EXHIBIT 10.1
-------------
NATIONSBANK, N.A.
RESTATED LOAN AGREEMENT
-----------------------
This Restated Loan Agreement (the "Agreement") dated as of
November 25, 1997, by and between NationsBank, N.A. f/k/a
NationsBank, N.A. (South) as successor in interest to NationsBank
of Florida, N.A., a national banking association ("Bank" or
"Lender") and the Borrower described below. This Agreement shall
replace and supersede that certain loan agreement dated August
31, 1994, as amended, between Bank and Borrower.
In consideration of the Loan or Loans described below and
the mutual covenants and agreements contained herein, and
intending to be legally bound hereby, Bank and Borrower agree as
follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any
other terms defined herein, the following terms shall have the
meaning set forth with respect thereto:
A. Borrower: Elcotel, Inc. ("Elcotel"), Elcotel
Direct, Inc., ("Elcotel Direct") and Elcotel Hospitality
Services, Inc., ("Elcotel Hospitality"), all Delaware
corporations, and all subsidiaries, each jointly and severally.
B. Borrower's Address:
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
C. Collateral. As collateral for the Loan and any
other indebtedness of the Borrower, Borrower has granted a first
priority lien on all assets of Borrower, now owned or hereinafter
acquired and wherever located, including but not limited to all
accounts receivable, notes receivable and inventory of Borrower.
D. Current Assets. Current Assets means the aggregate
amount of all of its assets which would, in accordance with GAAP,
properly be defined as current assets, but excluding the
following items, if any: N/A
E. Current Liabilities. Current Liabilities means the
aggregate amount of all current liabilities as determined in
accordance with GAAP, but in any event shall include all
liabilities except those having a maturity date which is more
than one year from the date as of which such computation is being
made.
F. 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).
G. Domestic Accounts Receivable. Domestic Accounts
Receivable shall mean trade accounts receivable of Borrower
arising from and after the date hereof from the sale of goods in
the ordinary course of business to any entity formed under the
laws of the United States of America, and its territories, or its
50 states.
H. Eligible Accounts Receivable. Eligible Accounts
Receivable means: (1) All Domestic Accounts Receivable of the
Borrower, which, as of the date of any such determination: (i)
are not owed by or in respect of a director, officer, employee,
agent, subsidiary or affiliate of the Borrower; (ii) have not
been owing for more than 90 days from the invoice date relating
thereto; (iii) are not accounts with respect to which the
Borrower is or might become liable to the account debtor for
goods sold or services rendered to the Borrower; and (iv) are not
owed by the United States or any agency, department or
instrumentality thereof; (2) All Foreign Open Accounts Receivable
of the Borrower which as of the date of any such determination
have not been owing for more than ninety (90) days from the
invoice date relating thereto, provided however that the total of
all such Foreign Open Accounts Receivable to be included in the
Borrowing Base shall not exceed 10% of the total of all Eligible
Accounts Receivable including Foreign Open Accounts Receivable;
(3) All other Foreign Accounts Receivable, except for Foreign
Open Accounts Receivable, of Borrower which are (i) secured by
letters of credit which are satisfactory to Bank in its sole
discretion (ii) covered by export credit insurance or an Exim
Bank guaranty satisfactory to Bank in its sole discretion, (iii)
are factored through Bank or an affiliate of Bank or (iv) for
goods shipped through international site documentation and
collection satisfactory to Bank in its sole discretion.
I. Eligible Inventory. That portion of inventory on
hand exclusive of any work in progress and excluding equipment.
J. Foreign Accounts Receivable. Foreign Accounts
Receivable shall mean trade accounts receivable of Borrower
arising from and after the date hereof from the sale of goods in
the ordinary course of business to any entity not formed under
the laws of the United States of America, and its territories, or
any of its 50 states.
2
K. Foreign Open Accounts Receivable. Foreign Open
Accounts Receivable shall mean those Foreign Accounts Receivable
of Borrower which are not: (i) secured by letters of credit
satisfactory to Bank, (ii) covered by export credit insurance or
an Exim Bank guaranty satisfactory to Bank, (iii) factored
through the Bank or an affiliate of the Bank, or (iv) for goods
shipped through international site documentation and collections
satisfactory to Bank.
L. Interest Coverage Ratio. Interest Coverage Ratio
means Borrower's earnings before interest and taxes divided by
Borrower's interest expense, as determined in accordance with
GAAP.
M. Loan(s). Loan(s) means collectively any and all
loans heretofore or hereafter made by Bank to the Borrower.
N. Loan Documents. Loan Documents means this Loan
Agreement and any and all promissory notes executed by Borrower
in favor of Bank and all other documents, instruments,
guarantees, certificates and agreements executed and/or delivered
by Borrower, any guarantor or third party in connection with any
Loan, including but not limited to the previous loan documents
executed and delivered in connection with the loans consolidated
by the Line of Credit Note and Mortgage Note.
