EXHIBIT 10.6
FIRST AMENDMENT TO LOAN AGREEMENT
AND SECURITY AGREEMENT
THIS AMENDMENT to Loan Agreement and Security Agreement (this
"Amendment") is executed as of the 29th of March, 1999, by and between ELCOTEL,
INC., ELCOTEL DIRECT, INC., and TECHNOLOGY SERVICE GROUP, INC. (successor by
merger with ELCOTEL HOSPITALITY SERVICES, INC.), all Delaware corporations
(collectively "Borrower"),and NATIONSBANK, N.A., a National Banking Association
("Lender" or "Bank").
WITNESSETH:
WHEREAS, Borrower and Lender entered into that certain Restated Loan
Agreement dated as of November 25, 1997 (the "Loan Agreement") and that certain
Restated Security Agreement dated November 25, 1997 (the "Security Agreement";
the Loan Agreement and the Security Agreement are together referred to herein as
the "Agreements") in connection with a $15,000,000.00 loan; and
NOW THEREFORE, in consideration of this Amendment to the Loan
Agreements, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties mutually agree as
follows:
1. This Amendment is a modification only and not a novation. All terms,
covenants and conditions of said Agreements remain unchanged except as specified
below. This Amendment shall not waive any right or remedy afforded Lender under
said Agreements.
2. The term "note" or "promissory note", as referred to in the
Agreements, includes that certain First Replacement Note in the amount of
$10,000,000.00, that certain Second Replacement Note in the amount of
$4,000,000.00, and that certain Promissory Note in the principal amount of
$1,500,000.00, each of even date herewith, all executed by Borrower and
delivered to Lender. The term "Line of Credit Note" shall refer to the First
Replacement Note. The term "Loan ", as used in this Amendment and in the
Agreements shall include the indebtedness evidenced by the aforesaid First
Replacement Note, Second Replacement Note, and Promissory Note.
3. Borrower hereby warrants and covenants that it is in compliance with
all terms, covenants and conditions of the Note, Agreements as modified hereby,
and all other loan documents executed in connection therewith (the "Loan
Documents"). Borrower hereby ratifies and confirms all warranties and covenants
contained in the Note, Agreements and other Loan Documents as of the date of
this Amendment.
4. Disbursements under the $1,500,000.00 Promissory Note described in
paragraph 2 above shall be made by Lender to finance the purchase of new
equipment, approved by Lender in writing and used in connection with, and to be
located on, the real property described in the Agreements. Such disbursements
shall be limited to 75% of the purchase price of such equipment, excluding taxes
and fees, and shall be conditioned upon the delivery by Borrower to Lender of:
(a) a copy of the purchase order invoice(s) for the acquisition of the equipment
for which disbursement is being sought and (b) evidence satisfactory to Lender
that (1) such
equipment is encumbered by a first perfected security interest for the benefit
of Lender, as evidenced by security agreements and UCC-1 Financing Statements
filed at Borrower's expense in the applicable office(s), and (2) all reasonable
requirements of Lender for similar transactions have been satisfied.
5. Subparagraph 1.F. of the Loan Agreement is deleted in its entirety
and replaced with the following:
"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")
plus Current Maturities of Capital Leases ("CMCL") plus Interest Expense ("IE")
(i.e. NI + D + AMORT - DIV
--------------------
CMLTD + CMCL + IE)
6. Paragraph 4.A.iv is hereby deleted.
7. Paragraph 5A is hereby amended to increase the limitation from
$500,000.00 to $1,500,000.00.
8. For purposes of interpreting subparagraph 2G of the Loan Agreement,
the figure "$15,00,000.00" shall be changed to "$10,000,000.00".
9. Subparagraph 2D of the Loan Agreement is deleted in its entirety,
effective as of the date of this Amendment, and replaced by the following
provision:
"D. Borrowing Base. Borrowings under the Line of Credit Note will be
based on a Borrowing Base formula and at no time will the outstanding
principal balance of the Loan exceed the lesser of (1) $10,000,000.00
or (2) the sum of 80% of Eligible Domestic Accounts Receivable plus 40%
of Eligible Inventory (which inventory portion of the Loan will be
capped at $4,000,000.00) minus the aggregate face amount of all
outstanding Letters of Credit as hereinafter defined. 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 and
accounts receivables aging lists 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 and accounts receivable aging list 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."
