-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HPCctCNBjZp3UbgKRiY81WYvFqrNSguwL3xXkIu2Wg0mEqz9MDHDArN51wT9FjIv RwD+JcHoO+hW8uxbHdg6qw== 0000801448-96-000010.txt : 19961115 0000801448-96-000010.hdr.sgml : 19961115 ACCESSION NUMBER: 0000801448-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELCOTEL INC CENTRAL INDEX KEY: 0000801448 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 592518405 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15205 FILM NUMBER: 96662003 BUSINESS ADDRESS: STREET 1: 6428 PARKLAND DR CITY: SARASOTA STATE: FL ZIP: 34243 BUSINESS PHONE: 8137580389 MAIL ADDRESS: STREET 1: 6428 PARKLAND DR CITY: SARASOTA STATE: FL ZIP: 34243 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996. Commission File No. 0-15205 ELCOTEL, INC. (Exact name of registrant as specified 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) (Zip Code) (941) 758-0389 ------------------------ (Registrant's telephone number, including area code) Not Applicable ------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 1, 1996 was 8,108,144. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. --------------------- ELCOTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, March 31, 1996 1996 ----------- ----------- (Unaudited) (See Note) ASSETS CURRENT ASSETS Cash and temporary investments $9 $232 Accounts receivable, net 3,040 2,943 Notes receivable, net 2,615 2,238 Inventories 2,731 2,800 Refundable income taxes 226 507 Deferred tax asset 1,332 1,332 Prepaid exp. and other current assets 393 175 ------- ------- TOTAL CURRENT ASSETS 10,346 10,227 Property, plant and equipment, net 3,128 3,103 Notes receivable, noncurrent 879 646 Deferred tax asset 782 782 Other assets 181 171 ------- ------- $15,316 $14,929 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $2,102 $2,164 Line of credit 1,180 965 Current portion of long-term debt 477 810 ------- ------- TOTAL CURRENT LIABILITIES 3,759 3,939 ------- ------- LONG TERM DEBT, less current portion 332 432 ------- ------- SHAREHOLDERS' EQUITY: Common Stock 82 81 Additional paid-in capital 10,863 10,720 Retained earnings/(deficit) 457 (66) Less treasury stock (177) (177) ------- ------- 11,225 10,558 ------- ------- $15,316 $14,929 ======= ======= Note: The balance sheet at March 31, 1996, has been derived from the audited financial statements. 1 See Notes to Condensed Consolidated Financial Statements
ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended September 30, September 30, ------------------ ------------------- 1996 1995 1996 1995 ------ ------ ------ ------ NET SALES $6,101 $5,484 $11,652 $11,304 ------ ------ ------- ------- COSTS AND EXPENSES: Cost of sales 3,781 3,260 7,035 6,582 Research and development 695 543 1,240 1,064 Selling, general and administrative 1,168 1,597 2,648 3,144 ------ ------ ------- ------- TOTAL COSTS AND EXPENSES 5,644 5,400 10,923 10,790 ------ ------ ------- ------- PROFIT FROM OPERATIONS 457 84 729 514 INTEREST INCOME, net 46 43 76 188 ------ ------ ------- ------- PROFIT BEFORE INCOME TAXES 503 127 805 702 INCOME TAX PROVISION 177 44 282 246 ------ ------ ------- ------- NET PROFIT $326 $83 $523 $456 ====== ====== ======= ======= NET PROFIT PER COMMON AND COMMON EQUIVALENT SHARE $0.04 $0.01 $0.06 $0.06 ====== ====== ======= ======= WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,310 8,226 8,294 8,219 ====== ====== ======= ======= 2 See Notes to Condensed Consolidated Financial Statements
ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (Unaudited)
Six Months Ended September 30, 1996 1995 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net profit $523 $456 Adjustments to reconcile net profit to net cash provided from operations: Depreciation and amortization 185 167 Provision for doubtful accounts (333) 75 Change in operating assets and liabilities: Accounts receivable 282 (1,807) Notes receivable (657) 597 Inventories 69 (746) Prepaid expenses and other current assets (218) 116 Accounts payable and accrued expenses 220 58 Other, net (10) (15) ------ ------ Net cash flow (used in)/provided from operations 61 (1,099) ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (210) (142) ------ ------ Net cash flow used in investing activities (210) (142) ------ ------ 3
ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (Unaudited) (continued)
Six Months Ended September 30, 1996 1995 ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Net (payments)/proceeds related to short-term borrowings 215 (20) Payments on long-term debt (433) 826 Issuance of common stock 144 185 ------ ------ Net cash flow used in financing activities (74) 991 ------ ------ Net decrease in cash and temporary investments (223) (250) Cash and temporary investments at beginning of year 232 366 ------ ------ Cash and temporary investments at end of quarter $9 $116 ====== ====== ADDITIONAL CASH FLOW INFORMATION: Cash Paid During the period for: Interest $37 $59 Income taxes - 212 4 See Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. ----------------------------------------------- Results of Operations - --------------------- (Dollars in thousands) Quarter ended September 30, 1996, compared to the quarter ended September 