O. Tangible Net Worth. Tangible Net Worth means the
amount by which total assets exceed total liabilities in
accordance with GAAP, less the following items, if any: (a) ANY
NOTES FROM SHAREHOLDERS, OFFICERS, DIRECTORS OR EMPLOYEES IN
FAVOR OF BORROWER AND (b) ANY GENERAL INTANGIBLE ASSETS, AS
DETERMINED IN ACCORDANCE WITH GAAP.
P. TSG. TSG shall mean Technology Service Group, Inc.
Q. TSG Merger Agreement. TSG Merger Agreement shall
mean that certain Agreement and Plan of Merger dated as of August
13, 1997 by and among Elcotel, Elcotel Hospitality and TSG.
R. Accounting Terms. All accounting, terms not
specifically defined or specified herein shall have the meanings
generally attributed to such terms under generally accepted
accounting principles ("GAAP"), as in effect from time to time,
consistently applied, with respect to the financial statements
referenced in Section 3.H. and 4.B. hereof.
2. LOANS.
A. Loan. Bank hereby agrees to refinance existing
loans to Borrower in the principal amounts of $2,000,000.00 (with
a current balance of $1,035,000.00), $2,850,000.00, $950,000.00
and $1,408,864.28 of a previous $3,050,000.00 loan, and to make a
3
new line of credit loan in the amount of $7,791,135.72 for a
total consolidated line of credit loan in the amount of
$15,000,000.00 and to renew a $315,173.80 mortgage loans and to
make a $1,604,826.20 future advance loan to Elcotel to be
consolidated with the $315,173.80 renewal loan for a
$1,920,000.00 consolidated mortgage loan. The obligation to repay
the loans is evidenced by a $2,000,000.00 note dated August 31,
1996 (as extended by Note Modification Agreement dated August 20,
1997), a $2,850,000.00 note dated October 2, 1997, a $950,000.00
note dated October 2, 1997, a $3,050,000.00 note dated October 2,
1997, a $1,408,864.28 and a $7,791,135.72 note both dated
November 25, 1997, all as consolidated by a $15,000,000.00
Consolidation Promissory Note, dated November 25, 1997 (all such
notes together with any other promissory notes heretofore or
hereafter executed by Borrower in favor of Bank and any and all
renewals, extensions or rearrangements thereof being hereafter
collectively referred to as the "Line of Credit Note") and by a
$315,173.80 renewal note, a $1,604,826.20 future advance note and
a $1,920,000.00 Consolidated Promissory Note all dated on or
about even date herewith (such notes together with any and all
renewals, extensions or rearrangements thereof are hereinafter
collectively called the "Mortgage Note") having a maturity date,
repayment terms and interest rate as set forth in the Line of
Credit Note and Mortgage Note.
B. Revolving Credit Feature. Subject to the terms and
provisions of this Agreement, the Line of Credit Note provides
for a revolving line of credit (the "Line") under which Borrower
may from time to time, borrow, repay and re borrow funds, not to
exceed the Borrowing Base formula set forth in paragraph 2.D.
below at any one time outstanding. Requests for advances must be
accompanied by certification of an authorized officer of Borrower
that Borrower is not in default of the Loan Documents. Each
advance under the Line shall be in increments of $1.00 to
facilitate AutoPay or AutoBorrow through the Bank's treasury
management system.
C. Intentionally Deleted.
D. Borrowing Base. Borrowings under the Line of
Credit Note will be based upon a Borrowing Base formula and at no
time will the outstanding principal balance of the Loan exceed
the lesser of: (a) $15,000,000.00 or (b) the sum of 80%f Eligible
Accounts Receivable plus 40% of Eligible Inventory (which
inventory portion of the Loan will be capped at $5,000,000.00)
minus the aggregate face amount of all outstanding Letters of
Credit as hereinafter defined; provided however, from and after
the date hereof through March 31, 1998 the 40% of Eligible
Inventory limitation and the $5,000,000.00 cap on Eligible
Inventory shall not apply. Further provided, commencing April 1,
4
1998 such 40% limitation and $5,000,000.00 cap shall be
reinstated and commencing April 1, 1999 the 40% limitation on
Eligible Inventory shall be changed to 30% and the $5,000,000 cap
will remain in place. Borrower, at its expense shall deliver or
cause to be delivered to Bank within 30 days of written request
by Bank throughout the term of the Loan, an Eligible Inventory
Report, in form satisfactory to Bank from Borrower or at Bank's
option, some other inspector chosen by Bank listing all of
Borrower's Eligible Inventory on hand. On the day of a draw
request, the Borrower shall submit to Bank a certification, in
form satisfactory to Bank, that Borrower is not in default under
the Loan Agreement, the Line of Credit Note, or other Loan
Documents. Borrower on a consolidated basis, will provide
Borrowing Base Certificates monthly, or at any such time as
required by Bank, which Borrowing Base Certificate shall
calculate the availability under the full commitment of the Line,
in form attached hereto as Exhibit "A", or such other form as
Bank determines to be acceptable in its sole discretion. Included
in the calculation shall be any Letters of Credit which are being
secured by the Loan. The monthly Borrowing Base Certificate shall
be provided within 20 days of month end. If at any time the
outstanding balance of the Note exceeds the Borrowing Base, the
Borrower shall have 30 days to cure such default.
