-----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, Ng7oDcg09AS7iE+HAwRvc4L5lK9lyzttjPaLdzkHx5B1+ZXwtLf9I2CxZuMGsH66 WTJjNEXVeXcq6iTJWG6Hbw== 0000801448-95-000027.txt : 19951119 0000801448-95-000027.hdr.sgml : 19951119 ACCESSION NUMBER: 0000801448-95-000027 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-15205 FILM NUMBER: 95589957 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 10QSB 1 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. PART I - FINANCIAL INFORMATION ------------------------------- ELCOTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, March 31, 1995 1995 ------------- ------------- (Unaudited) (See Note) 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 ======= ======= 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.
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, ------------------ ------------------- 1995 1994 1995 1994 ------ ------ ------ ------ 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 ====== ====== ======= ======= 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, -------------------------- 1995 1994 ------- ------- 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) 3
ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (Unaudited) (continued)
Six Months Ended September 30, -------------------------- 1995 1994 ------- ------- 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 4 See Notes to Condensed Consolidated Financial Statements
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 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 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 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 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 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 EX-10.1 2 AMENDMENT TO LOAN AGREEMENT 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. 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) EX-10.2 3 RENEWAL PROMISSORY NOTE 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 (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. (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. 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. 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. 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. 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. 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. 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. 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. 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) EX-10.3 4 PROMISSORY NOTE 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 (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. (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. 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. 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) 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. 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 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 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 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. 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. 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) EX-10.4 5 MORTGAGE MODIFICATION AGREEMENT 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 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 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 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 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 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 EX-10.5 6 REPLACEMNT PROMISSORY NOTE 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. 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. 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. 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 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 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. 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. 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 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) EX-27 7 FINANCIAL DATA SCHEDULE FOR 10QSB-9/30/95
5 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. 1,000 6-MOS MAR-31-1996 APR-01-1995 SEP-30-1995 116 0 4,541 0 3,085 12,375 3,163 0 17,715 5,174 0 79 0 0 11,653 17,715 11,304 11,304 6,582 6,582 4,208 0 (188) 702 246 456 0 0 0 456 .06 .06
-----END PRIVACY-ENHANCED MESSAGE-----