30, 1995: Net sales for the quarter ended September 30, 1996 ("second quarter 1997"), increased from $5,484 for the quarter ended September 30, 1995 ("second quarter 1996") to $6,101, an increase of $617, or approximately 11%, principally as a result of an increase in sales of complete payphones of approximately 22% offset by a decrease in sales of electronic assemblies of approximately 18%. Unit sales of complete payphones increased by approximately 31% and unit sales of electronic assemblies decreased by approximately 5%. Average selling prices of payphones in the quarter were approximately 7% lower than in the same quarter last year due to discounts given to customers for competitive reasons, while average selling prices of electronic assemblies were approximately 14% lower than last year due to trade in credits given to customers who upgraded older electronic assemblies, that they previously purchased from either the Company or other manufacturers, for the Company's current models. Cost of sales as a percentage of net sales increased from 59% for the second quarter 1996 to 62% for the second quarter 1997, principally as a result of higher sales of complete payphones than electronic assemblies as compared with last year. 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 payphones are a significant portion of the total cost of the telephone but are priced only nominally above cost. Research and development costs increased by $152, or approximately 28%, from $543 in the second quarter 1996 to $695 in the second quarter 1997 due to the hiring of additional development staff partially offset by a reduction in the use of outside contractors. Selling, general and administrative expenses decreased by $429, or approximately 27%, from $1,597 in the second quarter 1996 to $1,168 in the second quarter 1997 principally as a result of a reduction in the Company's provision for doubtful accounts due to cash collection or product return of previously reserved amounts as well as improved aging of current accounts, partially offset by an increase in legal fees and international travel expense, as compared with the second quarter 1996. Interest income decreased by $21, or approximately 20%, from $105 in the second quarter 1996 to $84 in the second quarter 1997 due to a decrease in the Company's note receivable portfolio. Interest expense decreased by $24, or approximately 39%, from $62 in the second quarter 1996 to $38 in the second quarter 1997 due to decreased borrowings under the Company's line of credit facility with its bank. 6 Six months ended September 30, 1996, compared to the six months ended September 30, 1995: Net sales for the six months ended September 30, 1996 ("six-months 1997"), increased from $11,304 for the six months ended September 30, 1995 ("six-months 1996") to $11,652, an increase of $348, or approximately 3%, principally as a result of an increase in sales of complete payphones of approximately 8% offset by a decrease in sales of electronic assemblies of approximately 2%. Unit sales of complete payphones increased by approximately 17% while unit sales of electronic assemblies were at the same level as during the six-months 1996. Average selling prices of payphones during the six-months 1997 were approximately 8% lower than during the six-months 1996 due to discounts given to customers for competitive reasons, while average selling prices of electronic assemblies were approximately 3% lower than last year due to trade in credits given to customers who upgraded older electronic assemblies, that they previously purchased from either the Company or other manufacturers, for the Company's current models. Cost of sales as a percentage of net sales increased from 58% for the six-months 1996 to 60% for the six-months 1997, principally as a result of higher sales of complete payphones than electronic assemblies as compared with last year. 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 payphones are a significant portion of the total cost of the telephone but are priced only nominally above cost. Research and development costs increased by $176, or approximately 17%, from $1,064 in the six-months 1996 to $1,240 in the six-months 1997 due to the hiring of additional development staff partially offset by a reduction in the use of outside contractors. Selling, general and administrative expenses decreased by $496, or approximately 16%, from $3,144 in the six-months 1996 to $2,648 in the six-months 1997 principally as a result of a reduction in the Company's provision for doubtful accounts due to cash collection or product return of previously reserved amounts as well as improved aging of current accounts during the six-months 1997 and reduced sales commission expense, partially offset by an increase in legal fees as compared with the six-months 1996. Interest income decreased by $134, or approximately 46%, from $290 in the six-months 1996 to $156 in six-months 1997 due to a decrease in the Company's note receivable portfolio. Interest expense decreased by $22, or approximately 22%, from $102 in the six-months 1996 to $80 in the six-months 1997 due to decreased borrowings under the Company's line of