EXHIBIT 10.13
(BANK ONE LOGO) CREDIT AGREEMENT
This agreement dated as of June 22, 2004 between Bank One, NA, with its main
office, in Chicago, IL, and its successors and assigns, (the "Bank"), whose
address is ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and
TASER International, Inc. (the "Borrower"), whose address is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ #▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇.
1. CREDIT FACILITIES.
1.1 SCOPE. This agreement governs Facility A, and, unless otherwise agreed
to in writing by the Bank and the Borrower or prohibited by applicable
law, governs the Credit Facilities.
1.2 FACILITY A (LINE OF CREDIT). The Bank has approved a credit facility
to the Borrower in the principal sum not to exceed $10,000,000.00 in
the aggregate at any one time outstanding ("Facility A"). Credit under
Facility A shall be repayable as set forth in a Line of Credit Note
executed concurrently with this agreement, and any renewals,
modifications or extensions thereof. The proceeds of Facility A shall
be used for the following purpose: finance on going working capital
requirements and general corporate purposes.
NON USAGE FEE. The Borrower shall pay to the Bank a non-usage fee (the
"Non-Usage Fee") with respect to each calendar quarter during the term
of Facility A, based on the unused amount of Facility A. The Non-Usage
Fee shall be an amount equal to A x (B - C) x (D/E), where A equals
the Applicable Fee Sate; B equals the maximum amount of Facility A; C
equals the average daily used portion (i.e., the sum of the aggregate
principal amount of advances outstanding, the aggregate amount
available to be drawn under all outstanding letters of credit issued
under the letter of credit sub-limit described below, plus the
aggregate amount drawn and unreimbursed under letters of credit issued
under that sub-limit) of Facility A, during the calendar quarter; D
equals the actual number of days elapsed during the calendar quarter;
and E equals 360. Each Non-Usage Fee shall be due and payable to the
Bank quarterly, in arrears, within fifteen (15) days after Borrower's
receipt of an invoice for the Non-Usage Fee from the Bank.
LETTER OF CREDIT SUB-LIMIT. At any time the Borrower is entitled to an
advance under Facility A, the Bank agrees to issue letters of credit
for the account of the Borrower in an amount not in excess of the
maximum advance that the Borrower would then be entitled to obtain
under Facility A, provided that (a) the aggregate maximum amount which
is drawn and remains unreimbursed under all letters of credit plus the
aggregate maximum available amount which may be drawn under all
letters of credit which are outstanding at any time, including without
limitation all letters of credit issued for the account of the
Borrower which arc outstanding on the date of the Line of Credit Note,
shall not exceed $5,000,000.00, (b) the issuance of any letter of
credit with an expiration date beyond the maturity date of the Line of
Credit Note shall be entirely at the discretion of the Bank, (c) any
letter of credit shall be a standby or commercial letter of credit and
the form of the requested letter of credit shall be satisfactory to
the Bank, in the Bank's sole discretion, and (d) the Borrower shall
have executed an application and reimbursement agreement for any
letter of credit in the Bank's standard form. While any letter of
credit is outstanding, the maximum amount of advances that may be
outstanding under the Line of Credit Note shall be automatically
reduced by the maximum amount available to be drawn under any and all
such letters of credit plus the aggregate of the amounts which have
been drawn and remain unreimbursed under all letters of Credit. The
Borrower shall pay the Bank a fee for each standby letter of credit
that is issued, calculated at the Applicable Fee Rate per annum of the
original maximum amount available of such standby letter of credit,
with such fee being calculated on the basis of a 360-day year and the
actual number of days in the period during which the standby letter of
credit will be outstanding; provided, however, that such fee shall not
be less than $100.00 for each letter of credit. The Borrower shall pay
the Bank a fee for each commercial letter of credit that is issued,
equal to the greater of $100.00 or 1.00% per annum of the original
maximum available amount of such commercial letter of credit. No
credit shall be given for fees paid due to early termination of any
letter of credit. The Borrower shall also pay the Bank's standard
transaction fees with respect to any transactions occurring on an
account of any letter of credit. Each fee shall be payable when the
related letter of credit is issued, and transaction fees shall be
payable upon completion of the transaction as to which they are
charged. All fees may be debited by the Bank to any deposit account of
the Borrower carried with the Bank without further authority and, in
any event, shall be paid by the Borrower within ten (10) days
following billing.
1.3 BORROWING BASE. The aggregate principal amount of advances outstanding
at any one time under Facility A, plus the aggregate amount available
to be drawn under all outstanding letters of credit issued under the
letter of credit sub-limit described above, plus the aggregate amount
drawn and unreimbursed under letters of credit issued under that
sub-limit (the "Aggregate Outstanding Amount") shall not exceed the
Borrowing Base or the maximum principal amount then available under
the Line of Credit Note (and any renewals, modifications or extensions
thereof) evidencing Facility A, whichever is less (the "Maximum
Available Amount"). If at any time the Aggregate
Outstanding Amount exceeds the Maximum Available Amount, the Borrower
shall immediately pay the Bank an amount equal to such excess.
"Borrowing Base" means the aggregate of:
A. 80% of Eligible Accounts; plus
B. 50% of Eligible Inventory, not to exceed 50% of Margined Eligible
Accounts.
Upon the request of the Borrower, the Borrowing Base may also include
additional amounts with respect to deposit accounts, certificates of
deposit or time deposit receipt accounts with the Bank and acceptable
marketable securities, in which Borrower has granted to the Bank a
perfected, first priority security interest securing the Credit
Facilities. The inclusion of such additional amounts shall be on such
terms and conditions as the Bank may determine in its sole discretion,
including without limitation the percentages of such assets upon which
the calculation of such additional amounts shall be based, and the
execution and delivery of such agreements and the provision of such
additional assurances as the Bank may reasonably require.
2. DEFINITIONS. As used in this agreement, the following terms have the
following respective meanings:
2.1 "Credit Facilities" means all extensions of credit from the Bank to
the Borrower, whether now existing or hereafter arising, including but
not limited to those described in Section 1.
2.2 "Liabilities" means all obligations, indebtedness and liabilities of
the Borrower to any one or more of the Bank, BANK ONE CORPORATION, and
any of their subsidiaries, affiliates or successors, now existing or
later arising, including, without limitation, all loans, advances,
interest, costs, overdraft indebtedness, credit card indebtedness,
lease obligations, or obligations relating to any Rate Management
Transaction, all monetary obligations incurred or accrued during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceedings, regardless of whether allowed or allowable in such
proceeding, and all renewals, extensions, modifications,
consolidations or substitutions of any of the foregoing, whether the
Borrower may be liable jointly with others or individually liable as a
debtor, maker, co-maker, drawer, endorser, guarantor, surety or
otherwise, and whether voluntarily or involuntarily incurred, due or
not due, absolute or contingent, direct or indirect, liquidated or
unliquidated. The term "Rate Management Transaction" in this agreement
means any transaction (including an agreement with respect thereto)
now existing or hereafter entered into among the Borrower, the Bank or
BANK ONE CORPORATION, or any of its subsidiaries or affiliates or
their successors, which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or
any other similar transaction (including any option with respect to
any of these transactions) or any combination thereof, whether linked
to one or more interest rates, foreign currencies, commodity prices,
equity prices or other financial measures.
2.3 "Notes" means the Line of Credit Note(s) described in Section 1, and
all promissory notes, instruments and/or contracts evidencing the
terms and conditions of the Liabilities.
2.4 "Account" means a trade account, account receivable, other receivable,
or other right to payment for goods sold or leased or services
rendered owing to the Borrower (or to a third party grantor acceptable
to the Bank).
2.5 "Account Debtor" means the person or entity obligated upon an Account.
2.6 "Affiliate" means any person, corporation or other entity directly or
indirectly controlling, controlled by or under common control with the
Borrower and any director or officer of the Borrower or any subsidiary
of the Borrower.
2.7 "Applicable Fee Rate" means with respect to any standby letter of
credit fee or Non-Usage Fee, as the case may be, the rate per annum
set forth below opposite the applicable Leverage Ratio (hereinafter
defined in Section 5.2 (J).
Applicable Fee Rate
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Leverage Ratio Standby LOC Fee Non-Usage Fee
-------------- --------------- -------------
Greater than 0.75 to 1.00 2.00% 0.20%
Less than or equal to 0.75 to 1.00 but greater than
0.25 to 1.00 1.75% 0.15%
Less than or equal to 0.25 to 1.00 1.50% 0.10%
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The Applicable Fee Rate shall, in each case, be determined and
adjusted quarterly on the first day of the month after the date of
delivery of the quarterly and annual financial statements required by
this agreement, provided, however, that if such financial statements
are not delivered within two Business Days after the required date
(each, a "Fee Determination Date"), the Applicable Fee Rate shall
increase to the maximum percentage amount set forth in the table above
from the date such financial statements were required to be delivered
to the Bank until received by the Bank. The Applicable Fee Rate shall
be effective from a Fee Determination Date until the next Fee
Determination Date. Such determinations by the Bank shall be
conclusive absent manifest error. The initial Applicable Fee Rate for
the standby letter of credit fee is 1.50% and for the Non-usage Fee is
0.10%.