E. Letter of Credit Subfeature. As a subfeature under
the Line, Bank may from time to time issue letters of credit for
the account of Borrower (each, a "Letter of Credit" and
collectively, "Letters of Credit"); provided, however, that the
form and substance of each Letter of Credit shall be subject to
approval by Bank in its sole discretion; and provided further
that the aggregate undrawn amount of all outstanding Letters of
Credit shall not at any time exceed the undrawn balance of the
Line of Credit Note. Unless otherwise agreed by the Bank, each
Letter of Credit shall be issued for a term not to exceed one
year, as designated by Borrower, provided, however, if Line of
Credit Note is in default or if any Letter of Credit which shall
have an expiration date subsequent to November 25, 2002 and the
term of the Line of Credit Note is not renewed for a period
beyond such expiration date, upon such default or the maturity
date of the Line of Credit Note, as applicable, Borrower hereby
agrees that Borrower shall either: (i) deposit with Lender and
pledge as security for all outstanding Letter(s) of Credit, cash
in the amount of all outstanding Letter(s) of Credit or other
collateral satisfactory to Bank in its sole discretion, or (ii)
Borrower shall immediately make application to another financing
institution to issue such letters of credit in replacement of the
Letters of Credit and shall agree to such financial institution's
conditions to the issuance of the replacement letters of credit
without reservation. The failure to provide the Bank with (i)
replacement letters of credit for the benefit of beneficiary, as
defined in the Letters of Credit, and the beneficiary's
authorization to cancel the Letters of Credit or (ii) the cash or
5
additional collateral, within fifteen (15) days of Bank's written
request shall constitute an event of default under this Restated
Loan Agreement. In connection with the deposit of cash or
additional collateral, Borrower agrees to execute and deliver
such pledges, security agreements, financing statements or other
loan documents reasonably required by Lender. The undrawn amount
of all Letters of Credit plus any and all amounts paid by Bank in
connection with drawings under any Letter of Credit for which the
Bank has not been reimbursed shall be reserved under the Line and
shall not be available for advances thereunder. Each draft paid
by Bank under a Letter of Credit shall be deemed an advance under
the Line and shall be repaid in accordance with the terms of the
Line; provided however, that if the Line is not available for any
reason whatsoever, at the time any draft is paid by Bank, or if
advances are not available under the Line in such amount due to
any limitation of borrowing set forth herein, then the full
amount of such drafts shall be immediately due and payable,
together with interest thereon, from the date such amount is paid
by Bank to the date such amount is fully repaid by Borrower, at
that rate of interest applicable to advances under the Line. In
such event, Borrower agrees that Bank, at Bank's sole discretion
may debit Borrower's deposit account with Bank for the amount of
such draft.
F. Fees. Borrower will pay to Bank, prior to and as
a condition of Bank issuing the Letter of Credit, and on each
yearly anniversary date of such Letters of Credit with an expiry
date in excess of one year, a fee equal to the greater of: (i)
$300.00, or (ii) one and one half percent (1.5%) of the face
value of each Letter of Credit issued up to $1,000,000.00, and
one percent (1.0%) of the face value of each Letter of Credit
with a face value in excess of $1,000,000.00.
G. Usage Fee. Borrower will pay hereafter on April
10, 1998 and on the 10th day of each calendar quarter thereafter
for the period from and including January 1, 1998 to and
including the maturity date of the Line, a usage fee at a rate
per annum of .25% of the difference between $15,000,000 and the
average daily outstanding principal balance under the Line of
Credit Note. For purposes of this calculation, the portion of
the Line restricted due to issuance of Letters of Credit shall be
deemed outstanding under the Line. The Borrower may at any time
upon written notice to the Bank permanently reduce the amount of
the Line at which time the obligation of the Borrower to pay a
usage fee shall thereupon correspondingly be reduced.
H. Accounts; Increase of Line of Credit Note Interest
Rate. Borrower, to induce Bank to make the Loan, agrees to
maintain its principal operating accounts with Bank. Borrower
acknowledges that the interest rate and terms of the Line of
Credit Note are based upon this covenant and the terms of this
6
Agreement, and should Borrower breach this covenant or the terms
of this Agreement, which breach is not cured within five (5)
days, at the option of Bank, the interest rate due under the Line
of Credit Note shall automatically and immediately be adjusted to
two percent (2%) in excess of the non-default interest rate
charged under the Line of Credit Note. The curative period set
forth herein shall not be in addition to any other curative
period set forth in the Loan Documents.