credit facility with its bank. 7 Liquidity and Capital Resources - ------------------------------- (Dollars in thousands) The Company's current assets increased by $119, or approximately 1%, from $10,227 at March 31, 1996 to $10,346 at September 30, 1996, predominantly from an increase in accounts receivable of $97, an increase of $377 in notes receivable and an increase of $218 in prepaid expenses, partially offset by a reduction in cash of $223, a decrease in inventory of $69 and a decrease in refundable income taxes of $281. Current liabilities decreased by $180, or approximately 5%, from $3,939 at March 31, 1996 to $3,759 at September 30, 1996 predominantly from a reduction in the current portion of long term debt and a decrease in accounts payable and accrued expenses partially offset by an increase in the amount owed under the Company's line of credit with its lender. Since August 31, 1995 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 is at the bank's floating 30 day libor rate plus 2.75%. 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 1997 ranging from $410 to $1,185. The line of credit was renewed effective August 28, 1996 and the Company believes its lender will renew the line of credit when it matures on August 31, 1997. In addition, on August 31, 1995, the Company borrowed $1,000 from the same lender for an eighteen month term with interest at the bank's floating 30 day libor rate plus 2.75%. The Company also refinanced its mortgage note with its lender on the same date without changing the maturity date of May 23, 1999, but lowering 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, 1997. CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The statements contained in this Quarterly Report on Form 10-Q which are not historical facts contain forward looking information with respect to plans, projections or future performance of the Company, the occurrence of which involve certain risks and uncertainties that could cause the Company's actual results to differ materially from those expected by the Company, including the risk of adverse regulatory action affecting the Company's business or the business of the Company's customers, competition, the risk of obsolescence of its products, the ultimate outcome of the class action lawsuit, and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. 8 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ------------------ As previously reported, on August 3, 1995, one of the Company's customers, Amtel Communications, Inc. and four related entities ("Amtel"), filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, which were administratively consolidated under the case name of In re ACI-HDT Supply Company, United States Bankruptcy Court for the Southern District of California, Administratively Consolidated Case No. 95-08253-A11. In late 1994 and early 1995, the Company had sold Amtel on credit approximately 3,500 pay phones and related equipment. To secure Amtel's obligations to pay the Company for the pay phones and related equipment pursuant to five promissory notes, Amtel granted the Company a security interest in pay phones sold to Amtel and collateral assignments of agreements between Amtel and the owners of certain sites where those pay phones had been or were to be installed. The Company filed a proof of claim in the bankruptcy proceeding as a secured creditor in the amount of approximately $3,520,900 plus additional interest and attorneys' fees and a proof of claim as an unsecured creditor in the amount of approximately $54,650. On August 29, 1996, the Bankruptcy Court approved the sale of Amtel's pay phone assets and business to PhoneTel Technologies, Inc. in accordance with the terms described in Item 1, Legal Proceedings of Part II of the Company's Form 10-Q for the quarter ended June 30, 1996. Pursuant to an order entered October 10, 1996, the Bankruptcy Court approved the settlement agreement between the Company and Amtel regarding the treatment of the Company's claims against Amtel. Pursuant to that settlement agreement, the Company was allowed a fully secured claim in all of its collateral and received in satisfaction of its claim payment of $1.7 million and the transfer to the Company of certain pay phones (approximately 1,350) and related equipment in the Company's possession and being warehoused by the Company pursuant to a prior Bankruptcy Court order. The Company and Amtel also exchanged mutual releases of all other claims subject to certain exceptions. On October 30, 1996, the Company received a check for $1.7 million from Amtel and Amtel released its interest in the warehoused pay phones and equipment. In re ACI-HDT Supply Company, debtor and related cases. Nogah Bethlahmy, et al plaintiffs v. Randy S. Kuhlmann, et al. defendants. Adversary Proceeding No. 95-90809 in the United States Bankruptcy Court, Southern District of California. As previously reported, this putative class action was filed in the Superior Court of the State of California for the County of San Diego ("State Court") alleging that Amtel conspired with its own officers and professionals, and with various telephone suppliers (including the Company) to defraud investors in Amtel by operating a Ponzi scheme. See Item 3, Legal Proceedings of Part I of the Company's Form 10-KSB for the fiscal year ended March 31, 1996 for a more complete description of this class action litigation. 