2.8 "Distributions" means all dividends and other distributions made by
the Borrower to its shareholders, partners, owners or members, as the
case may be, other than salary, bonuses, and other compensation for
services expended in the current accounting period.
2.9 "Eligible Accounts" means, at any time, all of the Borrower's Accounts
which contain selling terms and conditions acceptable to the Bank. The
net amount of any Eligible Account against which the Borrower may
borrow shall exclude all returns, discounts, credits, and offsets of
any nature. Unless otherwise agreed to by the Bank in writing,
Eligible Accounts do not include Accounts: (1) with respect to which
the Account Debtor is an employee or agent of the Borrower; (2) with
respect to which the Account Debtor is affiliated with or related to
the Borrower; (3) with respect to which goods are placed on
consignment, guaranteed sale, or other terms by reason of which the
payment, by the Account Debtor may be conditional; (4) with respect to
which the Account Debtor is not a resident of the United States,
except to the extent such Accounts are supported by insurance, bonds
or other assurances satisfactory to the Bank; (5) with respect to
which the Borrower is or may become liable to the Account Debtor for
goods sold or services rendered by the Account Debtor to the Borrower;
(6) which are subject to dispute, counterclaim, or setoff; (7) with
respect to which the goods have not been shipped or delivered, or the
services have not been rendered, to the Account Debtor; (8) with
respect to which the Bank, in its sole discretion, deems the
creditworthiness or financial condition of the Account Debtor to be
unsatisfactory; (9) of any Account Debtor who has filed or has had
filed against it a petition in bankruptcy or an application for relief
under any provision of any state or federal bankruptcy, insolvency, or
debtor-in-relief acts; or who has had appointed a trustee, custodian,
or receiver for the assets of such Account Debtor; or who has made an
assignment for the benefit of creditors or has become insolvent or
fails generally to pay its debts (including its payrolls) as such
debts become due; (10) with respect to which the Account Debtor is the
United States government or any department or agency of the United
States; (11) which have not been paid in full within ninety (90) days
from the invoice date; and (12) due from any one Account Debtor to the
extent such Accounts constitute more than 5% of all Eligible Accounts.
In no event will the balance of any Account of any single Account
Debtor be eligible whenever the portion of the Account which has not
been paid within ninety (90) days from the invoice date is in excess
of 25% of the total amount outstanding on the Account.
2.10 "Eligible Inventory" means, at any time, all of the Borrower's
Inventory except: (1) Inventory which is not owned by the Borrower
free and clear of all security interests, liens, encumbrances, and
claims of third parties, except the Bank; (2) Inventory which the
Bank, in its sole discretion; deems to be obsolete, unsalable,
damaged, defective, perishable, or unfit for further processing; (3)
work in process; (4) Inventory subject to consignment or otherwise in
the possession of a third party, unless otherwise agreed to by the
Bank in writing; (5) Inventory in transit or located outside of the
United States; (6) Inventory identified to be purchased under a
contract under which the Borrower has received, or is entitled to
receive, an advance payment; (7) Inventory determined by the Bank in
its sole discretion to be ineligible due to licensing, intellectual
property, or legal or regulating issues which exist making it
difficult to resell such Inventory; and (8) Inventory which is
comprised of samples, returns, rejected items, re-work items,
non-standard items, odd-lots, or which is otherwise deemed ineligible
by the Bank in its sole discretion; provided, however, that
transportation and storage charges shall be excluded from amounts
otherwise included in Eligible Inventory.
2.11 "Inventory" means all of the Borrower's raw materials, work in
process, finished goods, merchandise, parts and supplies, of every
kind and description, and goods held for sale or lease or furnished
under contracts of service in which the Borrower now has or hereafter
acquires any right, whether held by the Borrower or others, and all
documents of title, warehouse receipts, bills of lading, and all other
documents of every type covering all or any part of the foregoing.
Inventory includes inventory temporarily out of the Borrower's custody
or possession and all returns on Accounts.
2.12 "Intangible Assets" means the aggregate amount of: (1) all assets
classified as intangible assets under generally accepted accounting
principles, including, without limitation, goodwill, trademarks,
patents, copyrights, organization expenses, franchises, licenses,
trade names, brand names, mailing lists, catalogs, excess of cost over
book value of assets acquired, and bond discount and underwriting
expenses; and (2) loans or advances to, investments in, or receivables
from (i) Affiliates, officers, directors, employees or shareholders of
the Borrower or
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(ii) any person or entity if such loan, advance, investment or
receivable is outside the Borrower's normal course of business.
2.13 "Margined Eligible Accounts" means 80% of Eligible Accounts.
2.14 "Tangible Net Worth" means total assets less the sum of Intangible
Assets and total liabilities.
3. CONDITIONS PRECEDENT.
3.1 CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. Before the first
extension of credit governed by this agreement, whether by
disbursement of a loan, issuance of a letter of credit, or otherwise,
the Borrower shall deliver to the Bank, in form and substance
satisfactory to the Bank:
A. LOAN DOCUMENTS. The Notes, and as applicable, the letter of credit
applications, the security agreements, the pledge agreements,
financing statements, mortgages or deeds of trust, the guaranties, the
subordination agreements, and any other loan documents which the Bank
may reasonably require to give effect to the transactions described in
this agreement;
B. EVIDENCE OF DUE ORGANIZATION AND GOOD STANDING. Evidence,
satisfactory to the Bank, of the due organization and good standing of
the Borrower and every other business entity that is a party to this
agreement or any other loan document required by this agreement; and
C. EVIDENCE OF AUTHORITY TO ENTER INTO LOAN DOCUMENTS. Evidence that
(i) each party to this agreement and any other loan document required
by this agreement is authorized to enter into the transactions
described in this agreement and the other loan documents, and (ii) the
person signing on behalf of each such party is authorized to do.
3.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. Before any extension
of credit governed by this agreement, whether by disbursement of a
loan, issuance of a letter of credit or otherwise, the following
conditions must be satisfied-
A. REPRESENTATIONS. The representations of the Borrower are true on
and as of the date of the extension of credit;
B. NO EVENT OF DEFAULT. No default has occurred in any provision of
this agreement, the Notes or any agreement related to the Credit
Facilities and is continuing or would result from the extension of
credit, and no event has occurred which would constitute the
occurrence of any default but for the lapse of time until the end of
any grace or cure period; and
C. ADDITIONAL APPROVALS, OPINIONS, AND DOCUMENTS. The Bank has
received any other approvals, opinions and documents as it may
reasonably request.
4. AFFIRMATIVE COVENANTS. The Borrower shall:
4.1 INSURANCE. Maintain insurance with financially sound and reputable
insurers covering its properties and business against those casualties
and contingencies and in the types and amounts as are in accordance
with sound business and industry practices.
4.2 EXISTENCE. Maintain its existence and business operations as presently
in effect in accordance with all applicable laws and regulations, pay
its debts and obligations when due under normal terms, and pay on or
before their due date, all taxes, assessments, fees and other
governmental monetary obligations, except as they may be contested in
good faith if they have been properly reflected on its books and, at
the Bank's request, adequate funds or security has been pledged to
insure payment,
4.3 FINANCIAL RECORDS. Maintain proper books and records of account, in
accordance with generally accepted accounting principles, and
consistent with financial statements previously submitted to the Bank.
4.4 INSPECTION. Permit the Bank to inspect and copy the Borrower's
business records at such times and at such intervals as the Bank may
reasonably require, and to discuss the Borrower's business,
operations, and financial condition with the Borrower's officers and
accountants.
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4.5 FINANCIAL REPORTS. Furnish to the Bank whatever information, books and
records the Bank may from time to time reasonably request, including
at a minimum:
A. Via either the ▇▇▇▇▇ System or its Home Page, within forty-five
(45) days after the filing of its Quarterly Report on Form 10-Q for
the fiscal quarter then ended with the Securities and Exchange
Commission, but in no event later than forty-five (45) days after the
end of such fiscal quarter, copies of the financial statements for
such fiscal quarter as contained in such Quarterly Report, on Form
10-Q, and, as soon as it shall become available, a quarterly report to
shareholders of the Borrower for the fiscal quarter then ended.
B. Via either the ▇▇▇▇▇ System or its Home Page, within ninety (90)
days after filing of its Annual Report on Form 10-K for the fiscal
year then ended with the Securities and Exchange Commission, but in no
event later than ninety (90) days after the end of such fiscal year,
the financial statements for such fiscal year as contained in such
Annual Report on Form 10-K and, as soon as it shall become
available, the annual report to shareholders of the Borrower for the
fiscal year then ended.
If for any reason the ▇▇▇▇▇ System and/or its Home Page are not
available to the Borrower as is required for making available the
financial statements or reports referred to above, the Borrower shall
then furnish a copy of such financial Statements or reports to the
Bank.
For the purposes of this section "▇▇▇▇▇ System" means the Electronic
Data Gathering Analysis and Retrieval System owned and operated by the
United States Securities and Exchange Commission or any replacement
system, and "Home Page" means the Borrower's corporate home page on
the World Wide Web accessible through the Internet via the universal
resource locator (URL) identified as ▇▇▇.▇▇▇▇▇.▇▇▇ or such other
universal resource locator that the borrower shall designate in
writing to the Bank as its corporate home page on the World Wide Web.