I. Use of Loan Proceeds. Borrower covenants and
agrees with Lender that the future advance loan proceeds shall be
used solely to refinance a portion of that certain $3,050,000.00
note dated October 2, 1997, and that the Line of Credit Note
proceeds shall be used solely to: (i) refinance the remainder of
Borrower's existing debt with Bank, (ii) for loan closing costs,
(iii) to finance the merger of Elcotel Hospitality into TSG
pursuant to the TSG Merger Agreement and (iv) to provide working
capital. In connection therewith, Borrower covenants and agrees
with Lender that no portion of the Line shall be used to finance
the merger of Elcotel Hospitality into TSG unless and until the
following conditions have been met:
(a) the shareholders of TSG and Elcotel Hospitality, at
duly held meetings or by unanimous written consent, approve
the merger of TSG and Elcotel Hospitality pursuant to the
TSG Merger Agreement.
(b) Bank shall have been provided with payoff estoppel
letters from all creditors of TSG holding a security
interest in any of the TSG assets to be indirectly acquired
by Elcotel by acquiring 100% of the Stock of TSG through the
TSG Merger Agreement, and the funds available through the
Line, are sufficient to satisfy all of such debt. In the
event there is a deficiency between the funds available
under the Line and the amount necessary to satisfy all of
such debt, prior to advancing funds Borrower shall provide
to Bank sufficient funds to fully pay such deficiency.
(c) Borrower shall not be in default under this
Restated Loan Agreement or other Loan Documents.
(d) Simultaneously with the consummation of the merger
of Elcotel Hospitality into TSG, TSG shall execute and
deliver to Bank such UCC-1 financing statements and
confirmations and assumption of all of Elcotel
Hospitality's obligations under the Loan Documents as
Bank shall require.
7
(e) Borrower shall have provided, or Bank obtained,
evidence that upon TSG executing and delivering the
confirmation, assumption and UCC-1 financing statements and
upon payment to the creditors of TSG holding a security
interest in the assets to be indirectly acquired by Elcotel
by acquiring 100% of the stock of TSG, that Bank's security
interest in all of such assets shall be a first priority
security interest.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby
represents and warrants to Bank as follows:
A. Good Standing. Borrower is a corporation, duly
organized, validly existing and in good standing under the laws
of Delaware and has the power and authority to own its property
and to carry on its business in each jurisdiction in which
Borrower does business with the exception that Elcotel
Hospitality is not yet qualified to do business in the State of
Florida.
B. Authority and Compliance. Borrower has full power
and authority to execute and deliver the Loan Documents and to
incur and perform the obligations provided for therein, all of
which have been duly authorized by all proper and necessary
action of the appropriate governing body of Borrower. No consent
or approval of any public authority or other third party is
required as a condition to the validity of any Loan Document, and
Borrower is in compliance with all laws and regulatory
requirements to which it is subject.
C. Binding Agreement. This Agreement and the other
Loan Documents executed by Borrower constitute valid and legally
binding obligations of Borrower, enforceable in accordance with
their terms.
D. Litigation. There is no proceeding involving
Borrower pending or, to the knowledge of Borrower, threatened
before any court or governmental authority, agency or arbitration
authority, except as disclosed to Bank in writing and
acknowledged by Bank prior to the date of this Agreement.
E. No Conflicting Agreements. There is no charter,
bylaw, stock provision, partnership agreement or other document
pertaining to the organization, power or authority of Borrower
and no provision of any existing agreement, mortgage, indenture
or contract binding on Borrower or affecting its property, which
would conflict with or in any way prevent the execution, delivery
or carrying out of the terms of this Agreement and the other Loan
Documents.
8
F. Ownership of Assets. Borrower has good title to
its assets, and its assets are free and clear of liens, except
those granted to Bank and as disclosed to Bank in writing prior
to the date of this Agreement.
G. Taxes. All taxes and assessments due and payable
by Borrower have been paid or are being contested in good faith
by appropriate proceedings and the Borrower has filed all tax
returns which it is required to file.
H. Financial Statements. The financial statements of
Borrower heretofore delivered to Bank have been prepared in
accordance with GAAP applied on a consistent basis throughout the
period involved and fairly present Borrower's financial condition
as of the date or dates thereof, and there has been no material
adverse change in Borrower's financial condition or operations
since June 30, 1997. To the best of Borrower's knowledge, all
factual information furnished by Borrower to Bank in connection
with this Agreement and the other Loan Documents is and will be
accurate and complete on the date as of which such information is
delivered to Bank and is not and will not be incomplete by the
omission of any material fact necessary to make such information
not misleading.
I. Place of Business. Borrower's chief executive
office is located at:
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
J. Environmental Matters. The conduct of Borrower's
business operations do not and will not violate any federal laws,
rules or ordinances for environmental protection, regulations of
the Environmental Protection Agency and any applicable local or
state law, rule, regulation or rule of common law and any
judicial interpretation thereof relating primarily to the
environment or Hazardous Materials and Borrower will not use or
permit any other party to use any Hazardous Materials at any of
Borrower's places of business or at any other property owned by
Borrower except such materials as are incidental to Borrower's
normal course of business, maintenance and repairs and which are
handled in compliance with all applicable environmental laws.
Borrower agrees to permit Bank, its agents, contractors and
employees to enter and inspect any of Borrower's places of
business or any other property of Borrower at any reasonable
times upon three (3) days prior notice for the purposes of
conducting an environmental investigation and audit (including
taking physical samples) to insure that Borrower is complying
with this covenant and Borrower shall reimburse Bank on demand
for the costs of any such environmental investigation and audit.