9 In October, 1996 the Bankruptcy Court dismissed the first three causes of action in the second amended complaint, which were premised upon alleged violations of the California Unfair Business Practices Act, denied the motion to dismiss the fourth and fifth causes of action against the Company for alleged fraud and conspiracy and granted in part the motion to dismiss the seventh and eighth causes of action against the Company relating to purchases and sales of unregistered securities but denied the motion to the extent that it was limited solely to claims of alleged willful participation with a party to induce the purchase of unregistered securities. The Bankruptcy Court's hearing on the plaintiffs' motion for class certification and authorization of contingent fee arrangement has been postponed until November 21, 1996. In view of this motion practice, the Company has not yet answered the complaint but discovery in the litigation is continuing. The settlement proposal described in Item 1, Legal Proceedings of Part II of the Company's Form 10-Q for the quarter ended June 30, 1996 was not accepted by the necessary 80 percent of the lessor/investors. As as result the Company retained the $300,000 of the $1.7 million settlement payment in the Amtel bankruptcy case. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: Exhibits are listed in the Index to Exhibits on page E-1. (b) Reports on Form 8-K: None 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Elcotel, Inc. ---------------------- (Registrant) Date: November 13, 1996 By: /s/ Ronald M. Tobin ---------------------- Ronald M. Tobin Vice President (Principal Financial Officer and Chief Accounting Officer) 11 INDEX TO EXHIBITS Exhibit Incorporated by Page Number Description Reference to No. - ------- ----------- --------------- ---- 10.1 Second Amendment to Loan Agreement and Third Amendment to Collateral Assignment and Security Agreement between Elcotel, Inc. and NationsBank, N.A. (South) effective August 28, 1996. Included in this report. 10.2 Renewal Promissory Note between Elcotel, Inc. and NationsBank, N.A. (South) effective August 28, 1996. Included in this report. E-1 EX-10.1 2 SECOND AMENDMENT TO LOAN AGREEMENT EXHIBIT 10.1 SECOND AMENDMENT TO LOAN AGREEMENT AND THIRD AMENDMENT TO COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT THIS SECOND AMENDMENT TO LOAN AGREEMENT, AND THIRD AMENDMENT TO COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT (the "Amendment") is made effective the 28th day of August, 1996, by and between ELCOTEL, INC., a Delaware corporation ("Borrower"), and NATIONSBANK, N.A. (SOUTH), a National Banking Association, as successor in interest to NATIONSBANK OF FLORIDA, N.A. ("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 $1,000,000.00 line of credit loan Borrower executed a $1,000,000.00 promissory note and a $2,000,000.00 Consolidation Promissory Note, both dated August 31, 1994, as renewed by Renewal Promissory Note dated August 31, 1995, and executed a Loan Agreement and an Amendment to Collateral Assignment and Security Agreement both dated August 31, 1994 as amended by a First Amendment to Loan Agreement and Second Amendment to Collateral Assignment and Security Agreement dated August 31, 1995; and WHEREAS, Borrower has requested Lender to renew the line of credit loan in the amount of $2,000,000.00; and WHEREAS, Borrower and Lender desire to amend the terms of the Loan Agreement, Collateral Assignment and the Security Agreement, as previously amended, to reflect the renewal of the Line of Credit 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. 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. 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. 1 3. 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 $2,000,000.00 Renewal 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 delete all references to Eligible Note Portfolio from the formula for determining the borrowing base. Borrower shall no longer be entitled to request funds based upon Eligible Note Portfolio. 5. The definition of Debt Service Coverage Ratio in Paragraph 1.F., is hereby replaced in its entirety with the following: "Debt Service Coverage Ratio. Debt Service Coverage Ratio means Borrower's Net Income ("NI") + Depreciation ("D") + Amortization ("AMORT") less Dividends ("DIV"), all divided by Current Maturities of Long Term Debt ("CMLTD") and Current Maturities of Capital Leases ("CMCL") (i.e. (NI + D + AMORT - DIV --------------------- CMLTD + CMCL)". 6. Paragraph 4.A.ii. is amended to provide Borrower shall maintain a Debt Service Coverage Ratio of not less than 1.3:1.0 for the fiscal quarter end June 30, 1996, a Debt Service Coverage Ratio of not less than 1.5:1.0 for the fiscal quarter end September 30, 1996, a Debt Service Coverage Ratio of not less than 2.0:1.0 for fiscal quarter end December 31, 1996, and thereafter Borrower shall maintain a Debt Service Coverage Ratio of not less than 2.0:1.0 measured on a rolling four (4) quarter basis from the annual and quarterly financial statements, commencing March 31, 1997. Prior to March 31, 1997, the Debt Service Coverage Ratio shall be measured based upon only the fiscal quarter end and not on a rolling four (4) quarter basis. 