENT-ASSETS> 12,375
<PP&E> 3,163
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,715
<CURRENT-LIABILITIES> 5,174
<BONDS> 0
<COMMON> 79
0
0
<OTHER-SE> 11,653
<TOTAL-LIABILITY-AND-EQUITY> 17,715
<SALES> 11,304
<TOTAL-REVENUES> 11,304
<CGS> 6,582
<TOTAL-COSTS> 6,582
<OTHER-EXPENSES> 4,208
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (188)
<INCOME-PRETAX> 702
<INCOME-TAX> 246
<INCOME-CONTINUING> 456
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 456
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