Borrower shall provide Bank, its agents, contractors, employees
9
and representatives with access to and copies of any and all data
and documents relating to or dealing with any Hazardous Materials
used, generated, manufactured, stored or disposed of by
Borrower's business operations within five (5) days of the
request therefore.
K. Continuation of Representation and Warranties. All
representations and warranties made under this Agreement shall be
deemed to be made at and as of the date hereof and at and as of
the date of any future advance under any Loan.
4. AFFIRMATIVE COVENANTS. Until full payment and
performance of all obligations of Borrower under the Loan
Documents, Borrower will, unless Bank consents otherwise in
writing (and without limiting any requirement of any other Loan
Document):
A. Financial Condition. Maintain Borrower's financial
condition on a consolidated basis as follows, determined in
accordance with GAAP applied on a consistent basis throughout the
period involved except to the extent modified by the following
definitions:
i. Maintain a consolidated ratio of Current Assets to
Current Liabilities of not less than:
a. 1.5 to 1.0 for each calendar quarter, measured on
a rolling four quarter basis from company prepared
statements.
b. 1.5 to 1.0 for fiscal year end measured from the
consolidated audited financial statements of
Borrower.
ii. Maintain a consolidated Debt Service Coverage Ratio of
not less than 1.3 to 1.0, measured on a rolling four (4)
quarter basis from the consolidated annual and quarterly
financial statements of Borrower.
iii. Maintain a consolidated ratio of Total Liabilities (as
determined in accordance with GAAP) to Tangible Net Worth of
not more than 1.25 to 1.0 measured on a rolling four quarter
basis for each calendar quarter and fiscal year end.
iv. Maintain a consolidated Interest Coverage Ratio of
greater than 3.0 to 1.0 measured on a rolling four quarter
basis from the consolidated annual and quarterly financial
statements of Borrower.
10
B. Financial Statements and Other Information.
Maintain a system of accounting satisfactory to Bank and in
accordance with GAAP applied on a consistent basis throughout the
period involved, permit Bank's officers or authorized
representatives to visit and inspect Borrower's books of account
and other records at such reasonable times and as often as Bank
may desire, and pay the reasonable fees and disbursements of any
accountants or other agents of Bank selected by Bank for the
foregoing purposes. Unless written notice of another location is
given to Bank, Borrower's books and records will be located at
Borrower's chief executive office set forth above. All financial
statements called for below shall be prepared in form and content
acceptable to Bank and by independent certified public
accountants acceptable to Bank.
In addition, Borrower will:
i. Furnish to Bank unqualified and audited financial
statements of Borrower on a consolidated and consolidating basis
for each fiscal year of Borrower, within 120 days after the close
of each such fiscal year.
ii. Furnish to Bank company prepared financial statements
(including a balance sheet and profit and loss statement and
including results for the immediately preceding twelve month
period) of Borrower on a consolidated and consolidating basis for
each quarter of each fiscal year of Borrower, within 45 days
after the close of each such period.
iii. Furnish to Bank a compliance certificate for (and
executed by an authorized representative of) Borrower,
concurrently with and dated as of the date of delivery of each of
the financial statements as required in paragraphs i and ii
above, containing (a) a certification that the financial
statements of even date are true and correct and that the
Borrower is not in default under the terms of this Agreement, and
(b) computations and conclusions, in such detail as Bank may
request, with respect to compliance with all representations,
warranties, and covenants contained in this Agreement, and the
other Loan Documents, and including computations of all
quantitative covenants.
iv. Furnish to Bank promptly such additional information,
reports and statements respecting the business operations and
financial condition of Borrower, from time to time, as Bank may
reasonably request including but not limited to all filings with
the Securities and Exchange Commission as and when filed.
C. Insurance. Maintain product liability insurance
for all its products, in amounts and form satisfactory to Bank
from an insurer acceptable to Bank in its sole discretion.
11
Maintain insurance with responsible insurance companies on such
of its properties, in such amounts and against such risks as is
customarily maintained by similar businesses operating in the
same vicinity, specifically to include fire and extended coverage
insurance covering all assets, business interruption insurance,
workers compensation insurance and liability insurance, all to be
with such companies and in such amounts as are satisfactory to
Bank and with respect to insurance on the Collateral, to contain
a mortgagee clause naming Bank as a loss payee or an additional
insured (as applicable) as its interest may appear and providing
for at least 30 days prior notice to Bank of any cancellation
thereof. Satisfactory evidence of such insurance will be supplied
to Bank 30 days prior to each policy renewal. Bank acknowledges
that Liberty Mutual Insurance Company and the current coverages
disclosed to Bank are acceptable to Bank.