C. Within thirty (30) days after and as of the end of each calendar
month in which there was an outstanding advance of principal or an
outstanding letter of credit under Facility A on the last day of such
calendar month, the following lists, each certified as correct by one
of its authorized agents:
(1) a list of accounts receivable, aged from date of invoice,
and
(2) a list of inventory, valued at the lower of cost (determined
using the first-in, first-out method of inventory
accounting) or wholesale market value.
D. A borrowing base certificate, in the form of Exhibit A attached
hereto, along with such supporting documentation as the Bank may
request, at the following times: (A) within thirty (30) days after and
as of the end of each calendar month in which there was an outstanding
advance of principal or an outstanding letter of credit under Facility
A on the last day of such calendar month, and (B) if no borrowing base
certificate has been provided or is otherwise due as of the end of the
immediately preceding calendar month, with any request of an advance
under the Credit Facilities or for the issuance of a letter of credit.
4.6 NOTICES OF CLAIMS, LITIGATION, DEFAULTS, ETC. Promptly inform the Bank
in writing of (1) all existing and all threatened litigation, claims,
investigations, administrative proceedings and similar actions
affecting the Borrower which could materially affect the financial
condition of the Borrower; (2) the occurrence of any event which gives
rise to the Bank's option to terminate the Credit Facilities; (3) the
institution of steps by the Borrower to withdraw from, or the
institution of any steps to terminate, any employee benefit plan as to
which the Borrower may have liability; (4) any additions to or changes
in the locations of the Borrower's businesses; and (5) any alleged
breach of any provision of this agreement or of any other agreement
related to the Credit Facilities by the Bank.
4.7 ADDITIONAL INFORMATION. Furnish such additional information and
statements, as the Bank may request, from time to time.
4.8 INSURANCE REPORTS. Furnish to the Bank, upon request of the Bank,
reports on each existing, insurance policy showing such information as
the Bank may reasonably request.
4.9 OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between the Borrower
and any other party.
4.10 TITLE TO ASSETS AND PROPERTY. Maintain good and marketable title to
all of the Borrower's assets and properties.
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4.11 ADDITIONAL ASSURANCES. Make, execute and deliver to the Bank such
other agreements as the Bank may reasonably request to evidence the
Credit Facilities and to perfect any security interests.
4.12 EMPLOYEE BENEFIT PLANS. Maintain each employee benefit plan as to
which the Borrower may have any liability, in compliance with all
applicable requirements of law and regulations.
4.13 DEPOSITORY RELATIONSHIP. Maintain its primary banking depository
relationship with the Bank and establish such accounts and maintain
balances therein with the Bank sufficient to cover the cost of all the
Bank's services provided; provided, however, that nothing herein shall
require the Borrower to keep and maintain a specific minimum balance
in such accounts.
5. NEGATIVE COVENANTS.
5.1 Unless otherwise noted, the financial requirements set forth in this
section will be computed in accordance with generally accepted
accounting principles applied on a basis consistent with, financial
statements previously Submitted by the Borrower to the Bank.
5.2 Without the written consent of the Bank, the Borrower will not:
A. DIVIDENDS. Acquire or retire any of its shares of capital stock; or
declare or pay dividends or make any other distributions upon any of
its shares of capital stock, except in the absence of the occurrence
of any default, dividends in its capital stock.
B. SALE OF SHARES. Issue, sell or otherwise dispose of any shares of
its capital stock or other securities, or rights, warrants or options
to purchase or acquire those shares or securities, except that
Borrower can issue and permit the exercise of employee, director, and
consultant stock options in the ordinary course of business
C. DEBT. Incur, contract for, assume, or permit to remain outstanding,
indebtedness for borrowed money, installment obligations, or
obligations under capital leases or operating leases, other than (1)
unsecured trade debt incurred in the ordinary course of business, (2)
indebtedness owing to the Bank, (3) indebtedness reflected in the
latest financial statement of the Borrower furnished to the Bank prior
to execution of this agreement and that is not to be paid with
proceeds of borrowings under the Credit Facilities, and (4)
indebtedness, outstanding as of the date hereof that has been
disclosed to the Bank in writing and that is not to be paid with
proceeds of borrowings under the Credit Facilities.
D. GUARANTIES. Guarantee or otherwise become or remain secondarily
liable on the undertaking of another, except for endorsement of drafts
for deposit and collection in the ordinary course of business.
E. LIENS. Create or permit to exist any lien on any of its property,
real or personal, except: existing liens known to the Bank; liens to
the Bank; liens incurred in the ordinary course of business securing
current non-delinquent liabilities for taxes, worker's compensation,
unemployment insurance, social security and pension liabilities.
F. USE OF PROCEEDS. Use, or permit any proceeds of the Credit
Facilities to be used, directly or indirectly, for the purpose of
"purchasing or carrying any margin stock" within the meaning of
Federal Reserve Board Regulation U. At the Bank's request, the
Borrower will furnish a completed Federal Reserve Board Form U-l.
G. CONTINUITY OF OPERATIONS. (1) Engage in any business activities
substantially different from those in which the Borrower is presently
engaged; (2) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change its name, dissolve, or sell
any assets out of the ordinary course of business; or (3) enter into
any arrangement with any person providing for the leasing by the
Borrower or any subsidiary of real or personal property which has been
sold or transferred by the Borrower or subsidiary to such person.
H. LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into any agreement
with any person other than the Bank which prohibits or limits the
ability of the Borrower or any of its subsidiaries to create or permit
to exist any lien on any of its property, assets or revenues, whether
now owned or hereafter acquired.
I. CONFLICTING AGREEMENTS. Enter into any agreement containing any
provision which would be violated or breached by the performance of
the Borrower's obligations under this agreement.
J. LEVERAGE RATIO. Permit as of each fiscal quarter end, its ratio of
total liabilities to Tangible Net Worth to be greater than 1.00 to
1.00.
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K. FIXED CHARGE COVERAGE RATIO. Permit as of each fiscal quarter end,
its ratio of net income before taxes, plus amortization, depreciation,
interest expense, rent and operating lease payments minus any
Distributions, for the twelve month period then ending to prior period
current maturities of long term debt and capital leases, interest
expense, taxes, rent and operating lease payments for the same such,
period to be less than 1.25 to 1.00.
L. GOVERNMENT REGULATION. (1) Be or become Subject at any time to any
law, regulation, or list of any government agency (including, without
limitation, the U.S. Office of Foreign Asset Control list) that
prohibits or limits Bank from making any advance or extension of
credit to Borrower or from otherwise conducting business with
Borrower, or (2) fail to provide documentary and other evidence of
Borrower's identity as may be requested by Bank at any time to enable
Bank to verify Borrower's identity or to comply with any applicable
law or regulation, including, without limitation, Section 326 of the
USA Patriot Act of 2001, 31 U.S.C. Section 5318.
6. REPRESENTATIONS.
6.1 REPRESENTATIONS BY THE BORROWER. Each Borrower represents that: (a)
the execution and delivery of this agreement and the Notes, and the
performance of the obligations they impose, do not violate any law,
conflict with any agreement by which it is bound, or require the
consent or approval of any governmental authority or other third
party, (b) this agreement and the Notes are valid and binding
agreements, enforceable according to their terms, (c) all balance
sheets, profit and loss statements, and other financial statements and
other information furnished to the Bank in connection with the
Liabilities are accurate and fairly reflect the financial condition of
the organizations and persons to which they apply on their effective
dates, including contingent liabilities of every type, which financial
condition has not changed materially and adversely since those dates,
(d) no litigation, claim, investigation, administrative proceeding or
similar action (including those for unpaid taxes) against the Borrower
is pending or threatened, and no other event has occurred which may in
any one case or in the aggregate materially adversely affect the
Borrower's financial condition and properties, other than litigation,
claims, or other events, if any, that have been disclosed to and
acknowledged by the Bank in writing, (e) all of the Borrower's tax
returns and reports that are or were required to be filed, have been
filed, and all taxes, assessments and other governmental charges have
been paid in full, except those presently being contested by the
Borrower in good faith and for which adequate reserves have been
provided, (f) the Borrower is not an "investment company" or a company
"controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended, (g) the Borrower is not a
"holding company", or a "subsidiary company" of a "holding company" or
an "affiliate" of a "holding company" or of a "subsidiary company" of
a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, (h) there are no defenses or
counterclaims, offsets or adverse claims, demands or actions of any
kind, personal or otherwise, that the Borrower could assert with
respect to this agreement or the Credit Facilities, (i) the Borrower
owns, or is licensed to use, all trademarks, trade names, copyrights,
technology, know-how and processes necessary for the conduct of its
business as currently conducted, and (j) no part of the proceeds of
the Credit Facilities will be used for "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal
Reserve System of the United States (the "Board") as now and from time
to time hereafter in effect or for any purpose which violates the
provisions of any regulations of the Board. Each Borrower, other than
a natural person, further represents that: (a) it is duly organized,
existing and in good standing pursuant to the laws under which it is
organized, and (b) the execution and delivery of this agreement and
the Notes and the performance of the obligations they impose (i) are
within its powers, (ii) have been duly authorized by all necessary
action of its governing body, and (iii) do not contravene the terms of
its articles of incorporation or organization, its by-laws, or any
partnership, operating or other agreement governing its affairs.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
7
6.2 REPRESENTATIONS REGARDING ASSETS. With respect to any asset of the
Borrower utilized in the calculation of the Borrowing Base set forth
in this agreement, the Borrower represents and warrants to the Bank:
(1) each asset represented by the Borrower to be eligible for
Borrowing Base purposes of this agreement conforms to the eligibility
definitions set forth in this agreement (2) all asset values delivered
to the Bank will be true and correct, subject to immaterial variance;
and be determined on a consistent accounting basis; (3) except as
agreed to the contrary by the Bank in writing, each asset is now and
at all times hereafter will be in the Borrower's physical possession
and shall not be held by others on consignment, sale or approval, or
sale or return; (4) except as reflected in schedules delivered to (the
Bank, each asset is now and at all times hereafter will be of good and
merchantable quality, free from defects; (5) each asset is not now and
will not at any time hereafter be stored with a bailee, warehouseman,
or similar party without the Bank's prior written consent, and in
such event, the Borrower will concurrently at the time of bailment
cause any such bailee, warehouseman, or similar party to issue and
deliver to the Bank, warehouseman receipts in the Bank's name
evidencing the storage of the assets; and (6) the Bank, its assigns,
or agents shall have the right at any time and at the Borrower's
expense to inspect, examine and audit the Borrower's records, and if
Accounts are included in the calculation of Borrowing Base, confirm
with Account Debtors the accuracy of such Accounts, and inspect and
examine the assets and to check and test the same as to quality,
quantity, value, and condition.