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10. AS A MATERIAL INDUCEMENT FOR BANK TO EXECUTE THIS AMENDMENT,
BORROWER DOES HEREBY RELEASE, WAIVE, DISCHARGE, COVENANT NOT TO ▇▇▇, ACQUIT,
SATISFY AND FOREVER DISCHARGE BANK, ITS OFFICERS, DIRECTORS, EMPLOYEES, AND
AGENTS AND ITS AFFILIATES AND ASSIGNS FROM ANY AND ALL LIABILITY, CLAIMS,
COUNTERCLAIMS, DEFENSES, ACTIONS, CAUSES OF ACTION, SUITS, CONTROVERSIES,
AGREEMENTS, PROMISES AND DEMANDS WHATSOEVER IN LAW OR IN EQUITY WHICH BORROWER
EVER HAD, NOW HAVE, OR WHICH ANY PERSONAL REPRESENTATIVE, SUCCESSOR, HEIR OR
ASSIGN OF BORROWER HEREAFTER CAN, SHALL OR MAY HAVE AGAINST BANK, ITS OFFICERS,
DIRECTORS, EMPLOYEES, AND AGENTS, AND ITS AFFILIATES AND ASSIGNS, FOR, UPON OR
BY REASON OF ANY MATTER, CAUSE OR THING WHATSOEVER THROUGH THE DATE THEREOF.
BORROWER FURTHER EXPRESSLY AGREES THAT THE FOREGOING RELEASE AND WAIVER
AGREEMENT IS INTENDED TO BE AS BROAD AND INCLUSIVE AS PERMITTED BY THE LAWS OF
THE STATE OF FLORIDA. IN ADDITION TO, AND WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, AND IN CONSIDERATION OF BANK'S EXECUTION OF THIS AMENDMENT, BORROWER
COVENANTS WITH AND WARRANT UNTO BANK, AND ITS AFFILIATES AND ASSIGNS, THAT THERE
EXIST NO CLAIMS, COUNTERCLAIMS, DEFENSES, OBJECTIONS, OFFSETS OR CLAIMS OF
OFFSETS AGAINST BANK OR THE OBLIGATION OF BORROWER TO PAY THE LOAN TO BANK WHEN
AND AS THE SAME BECOMES DUE AND PAYABLE.
11. Notwithstanding any provision to the contrary contained in the
Agreements, the parties agree to add the following thereto:
"ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THE
AGREEMENTS OR THIS AMENDMENT 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 AMENDMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING,
TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THE AGREEMENTS OR
THIS AMENDMENT 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.
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B. RESERVATION OF RIGHTS. NOTHING IN THIS AMENDMENT SHALL BE DEEMED TO
(I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION
OR REPOSE AND ANY WAIVERS CONTAINED IN THE AGREEMENTS OR THIS AMENDMENT; OR (II)
BE A WAIVER BY THE LENDER 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
LENDER 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 LENDER 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
AMENDMENT. 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 OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES."
12. Year 2000 Compliance. Borrower has (i) initiated a review and
assessment of all areas within its and each of its subsidiaries' business and
operations (including those affected by supplier and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by Borrower or any of its subsidiaries (or its suppliers and
vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan in accordance with
that timetable. Borrower reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material to its or any
of its subsidiaries' business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure
to do so could not reasonably be expected to have a material adverse effect on
Borrower or its subsidiaries. Borrower will promptly notify Lender in the event
Borrower discovers or determines that any computer application (including those
of its supplier and vendors) that is material to its or any of its subsidiaries'
business and operations will not be Year 2000 compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a material adverse effect on Borrower or its subsidiaries.
13. Nothing herein invalidates or shall impair or release any covenant,
condition, agreement, or stipulation in the Note, Loan Agreements and any other
Loan Documents, and the same, except as herein modified, shall continue in full
force and effect and the Borrower further covenants and agrees to perform and
comply with and abide by each and every of the covenants, agreements,
conditions, and stipulations of thereof which are not inconsistent herewith.
14. This Amendment shall be binding upon and shall inure to the benefit
of the heirs, executors, administrators and assigns, or successors and assigns
of the respective parties hereto.
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15. All pronouns and all variations thereof shall be construed so as to
refer to the masculine, feminine, neuter, singular, and plural form thereof as
required by the identity of the person or persons or the situation.
16. This instrument may be executed in one or more counterparts
(including telecopied counterpart(s)), each of which shall be deemed an original
and all of which taken together shall constitute one and the same instrument.
17. As amended hereby, the Agreements shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date and year first above written.
Signed, Sealed and Delivered NATIONSBANK, N.A.,
in the presence of: a National Banking Association
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
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*-------------------------- ▇▇▇▇▇▇ ▇▇▇▇
*(Print Name of Witness) Vice President
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------
*--------------------------
*(Print Name of Witness) (CORPORATE SEAL)
LENDER
ELCOTEL, INC., a
Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------- -----------------------
*-------------------------- ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Senior Vice
*(Print Name of Witness) President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(CORPORATE SEAL)
---------------------------
*--------------------------
*(Print Name of Witness)
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ELCOTEL DIRECT, INC., a
Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------- ---------------------------
*-------------------------- ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
*(Print Name of Witness) Vice President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(CORPORATE SEAL)
---------------------------
*--------------------------
*(Print Name of Witness)
TECHNOLOGY SERVICE GROUP, INC.
(successor by merger with ELCOTEL
HOSPITALITY SERVICES, INC.), a
Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------- -----------------------
*-------------------------- ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
*(Print Name of Witness) Vice President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------- (CORPORATE SEAL)
*--------------------------
*(Print Name of Witness)
BORROWER
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