D. Existence and Compliance. Maintain its existence,
good standing and qualification to do business, where required
and comply with all applicable laws, regulations and governmental
requirements including, without limitation, the Occupational
Safety and Health Act, Pension Guaranty Board requirements,
Employee Retirement Income Security Act, Americans with
Disabilities Act, Environmental Protection Agency regulations,
and any other environmental laws applicable to it or to any of
its property, business operations and transactions. Elcotel
covenants and agrees immediately after the merger of Elcotel
Hospitality into TSG to cause TSG to file with the applicable
governmental agency to qualify to do business in the State of
Florida and to provide to Bank evidence within 30 days from the
date hereof that it has so qualified to do business in the State
of Florida.
E. Adverse Conditions or Events. Promptly advise Bank
in writing of (i) any condition, event or act which comes to its
attention that would or might materially adversely affect
Borrower's financial condition or operations, the Collateral, or
Bank's rights under the Loan Documents, (ii) any litigation filed
by or against Borrower exceeding $50,000, (iii) any event that
has occurred that would constitute an event of default under any
Loan Documents and (iv) any uninsured or partially uninsured loss
through fire, theft, liability or property damage in excess of an
aggregate of $25,000.00.
F. Taxes and Other Obligations. Pay all of its
taxes, assessments and other obligations, including, but not
limited to taxes, costs or other expenses arising out of this
transaction, as the same become due and payable, except to the
extent the same are being contested in good faith by appropriate
proceedings in a diligent manner.
12
G. Maintenance. Maintain all of its tangible property
in good condition and repair and make all necessary replacements
thereof, and preserve and maintain all licenses, trademarks,
privileges, permits, franchises, certificates and the like
necessary for the operation of its business.
H. Notification of Environmental Claims. Borrower
shall immediately advise Bank in writing of (i) any and all
enforcement, cleanup, remedial, removal, or other governmental or
regulatory actions instituted, completed or threatened pursuant
to any applicable federal, state, or local laws, ordinances or
regulations relating to any Hazardous Materials affecting
Borrower's business operations; and (ii) all claims made or
threatened by any third party against Borrower relating to
damages, contribution, cost recovery, compensation, loss or
injury resulting from any Hazardous Materials. Borrower shall
immediately notify Bank of any remedial action taken by Borrower
with respect to Borrowers business operations.
I. Facilities Leases. Except as waived in writing by
Bank from time to time, cause the landlord's lien rights, if any,
arising from all facilities leased to Borrower to be fully
subordinate to the Loan Documents.
J. Borrower covenants and agrees that within 60 days
from the date hereof, Borrower will provide to Lender, a company
prepared balance sheet for Borrower setting forth the new loan
indebtedness to Bank and the equity structure of Borrower
(including the assets acquired pursuant to the TSG Merger
Agreement).
5. NEGATIVE COVENANTS. Until full payment and performance
of all obligations of Borrower under the Loan Documents, Borrower
will not, without the prior written consent of Bank (and without
limiting any requirement of any other Loan Documents):
A. Capital Expenditures. Make non-financed capital
expenditures during each fiscal year (including capitalized
leases) exceeding in the aggregate $500,000.00
B. Transfer of Assets or Control. Sell, lease, assign
or otherwise dispose of or transfer any assets, except in the
normal course of its business, or enter into any merger,
consolidation, partnership, joint venture, sale/leaseback
agreement, or transfer control or ownership of the Borrower or
create or acquire any subsidiary, not a party to the agreements
executed in connection with the Loan. Provided however, Bank
hereby consents to the merger between TSG and Elcotel Hospitality
pursuant to the TSG Merger Agreement.
C. Liens. Grant, suffer or permit any contractual or
noncontractual lien on, or security interest in, its assets,
13
except in favor of Bank, and except for any purchase money
security interest in chattels; or fail to promptly pay when due
all lawful claims, whether for labor, materials or otherwise.
D. Extensions of Credit. Make any loan or advance to
any officers or stockholders of Borrower, or any individual,
partnership, corporation or other entity.
E. Borrowings. Create, incur, assume or become liable
in any manner for any indebtedness (for borrowed money, deferred
payment for the purchase of assets, lease payments, as surety or
guarantor for the debt for another, or otherwise) other than to
Bank, except for normal trade debts and credit leases incurred in
the ordinary course of Borrower's business, and except for
existing indebtedness disclosed to Bank in writing and
acknowledged by Bank prior to the date of this Agreement.
F. Dividends and Distributions. Make any distribution
(other than dividends payable in capital stock of Borrower) on
any shares of any class of its capital stock, or apply any of
property or assets to the purchase, redemption or other
retirement of any shares of any class of capital stock of
Borrower, or in any way amend its capital structure, or pay any
dividends if in default.
G. Character of Business. Change the general
character of business as conducted at the date hereof, or engage
in any type of business not reasonably related to its business as
presently conducted.
H. Acquire or purchase any stocks,
partnership interest or other equity interest in any other
entity; provided however Borrower shall be entitled to acquire,
purchase or invest in obligations of the U.S. Government and its
agencies and shall be entitled to acquire, purchase or invest in
a capital stock of any subsidiary of Borrower.