7. DEFAULT/REMEDIES. If any of the Credit Facilities are not paid at maturity,
whether by acceleration or otherwise, or if a default by anyone occurs
under the terms of this agreement, the Notes or any agreement related to
the Credit Facilities, then the Bank shall have all of the rights and
remedies provided by any law or agreement.
8. MISCELLANEOUS.
8.1 NOTICE. Any notices and demands under or related to this document
shall be in writing and delivered to the intended party at its address
stated herein, and if to the Bank, at its main office if no other
address of the Bank is specified herein, by one of the following
means: (a) by hand, (b) by a nationally recognized overnight courier
service, or (c) by certified mail, postage prepaid, with return
receipt requested. Notice shall be deemed given: (a) upon receipt if
delivered by hand, (b) on the Delivery Day after the day of deposit
with a nationally recognized courier service, or (c) on the third
Delivery Day after the notice is deposited in the mail. "Delivery Day"
means a day other than a Saturday, a Sunday or any other day on which
national banking associations are authorized to be closed. Any party
may change its address for purposes of the receipt of notices and
demands by giving notice of such change in the manner provided in this
provision.
8.2 NO WAIVER. No delay on the part of the Bank in the exercise of any
right or remedy waives that right or remedy. No single or partial
exercise by the Bank of any right or remedy precludes any other future
exercise of it or the exercise of any other right or remedy. No waiver
or indulgence by the Bank of any default is effective unless it is in
writing and signed by the Bank, nor shall a waiver on one occasion bar
or waive that right on any future occasion.
8.3 INTEGRATION. This agreement, the Notes, and any agreement related to
the Credit Facilities embody the entire agreement and understanding
between the Borrower and the Bank and supersede all prior agreements
and understandings relating to their subject matter. If any one or
more of the obligations of the Borrower under this agreement or the
Notes is invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining obligations of
the Borrower shall not in any way be affected or impaired, and the
invalidity, illegality or uncnforceability in one jurisdiction shall
not affect the validity, legality or enforceability of the obligations
of the Borrower under this agreement or the Notes in any other
jurisdiction.
8.4 JOINT AND SEVERAL LIABILITY. Each Borrower, if more than one, is
jointly and severally liable.
8.5 GOVERNING LAW AND VENUE. This agreement is delivered in the State of
Arizona and governed by Arizona law (without giving effect to its laws
of conflicts). The Borrower agrees that any legal action or proceeding
with respect to any of its obligations under this agreement may be
brought by the Bank in any state or federal court located in the State
of Arizona, as the Bank in its sole discretion may elect. By the
execution and delivery of this agreement, the Borrower submits to and
accepts, for itself and in respect of its property, generally and
unconditionally, the non exclusive jurisdiction of those courts. The
Borrower waives any claim that the State of Arizona is not a
convenient forum or the proper venue for any such suit, action or
proceeding.
8
8.6 CAPTIONS. Section headings are for convenience of reference only and
do not affect the interpretation of this agreement.
8.7 SUBSIDIARIES AND AFFILIATES OF THE BORROWER. To the extent the context
of any provisions of this agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used in this agreement shall include all of the
Borrower's subsidiaries and affiliates. Notwithstanding the foregoing,
however, under no circumstances shall this agreement be construed to
require the Bank to make any loan or other financial accommodation to
any of the Borrower's subsidiaries or affiliates.
8.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Borrower understands
and agrees that in extending the Credit Facilities, the Bank is
relying on all representations, warranties, and covenants made by the
Borrower in this agreement or in any certificate or other instrument
delivered by the Borrower to the Bank under this agreement. The
Borrower further agrees that regardless of any investigation made by
the Bank, all such representations, warranties and covenants will
survive the making of the Credit Facilities and delivery to the Bank
of this agreement, shall be continuing in nature, and shall remain in
full force and effect until such time as the Borrower's indebtedness
to the Bank shall be paid in full.
8.9 NON-LIABILITY OF THE BANK. The relationship between the Borrower and
the Bank created by this agreement is strictly a debtor and creditor
relationship and not fiduciary in nature, nor is the relationship to
be construed as creating any partnership or joint venture between the
Bank and the Borrower. The Borrower is exercising the Borrower's own
judgement with respect to the Borrower's business. All information
supplied to the Bank is for the Bank's protection only and no other
party is entitled to rely on such information. There is no duty for
Bank to review, inspect, supervise or inform the Borrower of any
matter with respect to the Borrower's business. The Bank and the
Borrower intend that the Bank may reasonably rely on all information
supplied by the Borrower to the Bank, together with all
representations and warranties given by the Borrower to the Bank,
without investigation or confirmation by the Bank and that any
investigation or failure to investigate will not diminish the Bank's
right to so rely.
8.10 INDEMNIFICATION OF THE BANK. The Borrower agrees to indemnify, defend
and hold the Bank and BANK ONE CORPORATION, or any of its subsidiaries
or affiliates or their successors, and each of their respective
shareholders, directors, officers, employees and agents (collectively,
the "Indemnified Persons") harmless from any and all obligations,
claims, liabilities, losses, damages, penalties, fines, forfeitures,
actions, judgments, suits, costs, expenses and disbursements of any
kind or nature (including, without limitation, any Indemnified
Person's, attorneys' reasonable fees) (collectively, the "Claims")
which may be imposed upon, incurred by or assessed against any
Indemnified Person arising out of or relating to this agreement; the
exercise of the rights and remedies granted under this agreement
(including, without limitation, the enforcement of this agreement and
the defense of any Indemnified Person's action or inaction in
connection with this agreement); and in connection with the Borrower's
failure to perform all of the Borrower's obligations under this
agreement, except to the limited extent that the Claims against any
such Indemnified Person are proximately caused by such Indemnified
Person's gross negligence or willful misconduct. The indemnification
provided for in this section shall survive the termination of this
agreement and shall extend to and continue to benefit each individual
or entity who is or has at any time been an Indemnified Person.
The Borrower's indemnity obligations under this section shall not in
any way be affected by the presence or absence of covering insurance,
or by the amount of such insurance or by the failure or refusal of any
insurance carrier to perform any obligation on its part under any
insurance policy or policies affecting the Borrower's assets or the .
Borrower's business activities. Should any Claim be made or brought
against any Indemnified Person by reason of any event as to which the
Borrower's indemnification obligations apply, then, upon any
Indemnified Person's demand, the Borrower, at its sole cost and
expense, shall defend such Claim in the Borrower's name, if necessary,
by the attorneys for the Borrower's insurance carrier (if such Claim
is covered by insurance), or otherwise by such attorneys as any
Indemnified Person shall approve. Any Indemnified Person may also
engage its own attorneys at its reasonable discretion to defend the
Indemnified Person and to assist in its defense and the Borrower
agrees to pay the reasonable fees and disbursements of such attorneys.
8.11 COUNTERPARTS. This agreement may be executed in multiple counterparts,
each of which, when so executed, shall be deemed an original, but all
such counterparts, taken together, shall constitute one and the same
agreement.
8.12 SOLE DISCRETION OF THE BANK. Whenever the Bank's consent or approval
is required under this agreement, the decision as to whether or not
to consent or approve shall be in the sole and exclusive discretion of
the Bank and the Bank's decision shall be final and conclusive.