7. 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 dated August 3, 1995, and by Second Amendment to Loan Agreement dated of even date herewith by and between Borrower and Lender. 2 8. Except as modified herein, all other terms and conditions of the Loan Agreement, Collateral Assignment and the Security Agreement, all as previously amended, 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, N.A., (SOUTH) ELCOTEL, INC., a Delaware a National Banking Association corporation as successor in interest to NATIONSBANK OF FLORIDA, N.A. 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 Address: 6428 Parkland Drive Sarasota, FL 34236 Sarasota, FL 34243 (CORPORATE SEAL) (CORPORATE SEAL) 3 EX-10.2 3 RENEWAL PROMISSORY NOTE EXHIBIT 10.2 THIS NOTE RENEWS THAT RENEWAL PROMISSORY NOTE DATED AUGUST 31, 1995, 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 Prior Maturity Date: August 31, 1996 Date of Execution: September 25, 1996 Amount: $2,000,000.00 Effective Date: August 28, 1996 FOR VALUE RECEIVED, the undersigned ("Borrower") unconditionally (and jointly and severally, if more than one) promise(s) to pay to the order of NATIONSBANK, N.A. (SOUTH), as successor in interest to 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 (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. 1 (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. (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. 2 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. Single Principal Payment/Interest Only/Zero Balance: Principal shall be paid in full in a single payment on August 31, 1997. Interest thereon shall be paid: monthly, commencing on September 30, 1996, 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, as thereafter amended, 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. 3 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. 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. 4 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. 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. 1 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 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. 2 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 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. 3 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. 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. 4 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. PARAGRAPH 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. 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. 5 BORROWER: ELCOTEL, INC., a Delaware corporation By:/s/ Ronald M. Tobin ------------------------ Ronald M. Tobin Vice President (CORPORATE SEAL) 6 RENEWAL RIDER TO REVOLVING LINE OF CREDIT NOTE THIS RIDER contains additional provisions that are hereby incorporated and by this reference made a part of that certain Renewal Note - Revolving Line of Credit dated September 25, 1996, in the stated amount of TWO MILLION AND NO/100 DOLLARS ($2,000,000.00) (the "Note") executed by ELCOTEL, INC., a Delaware corporation (the "Borrower") in favor of NATIONSBANK, N.A. (SOUTH), a National Banking Association, as successor in interest to NATIONSBANK OF FLORIDA, N.A. (the "Lender"). Borrower further covenants and agrees as follows: 1. In the event of a conflict or inconsistency between this Rider and the terms contained in the Note or any other loan document executed in connection therewith, the terms contained in this Rider shall prevail and control. 2. Borrower acknowledges and agrees that the Note was given in renewal of, and not in substitution or exchange for, that certain Renewal Note - Revolving Line of Credit, dated August 31, 1995, executed by Borrower in favor of the Lender, evidencing a revolving line of credit in the stated amount of $2,000,000.00 (the "Renewed Note"). 3. Notwithstanding the date of execution of the Note, all provisions of the Note, including, without limitation, the rate of interest specified therein, shall be effective as of August 31, 1996, the maturity date of the Renewed Note. 4. The Borrower acknowledges and agrees that the outstanding principal balance of the Renewed Note is $2,000,000.00 as of the date hereof. 5. Borrower waives and releases Lender from any and all offsets, defenses and claims with respect to the Renewed Note, this Note, and Borrower's indebtedness and obligations thereunder. Dated this 25th day of September, 1996. ELCOTEL, INC., a Delaware corporation By:/s/ Ronald M. Tobin ----------------------- Ronald M. Tobin Vice President and Chief Financial Officer (CORPORATE SEAL) EX-27 4 FINANCIAL DATA SCHEDULE FOR 10Q-9/30/96
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS MAR-31-1997 APR-01-1996 SEP-30-1996 9 0 5,655 0 2,751 10,346 3,128 0 15,316 3,759 0 0 0 82 10,863 15,316 11,652 11,652 7,035 7,035 3,888 0 0 805 282 523 0 0 0 523 .06 .06
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