6. DEFAULT. Borrower shall be in default under this
Agreement and under each of the other Loan Documents if any of
the following events occurs before the loan is fully repaid:
A. Default in Payment. Any default in the payment of
principal and/or interest due and owing under the Loans.
B. Failure of Performance. Any failure to timely and
properly observe, keep or perform any term, covenant, agreement
or condition in any Loan Document or in any other loan agreement,
promissory note, security agreement, deed of trust, mortgage,
assignment or other contract securing or evidencing payment of
any indebtedness of Borrower to Bank or any affiliate or
subsidiary of NationsBank Corporation.
14
C. Violation of Representations or Warranties
Provision. Any warranty, representation, or statement made or
furnished to the Bank by Borrower in connection with the Loans
and this Agreement (including any warranty, representation, or
statement in the Borrower's financial statement(s)) or to induce
the Bank to renew the Loans is untrue or misleading in any
material respect.
D. Bankruptcy. Any voluntary or involuntary bankruptcy,
reorganization, insolvency, arrangement, receivership, or similar
proceeding is commenced by or against Borrower under any federal
or state law, or Borrower makes any assignment for the benefit of
creditors.
E. Cross-Default. Any default hereunder shall
constitute a default under any other mortgage, note, obligation
or agreement of Borrower held by Bank. The agreements contained
in this paragraph to create cross defaults under all mortgages,
notes, obligations and agreements between Borrower and Bank,
whether currently existing or hereafter created, in the event of
a default under one or more of such mortgages, notes, obligations
or agreements is a material and specific inducement and
consideration for the making by Bank of the Loan evidenced by the
Line of Credit Note and Mortgage Note.
7. REMEDIES UPON DEFAULT. If an event of default shall
occur Bank shall have all rights, powers and remedies available
under each of the Loan Documents as well as all rights and
remedies available at law or in equity.
8. NOTICES. All notices, requests or demands which any
party is required or may desire to give to any other party under
any provision of this Agreement must be in writing delivered to
the other party at the following address:
15
Borrower:
Elcotel Direct, Inc.
Elcotel Hospitality Services, Inc.
Elcotel, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Bank:
NationsBank, N.A.
0000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxx, Vice President
or to such other address as any party may designate by written
notice to the other party. Each such notice, request and demand
shall be deemed given or made as follows:
A. If sent by hand delivery, upon delivery;
B. If sent by mail, upon the earlier of the date of
receipt or five (5) days after deposit in the U.S. Mail, first
class postage prepaid.
9. COSTS. EXPENSES AND ATTORNEYS FEES. Borrower shall
pay to Bank immediately upon demand the full amount of all costs
and expenses, including reasonable attorneys' fees (to include
outside counsel fees and all allocated costs of Bank's in house
counsel), incurred by Bank in connection with (a) a default
hereunder by Borrower, and (b) Bank's continued administration
after such default.
10. MISCELLANEOUS. Borrower and Bank further covenant and
agree as follows, without limiting any requirement of any other
Loan Document:
A. Cumulative Rights and No Waiver. Each and every
right granted to Bank under any Loan Document, or allowed it by
law or equity shall be cumulative of each other and may be
exercised in addition to any and all other rights of Bank, and no
delay in exercising any right shall operate as a waiver thereof,
nor shall any single or partial exercise by Bank of any right
preclude any other or future exercise thereof or the exercise of
any other right. Borrower expressly waives any presentment,
demand, protest or other notice of any kind, including but not
limited to notice of intent to accelerate and notice of
acceleration. No notice to or demand on Borrower in any case
shall, of itself, entitle Borrower to any other or future notice
or demand in similar or other circumstances.
16
B. Applicable Law. This Restated Loan Agreement and
the rights and obligations of the parties hereunder shall be
governed by and interpreted in accordance with the laws of
Florida and applicable United States federal law.
C. Amendment. No modification, consent, amendment or
waiver of any provision of this Restated Loan Agreement, nor
consent to any departure by Borrower therefrom, shall be
effective unless the same shall be in writing and signed by an
officer of Bank, and then shall be effective only in the
specified instance and for the purpose for which given. This
Restated Loan Agreement is binding upon Borrower, its successors
and assigns, and inures to the benefit of Bank, its successors
and assigns; however, no assignment or other transfer of
Borrower's rights or obligations hereunder shall be made or be
effective without Bank's prior written consent, nor shall it
relieve Borrower of any obligations hereunder. There is no third
party beneficiary of this Restated Loan Agreement.
D. Documents. All documents, certificates and other
items required under this Restated Loan Agreement to be executed
and/or delivered to Bank shall be in form and content
satisfactory to Bank and its counsel.
E. Partial Invalidity. The unenforceability or
invalidity of any provision of this Restated Loan Agreement shall
not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of
any Loan Document to any person or circumstance shall not affect
the enforceability or validity of such provision as it may apply
to other persons or circumstances.