9
8.13 ADVICE OF COUNSEL. The Borrower acknowledges that it has been advised
by counsel, or had the opportunity to be advised by counsel, in the
negotiation, execution and delivery of this agreement and
any documents executed and delivered in connection with the Credit
facilities.
8.14 RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in
any law, rule, regulation, or guideline, or the interpretation or
application of any thereof by any court or administrative or
governmental authority (including any request or policy not having the
force of law) shall impose, modify, or make applicable any taxes
(except federal, state, or local income or franchise taxes imposed on
the Bank), reserve requirements, capital adequacy requirements, or
other obligations which would (A) increase the cost to the Bank for
extending or maintaining the Credit Facilities, (B) reduce the amounts
payable to the Bank under the Credit Facilities, or (C) reduce the
rate of return on the Bank's capital as a consequence of the Bank's
obligations with respect to the Credit Facilities, then the Borrower
agrees to pay the Bank such additional amounts as will compensate the
Bank therefor, within five (5) days after the Bank's written demand
for such payment. The Bank's demand shall be accompanied by an
explanation of such imposition or charge and a calculation in
reasonable detail of the additional amounts payable by the Borrower,
which explanation and calculations shall be conclusive in the absence
of manifest error.
8.15 CONFLICTING TERMS. If this agreement is inconsistent with any
provision in any agreement related to the Credit Facilities, the Bank
shall determine, in the Bank's sole and absolute discretion, which of
the provisions shall control any such inconsistency.
8.16 EXPENSES. The Borrower agrees to pay or reimburse the Bank for all its
out-of-pocket costs and expenses and reasonable attorneys' fees
(including the fees of in-house counsel) incurred in connection with
the development, preparation and execution of, and in connection with
the enforcement or preservation of any rights under, this agreement,
any amendment, supplement, or modification thereto, and any other
documents prepared in connection herewith or therewith. These costs
and expenses include without limitation any costs or expenses incurred
by the Bank in any bankruptcy, reorganization, insolvency or other
similar proceeding.
9. USA PATRIOT ACT NOTIFICATION. The following notification is provided to
Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C.
Section 5318:
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help
the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain,
verify, and record information that identifies each person or entity that
opens an account, including any deposit account, treasury management
account, loan, other extension of credit, or other financial services
product. What this means for Borrower: When Borrower opens an account, if
Borrower is an individual Bank will ask for Borrower's name, taxpayer
identification number, residential address, date of birth, and other
information that will allow Bank to identify Borrower, and if Borrower is
not an individual Bank will ask for Borrower's name, taxpayer
identification number, business address, and other information that will
allow Bank to identify Borrower. Bank may also ask, if Borrower is an
individual to see Borrower's driver's license or other identifying
documents, and if Borrower is not an individual to see Borrower's legal
organizational documents or other identifying documents.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
10
10. WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER
FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES.
11. JURY WAIVER. THE BORROWER AND THE BANK HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE
IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE)
BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO
THIS DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO
PROVIDE THE FINANCING DESCRIBED HEREIN.
ADDRESS(ES) FOR NOTICES: BORROWER:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ #▇ TASER International Inc.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
Printed Name Title
Date Signed: July 12, 2004
ADDRESS FOR NOTICES: BANK:
▇▇▇▇. ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ One, NA, with main office in
AZ1-1178 ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇
Attn: By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------- ------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, FVP
Printed Name Title
Date Signed: July 13, 2004
11
(BANK ONE LOGO) LINE OF CREDIT NOTE
$10,000,000.00
DUE: JUNE 30,2006 DATE: JUNE 22, 2004
PROMISE TO PAY. On or before June 30, 2006, for value received, TASER
International, Inc. (the "Borrower") promises to pay to Bank One, NA, with its
main office in Chicago, IL, whose address is ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Bank") or order, in lawful money of the United
States of America, the sum of Ten Million and 00/100 Dollars ($10,000,000.00) or
such lesser sum as is indicated on Bank records, plus interest as provided
below.
DEFINITIONS. As used in this Note, the following terms have the following
respective meanings:
"ADVANCE" means a Eurodollar Advance or a Prime Rate Advance and "ADVANCES"
means all Eurodollar Advances and all Prime Rate Advances under this Note.
"APPLICABLE MARGIN" means with respect to any Prime Rate Advance or Eurodollar
Advance, as the case may be, the rate per annum set forth below opposite the
applicable Leverage Ratio. Leverage Ratio is defined in the Credit Agreement.
Applicable Margin
---------------------------------------
Leverage Ratio Prime Rate Advance Eurodollar Advance
-------------- ------------------ ------------------
Greater than 0.75 to 1.00 0.50% 2.00%
Less than or equal to 0.75 to 1.00
but greater than 025 to 1.00 0.75% 1.75%
Less than or equal to 0.25 to 1.00 1.00% 1.50%
The Applicable Margin shall, in each case, be determined and adjusted quarterly
on the first day of the month after the date of delivery of the quarterly and
annual financial statements required by the Credit Agreement, provided, however,
that if such financial statements are not delivered within two Business Days
after the required date (each, an "Interest Determination Date"), the Applicable
Margin shall increase to the maximum percentage amount set forth in the table
above from the date such financial statements were required to be delivered to
the Bank until received by the Bank. The Applicable Margin shall be effective
from an Interest Determination Date until the next Interest Determination Date.
Such determinations by the Bank shall be conclusive absent manifest error. The
initial Applicable Margin for Prime Rate Advances is 1.00% and for Eurodollar
Advances is 1.50%.
"CREDIT AGREEMENT" means a certain Credit Agreement, dated June 22,2004, between
the Borrower and the Bank.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Arizona and/or New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day other than a Saturday, Sunday or any other day on
which national banking associations are authorized to be closed.
"EURODOLLAR BASE RATE" means, with respect to the relevant Interest Period, the
applicable British Bankers' Association LIBOR rate for deposits in U.S. dollars
as reported by any generally recognized financial information service as of
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, and having a maturity equal to such Interest Period, provided
that, if no such British Bankers' Association LIBOR rate is available to the
Bank, the applicable Eurodollar Base Rate for the relevant Interest Period shall
instead be the rate determined by the Bank to be the rate at which BANK ONE
CORPORATION or one of its affiliate banks offers to place deposits in U.S.
dollars with first-class banks in the London interbank market at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, in the approximate amount of the principal amount outstanding
on such date and having a maturity equal to such Interest Period.
"EURODOLLAR ADVANCE" means any borrowing under this Note when and to the extent
that its interest rate is determined by reference to the Eurodollar Rate.
"EURODOLLAR RATE" means, with respect to a Eurodollar Advance for the relevant
Interest Period, the sum of (i) the Applicable Margin plus (ii) the quotient of
(a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b)
one minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period.
"INTEREST PERIOD" means, with respect to a Eurodollar Advance, a period of one
(1), two (2), three (3), six (6), nine (9) or twelve (12) month(s) commencing on
a Business Day selected by the Borrower pursuant to this Note. Such Interest
Period shall end on the day which corresponds numerically to such date one (l),
two (2), three (3), six (6), nine (9) or twelve (12) month(s) thereafter, as
applicable, provided, however, that if there is no such numerically
corresponding day in such first, second, third, sixth or twelfth succeeding
month(s), as applicable, such Interest Period shall end on the last Business Day
of such first, second, third, sixth or twelfth succeeding month(s), as
applicable. If an Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next succeeding Business
Day, provided, however, that if said next succeeding Business Day falls in a new
calendar month, such Interest Period shall end on the immediately preceding
Business Day.
"PRIME RATE" means a rate per annum equal to the prime rate of interest
announced from time to time by the Bank or its parent (which is not necessarily
the lowest rate charged to any customer), changing when and as said prime rate
changes.
"PRIME RATE ADVANCE" means any Advance under this Note when and to the extent
that its interest rate is determined by reference to the Prime Rate.
"PRINCIPAL PAYMENT DATE" is defined in the paragraph entitled "Principal
Payments" below.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"RESERVE REQUIREMENT" means, with respect to an Interest Period, the maximum
aggregate reserve requirement (including all basic, supplemental, marginal and
other reserves) which is imposed under Regulation D.
INTEREST RATES. The Advance(s) evidenced by this Note may be drawn down and
remain outstanding as up to five (5) Eurodollar Advances and/or a Prime Rate
Advance. The Borrower shall pay interest to the Bank on the outstanding and
unpaid principal amount of each Prime Rate Advance at the Prime Rate minus the
Applicable Margin and each Eurodollar Advance at the Eurodollar Rate. Interest
shall be calculated on the basis of the actual number of days elapsed in a year
of 360 days. In no event shall the interest rate applicable to any Advance
exceed the maximum rate allowed by law. Any interest payment which would for any
reason be deemed unlawful under applicable law shall be applied to principal.
Borrower hereby agrees to pay an effective rate of interest that is the sum of
the interest rate provided for in this Note together with any additional rate of
interest resulting from any other charges of interest or in the nature paid or
to be paid in connection with this Note or the Related Documents.