F. Indemnification. Borrower shall indemnify, defend
and hold Bank and its successors and assigns harmless from and
against any and all claims, demands, suits, losses, damages,
assessments, fines, penalties, costs or other expenses (including
reasonable attorneys' fees and court costs) arising from or in
any way related to any of the transactions contemplated hereby,
including but not limited to actual or threatened damage to the
environment, agency costs of investigation, personal injury or
death, or property damage, due to a release or alleged release of
Hazardous Materials, arising from Borrower's business operations,
any other property owned by Borrower or in the surface or ground
water arising from Borrower's business operations, or gaseous
emissions arising from Borrower's business operations or any
other condition existing or arising from Borrower's business
operations resulting from the use or existence of Hazardous
Materials, whether such claim proves to be true or false.
Borrower further agrees that its indemnity obligations shall
include, but are not limited to, liability for damages resulting
from the personal injury or death of an employee of the Borrower,
17
regardless of whether the Borrower has paid the employee under
the workmen s compensation laws of any state or other similar
federal or state legislation for the protection of employees. The
term "property damage" as used in this paragraph includes, but is
not limited to, damage to any real or personal property of the
Borrower, the Bank, and of any third parties. The Borrower's
obligations under this paragraph shall survive the repayment of
the Loan and any deed in lieu of foreclosure or foreclosure of
any Deed to Secure Debt, Deed of Trust, Security Agreement or
Mortgage securing the Loan.
G. Survivability. All covenants, agreements,
representations and warranties made herein or in the other Loan
Documents shall survive the making of the Loan and shall continue
in full force and effect so long as the Loan is outstanding.
18
11. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG
THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT
OF OR RELATING TO THIS 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 AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT
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 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 THIS AGREEMENT SHALL
BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE BANK 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 BANK 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 BANK 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 THIS 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 IF ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
19
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed under seal by their duly authorized
representatives as of the date first above written.
BANK:
NATIONSBANK, N.A.
By:/s/ Xxxxxx Xxxx
----------------------------
Xxxxxx Xxxx, Vice President
(CORPORATE SEAL)
BORROWER:
ELCOTEL, INC., a Delaware
corporation
By:/s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx, Vice President and
Chief Financial Officer
(CORPORATE SEAL)
ELCOTEL DIRECT, INC., a Delaware
corporation
By:/s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx, Vice President
(CORPORATE SEAL)
ELCOTEL HOSPITALITY SERVICES,
INC., a Delaware corporation
By:/s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx, Vice President
(CORPORATE SEAL)
20
STATE OF GEORGIA
COUNTY OF XXXXXX
The foregoing instrument was acknowledged before me this
25th day of November, 1997, by Xxxxxx Xxxx, Vice-President of
NATIONSBANK, N.A., a National Banking Association, on behalf of
Bank. He is personally known to me and produced a Florida
Drivers License as identification and did not take an oath.
/s/ Xxxxxxx Xxxxxxx
------------------------------
*Xxxxxxx Xxxxxxx
(NOTARIAL SEAL) *(Print Name of Notary Public)
Notary Public - State of Georgia
My commission expires June 4, 2000
Notary Public, DeKalb County, GA
STATE OF GEORGIA
COUNTY OF XXXXXX
The foregoing instrument was acknowledged before me this
25th day of November, 1997, by Xxxxxx X. Xxxxx, Vice-President
and Chief Financial Officer of ELCOTEL, INC., a Delaware
corporation, on behalf of said corporation. He is personally
known to me and produced a Florida Drivers License as
identification and did not take an oath.
/s/ Xxxxxxx Xxxxxxx
------------------------------
*Xxxxxxx Xxxxxxx
(NOTARIAL SEAL) *(Print Name of Notary Public)
Notary Public - State of Georgia
My commission expires June 4, 2000
Notary Public, DeKalb County, GA
STATE OF GEORGIA
COUNTY OF XXXXXX
The foregoing instrument was acknowledged before me this
25th day of November, 1997, by Xxxxxx X. Xxxxx, Vice-President of
ELCOTEL DIRECT, INC., a Delaware corporation, on behalf of said
corporation. He is personally known to me and produced a Florida
Drivers License as identification and did not take an oath.
/s/ Xxxxxxx Xxxxxxx
------------------------------
*Xxxxxxx Xxxxxxx
(NOTARIAL SEAL) *(Print Name of Notary Public)
Notary Public - State of Georgia
My commission expires June 4, 0000
Xxxxxx Xxxxxx, XxXxxx Xxxxxx, XX
21
STATE OF GEORGIA
COUNTY OF XXXXXX
The foregoing instrument was acknowledged before me this
25th day of November, 1997, by Xxxxxx X. Xxxxx, Vice-President of
ELCOTEL HOSPITALITY SERVICES, INC., a Delaware corporation, on
behalf of said corporation. He is personally known to me and
produced a Florida Drivers License as identification and did not
take an oath.
/s/ Xxxxxxx Xxxxxxx
------------------------------
*Xxxxxxx Xxxxxxx
(NOTARIAL SEAL) *(Print Name of Notary Public)
Notary Public - State of Georgia
My commission expires June 4, 0000
Xxxxxx Xxxxxx, XxXxxx Xxxxxx, XX
22