BANK RECORDS. The Bank shall, in the ordinary course of business, make notations
in its records of the date, amount, interest rate and Interest Period of each
Advance hereunder, the amount of each payment on the Advances, and other
information. Such records shall, in the absence of manifest error, be conclusive
as to the outstanding principal balance of and interest rate or rates applicable
to this Note.
NOTICE AND MANNER OF ELECTING INTEREST RATES ON ADVANCES. The Borrower shall
give the Bank written notice (effective upon receipt) of the Borrower's intent
to draw down an Advance under this Note no later than 11:00 a.m. Mountain time,
one (1) Business Day before disbursement, if the full amount of the drawn
Advance is to be disbursed as a Prime Rate Advance and three (3) Business Days
before disbursement, if any part of such Advance is to be disbursed as a
Eurodollar Advance. The Borrower's notice must specify; (a) the disbursement
date, (b) the amount of each Advance, (c) the type of each Advance (Prime Rate
Advance or Eurodollar Advance), and (d) for each Eurodollar Advance, the
duration of the applicable Interest Period; provided, however, that the Borrower
may not elect an Interest Period ending after the maturity date of this Note.
Each Eurodollar Advance shall be in a minimum amount of Five Hundred Thousand
and 00/100 Dollars ($500,000.00). All notices under this paragraph are
irrevocable. By the Bank's close of business on the disbursement date and upon
fulfillment of the conditions set forth herein and in any other of the Related
Documents, the Bank shall disburse the requested Advances in immediately
available funds by crediting the amount of such Advances to the Borrower's
account with the Bank.
CONVERSION AND RENEWALS. The Borrower may elect from time to time to convert one
type of Advance into another or to renew any Advance by giving the Bank written
notice no later than 11:00 a.m. Mountain time, one (1) Business Day before
conversion into a Prime Rate Advance and three (3) Business Days before
conversion into or renewal of a Eurodollar Advance, specifying: (a) the renewal
or conversion date, (b) the amount of the Advance to be converted or renewed,
(c) in the case of conversion, the type of Advance to be converted into (Prime
Rate Advance or Eurodollar Advance), and (d) in the case of renewals of or
conversion into a Eurodollar Advance, the applicable Interest Period, provided
that (i) the minimum principal amount of each Eurodollar Advance outstanding
after a renewal or conversion shall be Five Hundred Thousand and 00/100 Dollars
($500,000.00); (ii) a Eurodollar Advance can only be converted on the last day
of the Interest Period for the Advance; and (iii) the Borrower may not elect an
Interest Period ending after the maturity data of this Note. All notices given
under this paragraph are irrevocable. If the Borrower fails to give
2
the Bank the notice specified above for the renewal or conversion of a
Eurodollar Advance by 11:00 a.m. Mountain time three (3) Business Days before
the end of the Interest Period for that Advance, the Advance shall automatically
be converted to a Prime Rate Advance on the last day of the Interest Period for
the Advance.
INTEREST PAYMENTS. Interest on the Advances shall be paid as follows:
A. For each Prime Rate Advance, on the last day of each month beginning with the
first month following disbursement of the Advance or following conversion of an
Advance into a Prime Rate Advance, and at the maturity or conversion of the
Advance into a Eurodollar Advance;
B. For each Eurodollar Advance, on the last day of the Interest Period for the
Advance and, if the Interest Period is longer than three months, at three-month
intervals beginning with the day three months from the date the Advance is
disbursed.
PRINCIPAL PAYMENTS. All outstanding principal and interest is due and payable in
full on June 30, 2006, which is defined herein as the "Principal Payment Date".
DEFAULT RATE OF INTEREST. After a default has occurred under this Note, whether
or not the Bank elects to accelerate the maturity of this Note because of such
default, all Advances outstanding under this Note, including all Eurodollar
Advances, shall bear interest at a per annum rate equal to the Prime Rate, plus
the Applicable Margin for a Prime Rate Advance, plus three percent (3.00%) from
the date the Bank elects to impose such rate. Imposition of this rate shall not
affect any limitations contained in this Note on the Borrower's right to repay
principal on any Eurodollar Advance before the expiration of the Interest Period
for that Advance.
PREPAYMENT. The Borrower may prepay all or any part of any Prime Rate Advance at
any time without premium or penalty. The Borrower may prepay any Eurodollar
Advance only at the end of an Interest Period.
FUNDING LOSS INDEMNIFICATION. Upon the Bank's request, the Borrower shall pay
the Bank amounts sufficient (in the Bank's reasonable opinion) to compensate it
for any loss, cost, or expense incurred as a result of:
A. Any payment of a Eurodollar Advance on a date other than the last day of the
Interest Period for the Advance, including, without limitation, acceleration of
the Advances by the Bank pursuant to this Note or the Related Documents; or
B. Any failure by the Borrower to borrow or renew a Eurodollar Advance on the
date specified in the relevant notice from the Borrower to the Bank.
ADDITIONAL COSTS. If any applicable domestic or foreign law, treaty, government
rule or regulation now or later in effect (whether or not it now applies to the
Bank) or the interpretation or administration thereof by a governmental
authority charged with such interpretation or administration, or compliance by
the Bank with any guideline, request or directive of such an authority (whether
or not having the force of law), shall (a) affect the basis of taxation of
payments to the Bank of any amounts payable by the Borrower under this Note or
the Related Documents (other than taxes imposed on the overall net income of the
Bank by the jurisdiction or by any political subdivision or taxing authority of
the jurisdiction in which the Bank has its principal office), or (b) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by
the Bank, or (c) impose any other condition with respect to this Note or the
Related Documents and the result of any of the foregoing is to increase the cost
to the Bank of maintaining any Eurodollar Advance or to reduce the amount of any
sum receivable by the Bank on such an Advance, or (d) affect the amount of
capital required or expected to be maintained by the Bank (or any corporation
controlling the Bank) and the Bank determines that the amount of such capital is
increased by or based upon the existence of the Bank's obligations under this
Note or the Related Documents and the increase has the effect of reducing the
rate of return on the Bank's (or its controlling corporation's) capital as a
consequence of the obligations under this Note or the Related Documents to a
level below that which the Bank (or its controlling corporation) could have
achieved but for such circumstances (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by the Bank to be material,
then the Borrower shall pay to the Bank, from time to time, upon request by the
Bank, additional amounts sufficient to compensate the Bank for the increased
cost or reduced sum receivable. Whenever the Bank shall learn of circumstances
described in this section which are likely to result in additional costs to the
Borrower, the Bank shall give prompt written notice to the Borrower of the basis
for and the estimated amount of any such anticipated additional costs. A
statement as to the amount of the increased cost or reduced sum receivable,
prepared in good faith and in reasonable detail by the Bank and submitted by the
Bank to the Borrower, shall be conclusive and binding for all purposes absent
manifest error in computation.
ILLEGALITY. If any applicable domestic or foreign law, treaty, rule or
regulation now or later in effect (whether or not it now applies to the Bank) or
the interpretation or administration thereof by a governmental authority charged
with such interpretation or administration, or compliance by the Bank with any
guideline, request or directive of such an authority (whether or not having the
force of law), shall make it unlawful or impossible for the Bank to maintain or
fund the Eurodollar Advances, then, upon notice to the Borrower by the Bank, the
outstanding principal amount of the Eurodollar Advances, together with accrued
interest and any other
3
amounts payable to the Bank under this Note or the Related Documents on account
of the Eurodollar Advances shall be repaid (a) immediately upon the Bank's
demand if such change or compliance with such requests, in the Bank's judgment,
requires immediate repayment, or (b) at the expiration of the last Interest
Period to expire before the effective date of any such change or request
provided, however, that subject to the terms and conditions of this Note and the
Related Documents the Borrower shall be entitled to simultaneously replace the
entire outstanding balance of any Eurodollar Advance repaid in accordance with
this section with a Prime Rate Advance in the same amount.
INABILITY TO DETERMINE INTEREST RATE. If the Bank determines that (a) quotations
of interest rates for the relevant deposits referred to in the definition of
Eurodollar Rate are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the interest rate on a
Eurodollar Advance as provided in this Note, or (b) the relevant interest rates
referred to in the definition of Eurodollar Rate do not accurately cover the
cost to the Bank of making or maintaining Eurodollar Advances, then the Bank
shall forthwith give notice of such circumstances to the Borrower, whereupon (i)
the obligation of the Bank to make Eurodollar Advances shall be suspended until
the Bank notifies the Borrower that the circumstances giving rise to the
suspension no longer exists, and (ii) the Borrower shall repay in full the then
outstanding principal amount of each Eurodollar Advance, together with accrued
interest, on the last day of the then current Interest Period applicable to the
Advance, provided, however, that, subject to the terms and conditions of this
Note and the Related Documents, the Borrower shall be entitled to simultaneously
replace the entire outstanding balance of any Eurodollar Advance repaid in
accordance with this section with a Prime Rate Advance in the same amount.
OBLIGATIONS DUE ON NON-BUSINESS DAY. Whenever any payment under this Note
becomes due and payable on a day that is not a Business Day, if no default then
exists under this Note, the maturity of the payment shall be extended to the
next succeeding Business Day, except, in the case of a Eurodollar Advance, if
the result of the extension would be to extend the payment into another calendar
month, the payment must be made on the immediately preceding Business Day.
MATTERS REGARDING PAYMENT. The Borrower will pay the Bank at the Bank's address
shown above or at such other place as the Bank may designate. Payments shall be
allocated among principal, interest and fees at the discretion of the Bank
unless otherwise agreed or required by applicable law. Acceptance by the Bank of
any payment which is less than the payment due at the time shall not constitute
a waiver of the Bank's right to receive payment in full at that time or any
other time.
LATE FEE. If any payment is not received by the Bank within ten (10) days after
its due date, the Bank may assess and the Borrower agrees to pay a late fee
equal to the greater of: (a) five percent (5.00%) of the past due amount or (b)
Twenty Five and 00/100 Dollars ($25.00), up to the maximum amount of One
Thousand Five Hundred and 00/100 Dollars ($1,500.00) per late charge.
BUSINESS LOAN. The Borrower acknowledges and agrees that this Note evidences a
loan for a business, commercial, agricultural or similar commercial enterprise
purpose, and that all advances made under this Note shall not be used for any
personal, family or household purpose.
CREDIT FACILITY. The Bank has approved a credit facility to the Borrower in a
principal amount not to exceed the face amount of this Note. The credit facility
is in the form of advances made from time to time by the Bank to the Borrower.
This Note evidences the Borrower's obligation to repay those advances. The
aggregate principal amount of debt evidenced by this Note is the amount
reflected from time to time in the records of the Bank. Until the earliest of
maturity, the occurrence of any default, or the occurrence of any event that
would constitute a default but for the giving of notice or the lapse of time or
both until the end of any grace or cure period, the Borrower may borrow, pay
down and reborrow under this Note subject to the terms of the Related Documents.
LIABILITIES. The term "Liabilities" in this Note means all obligations,
indebtedness and liabilities of the Borrower to any one or more of the Bank,
BANK ONE CORPORATION, and any of their subsidiaries, affiliates or successors,
now existing or later arising, including, without limitation, all loans,
advances, interest, costs, overdraft indebtedness, credit card indebtedness,
lease obligations, or obligations relating to any Rate Management Transaction,
all monetary obligations incurred or accrued during the pendency of any
bankruptcy, insolvency, receivership or other similar proceedings, regardless of
whether allowed or allowable in such proceeding, and all renewals, extensions,
modifications, consolidations or substitutions of any of the foregoing, whether
the Borrower may be liable jointly with others or individually liable as a
debtor, maker, co-maker, drawer, endorser, guarantor, surety or otherwise, and
whether voluntarily or involuntarily incurred, due or not due, absolute or
contingent, direct or indirect, liquidated or unliquidated. The term "Rate
Management Transaction" in this Note means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into among the
Borrower the Bank or BANK ONE CORPORATION, or any of its subsidiaries or
affiliates or their successors, which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.
4
RELATED DOCUMENTS. The term "Related Documents" in this Note means all loan
agreements, credit agreements, reimbursement agreements, security agreements,
mortgages, deeds of trust, pledge agreements, assignments, guaranties, or any
other instrument or document executed in connection with this Note or in
connection with any of the Liabilities.
SECURITY. The term "Collateral" in this Note means all real or personal property
described in all security agreements, pledge agreements, mortgages, deeds of
trust, assignments, or other instruments now or hereafter executed in connection
with this Note or in connection with any of the Liabilities. If applicable, the
Collateral secures the payment of this Note and the Liabilities.
BANK'S RIGHT OF SETOFF. In addition to the Collateral, if any, the Borrower
grants to the Bank a security interest in, and the Bank is authorized to setoff
and apply, all Accounts, Securities and Other Property, and Bank Debt against
any and all Liabilities of the Borrower. This right of setoff may be exercised
at any time and from time to time, and without prior notice to the Borrower.
This security interest and right of setoff may be enforced or exercised by the
Bank regardless of whether or not the Bank has made any demand under this
paragraph or whether the Liabilities are contingent, matured, or unmatured. Any
delay, neglect or conduct by the Bank in exercising its rights under this
paragraph will not be a waiver of the right to exercise this right of setoff or
enforce this security interest. The rights of the Bank under this paragraph are
in addition to other rights the Bank may have in the Related Documents or by
law. In this paragraph: (a) the term "Accounts" means any and all accounts and
deposits of the Borrower (whether general, special, time, demand, provisional or
final) at any time held by the Bank (including all Accounts held jointly with
another, but excluding any ▇▇▇ or Kcogh Account, or any trust Account in which a
security interest would be prohibited by law); (b) the term "Securities and
Other Property" means any and all securities and other property of the Borrower
in the custody, possession or control of the Bank (other than property held by
the Bank in a fiduciary capacity); and (c) the term "Bank Debt" means all
indebtedness at any time owing by the Bank, to or for the credit or account of
the Borrower.
REPRESENTATIONS BY BORROWER. Each Borrower represents that: (a) the execution
and delivery of this Note and the performance of the obligations it imposes do
not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or other third
party; (b) this Note is a valid and binding agreement, enforceable according to
its terms; and (c) all balance sheets, profit and loss statements, and other
financial statements furnished to the Bank in connection with the Liabilities
are accurate and fairly reflect the financial condition of the organizations and
persons to which they apply on their effective dates, including contingent
liabilities of every type, which financial condition has not changed materially
and adversely since those dates. Each Borrower, other than a natural person,
further represents that: (a) it is duly organized, existing and in good standing
pursuant to the laws under which it is organized; and (b) the execution and
delivery of this Note and the performance of the obligations it imposes (i) are
within its powers and have been duly authorized by all necessary action of its
governing body, and (ii) do not contravene the terms of its articles of
incorporation or organization, its by-laws, or any partnership, operating or
other agreement governing its affairs.
EVENTS OF DEFAULT/ACCELERATION. If any of the following events occurs this Note
shall become due immediately, without notice, at the Bank's option:
1. The Borrower, or any guarantor of this Note (the "Guarantor"), fails to pay
when due any amount payable under this Note, under any of the Liabilities,
or under any agreement or instrument evidencing debt to any creditor.
2. The Borrower or any Guarantor (a) fails to observe or perform any other
term of this Note; (b) makes any materially incorrect or misleading
representation, warranty, or certificate to the Bank; (c) makes any
materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (d) defaults under
the terms of any agreement or instrument relating to any debt for borrowed
money (other than the debt evidenced by this Note) and the effect of such
default will allow the creditor to declare the debt due before its
maturity.
3. In the event (a) there is a default under the terms of any Related
Document, (b) any guaranty of the loan evidenced by this Note is
terminated or becomes unenforceable in whole or in part, (c) any Guarantor
fails to promptly perform under its guaranty, or (d) the Borrower fails to
comply with, or pay, or perform under any agreement, now or hereafter in
effect, between the Borrower and BANK ONE CORPORATION, or any of its
subsidiaries or affiliates or their successors.
4. There is any loss, theft, damage, or destruction of any Collateral not
covered by insurance.
5. A "reportable event" (as defined in the Employee Retirement Income Security
Act of 1974 as amended) occurs that would permit the Pension Benefit
Guaranty Corporation to terminate any employee benefit plan of the Borrower
or any affiliate of the Borrower.
6. The Borrower or any Guarantor becomes insolvent or unable to pay its debts
as they become due.
7. The Borrower or any Guarantor (a) makes an assignment for the benefit of
creditors; (b) consents to the appointment of a custodian, receiver, or
trustee for itself or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy, reorganization, liquidation,
insolvency or similar laws of any jurisdiction.
8. A custodian, receiver, or trustee is appointed for the Borrower or any
Guarantor or for a substantial part of its assets without its consent.
9. Proceedings are commenced against the Borrower or any Guarantor under any
bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and they remain undismissed for thirty (30) days after
commencement; or the Borrower or the Guarantor consents to the commencement
of those proceedings.
5
10. Any judgment is entered against the Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of the
Borrower or any Guarantor.
11. The Borrower or any Guarantor dies, or a guardian or conservator is
appointed for the Borrower or any Guarantor or all or any portion of the
Borrower's assets, any Guarantor's assets, or the Collateral.
12. The Borrower or any Guarantor, without the Bank's written consent (a) is
dissolved, (b) merges or consolidates with any third party, (c) leases,
sells or otherwise conveys a material part of its assets or business
outside the ordinary course of its business, (d) leases, purchases, or
otherwise acquires a material part of the assets of any other business
entity, except in the ordinary course of its business, or (e) agrees to do
any of the foregoing (notwithstanding the foregoing, any subsidiary may
merge or consolidate with any other subsidiary, or with the Borrower, so
long as the Borrower is the survivor).
13. There is a substantial change in the existing or prospective financial
condition of the Borrower or any Guarantor that the Bank in good faith
determines to be materially adverse.
14. The Bank in good ▇▇▇▇▇ ▇▇▇▇▇ itself insecure.
CURE PERIODS. Except as expressly provided to the contrary in this Note or any
of the Related Documents, no condition, event or occurrence shall constitute the
occurrence of a default under this Note, of a default under any of the
Liabilities or of a default under any of the Related Documents unless: (a) the
Bank has notified the Borrower of such condition, event or occurrence in writing
(a "Default Notice"); and (b) such condition, event, or occurrence has not been
fully cured (i) within five (5) days after the Borrower's receipt of a Default
Notice, if the condition, event or occurrence giving rise to such Default Notice
can be cured by the payment of money, or (ii) within-ten (10) days after the
Borrower's receipt of a Default Notice, if the condition, event or occurrence
giving rise to such Default Notice is of a nature that it can be cured only by
means other than the payment of money.
Provided, however, that the Borrower shall have no notice and cure rights under
this section if: (a) the condition, event or occurrence giving rise to the
occurrence of a default under this Note, of a default under the Liabilities or
of a default under the Related Documents (i) is a condition, event or occurrence
described in any of clauses 3(b), (6), (7), (8), (9), (11) or (12) of the
section captioned Events of Default/Acceleration section above or (ii)
constitutes a breach of any covenant in any Related Document prohibiting the
sale or transfer of (1) any assets of any Borrower, Mortgagor, Pledgor, Debtor,
Assignor, Trustor or any similar pledging or borrowing party or (2) any of the
Collateral; or (b) the Borrower, during the twelve (12) month period immediately
preceding any Default Notice, has been given either (i) any other Default Notice
covering the same condition, event or occurrence or (ii) three (3) or more other
Default Notices of any nature.
REMEDIES. If this Note is not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. The Bank is authorized to cause all or any part of the
Collateral to be transferred to or registered in its name or in the name of any
other person or business entity, with or without designating the capacity of
that nominee. Without limiting any other available remedy, the Borrower is
liable for any deficiency remaining after disposition of any Collateral. The
Borrower is liable to the Bank for all reasonable costs and expenses of every
kind incurred in the making or collection of this Note, including without
limitation reasonable attorneys' fees and court costs. These costs and expenses
include without limitation any costs or expenses incurred by the Bank in any
bankruptcy, reorganization, insolvency or other similar proceeding.
WAIVERS. Any party liable on this Note waives (a) to the extent permitted by
law, all rights and benefits under any laws or statutes regarding sureties, as
may be amended; (b) any right to receive notice of the following matters before
the Bank enforces any of its rights: (i) the Bank's acceptance of this Note,
(ii) any demand, diligence, presentment, dishonor and protest, or (iii) any
action that the Bank takes regarding the Borrower, anyone else, any Collateral,
or any of the Liabilities, that it might be entitled to by law or under any
other agreement; (c) any right to require the Bank to proceed against the
Borrower, any other obligor or guarantor of the Liabilities, or any Collateral,
or pursue any remedy in the Bank's power to pursue; (d) any defense based on any
claim that any endorser or other parties' obligations exceed or are more
burdensome than those of the Borrower; (e) the benefit of any statute of
limitations affecting liability of any endorser or other party liable hereunder
or the enforcement hereof; (f) any defense arising by reason of any disability
or other defense of the Borrower or by reason of the cessation from any cause
whatsoever (other than payment in full) of the obligation of the Borrower for
the Liabilities; and (g) any defense based on or arising out of any defense that
the Borrower may have to the payment or performance of the Liabilities or any
portion thereof. Any party liable on this Note consents to any extension or
postponement of time of its payment without limit as to the number or period, to
any substitution, exchange or release of all or any part of the Collateral, to
the addition of any other party, and to the release or discharge of, or
suspension of any lights and remedies against, any person who may be liable for
the payment of this Note. The Bank may waive or delay enforcing any of its
rights without losing them. Any waiver affects only the specific terms and time
period stated in the waiver. No modification or waiver of any provision of this
Note is effective unless it is in writing and signed by the party against whom
it is being enforced. Without limiting any foregoing waiver, consent or
agreement, any party liable on this Note further waives any and all benefits
under. Arizona Revised Statutes Sections 12-1641 through 12-1646, inclusive, and
Rule 17(f) of the Arizona Rules of Civil Procedure, including any revision or
replacement of such statutes or rules hereafter enacted.
SUBORDINATION. Any rights of any party liable on this Note, whether now existing
or hereafter arising, to receive payment on account of any indebtedness
(including interest) owed to any party liable on this Note by the Borrower, or
to withdraw capital invested by it in the Borrower, or to receive distributions
from the Borrower, shall at all times be subordinate to the full and prior
repayment to the
6
Bank of the Liabilities. No party liable on this Note shall be entitled to
enforce or receive payment of any sums hereby subordinated until the Liabilities
have been paid in full and any such sums received in violation of this paragraph
shall be received by such party in trust for the Bank. Any party liable on this
Note agrees to stand still with regard to the Bank's enforcement of its rights,
including taking no action to delay, impede or otherwise interfere with the
Bank's rights to realize on the Collateral. The foregoing notwithstanding, until
the occurrence of any default, any party liable on this Note is not prohibited
from receiving distributions from the Borrower in an amount equal to any income
tax liability imposed on such party liable on this Note attributable to an
ownership interest, if any, in the Borrower.
RIGHTS OF SUBROGATION. Any party liable on this Note waives and agrees not to
enforce any rights of subrogation, contribution or indemnification that it may
have against the Borrower, any person liable on the Liabilities, or the
Collateral, until the Borrower and such party liable on this Note have fully
performed all their obligations to the Bank, even if those obligations are not
covered by this Note.
REINSTATEMENT. All parties liable on this Note agree that to the extent any
payment is received by the Bank in connection with the Liabilities, and all or
any part of such payment is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid by the Bank or paid over to
a trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then this Note shall continue to be effective or shall be reinstated,
as the case may be, and whether or not the Bank is in possession of this Note,
and, to the extent of such payment or repayment by the Bank, the Liabilities or
part thereof intended to be satisfied by such Preferential Payment shall be
revived and continued in full force and effect as if said Preferential Payment
had not been made.
GOVERNING LAW AND VENUE. This Note is delivered in the State of Arizona and
governed by Arizona law (without giving effect to its laws of conflicts). The
Borrower agrees that any legal action or proceeding with respect to any of its
obligations under this Note may be brought by the Bank in any state or federal
court located in the State of Arizona, as the Bank in its sole discretion may
elect. By the execution and delivery of this Note, the Borrower submits to and
accepts, for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of those courts. The Borrower,
waives any claim that the State of Arizona is not a convenient forum or the
proper venue for any such suit, action or proceeding.
RENEWAL AND EXTENSION. This Note is given in replacement, renewal and/or
extension of, but not extinguishing the indebtedness evidenced by, that Line of
Credit Note dated May 31, 2003 executed by the Borrower in the original
principal amount of Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00), including previous renewals or modifications thereof, if any
(the "Prior Note"), and is not a novation thereof. All interest evidenced by the
Prior Note shall continue to be due and payable until paid. If applicable, all
Collateral continues to secure the payment of this Note and the Liabilities. The
provisions of this Note are effective on June 30, 2004.
MISCELLANEOUS. The Borrower, if more than one, is jointly and severally liable
for the obligations represented by this Note, the term "Borrower" means any one
or more of them, and the receipt of value by any one of them constitutes the
receipt of value by the others. This Note binds the Borrower and its successors,
and benefits the Bank, its successors and assigns. Any reference to the Bank
includes any holder of this Note. Section headings are for convenience of
reference only and do not affect the interpretation of this Note. Any notices
and demands under or related to this document shall be in writing and delivered
to the intended party at its address stated herein, and if to the Bank, at its
main office if no other address of the Bank is specified herein, by one of the
following means: (a) by hand, (b) by a nationally recognized overnight courier
service, or (c) by certified mail, postage prepaid, with return receipt
requested. Notice shall be deemed given: (a) upon receipt if delivered by hand,
(b) on the Delivery Day after the day of deposit with a nationally recognized
courier service, or (c) on the third Delivery Day after the notice is deposited
in the mail "Delivery Day" means a day other than a Saturday, a Sunday, or any
other day on which national banking associations are authorized to be closed.
Any party may change its address for purposes of the receipt of notices and
demands by giving notice of such change in the manner provided in this
provision. This Note and any Related Documents embody the entire agreement
between the Borrower and the Bank regarding the terms of the loan evidenced by
this Note and supercede all oral statements and prior writings relating to that
loan. If any provision of this Note cannot be enforced, the remaining portions
of this Note shall continue in effect. The Borrower agrees that the Bank may
provide any information or knowledge the Bank may have about the Borrower or
about any matter relating to this Note or the Related Documents to BANK ONE
CORPORATION, or any of its subsidiaries or affiliates or their successors, or to
any one or more purchasers or potential purchasers of this Note or the Related
Documents. The Borrower agrees that the Bank may at any time sell, assign or
transfer one or more interests or participations in all or any part of its
rights and obligations in this Note to one or more purchasers whether or not
related to the Bank.
GOVERNMENT REGULATION. Borrower shall not (a) be or become subject at any time
to any law, regulation, or list of any government agency (including, without
limitation, the U.S. Office of Foreign Asset Control list) that prohibits or
limits Bank from making any advance or extension of credit to Borrower or from
otherwise conducting business with Borrower, or (b) fail to provide documentary
and other evidence of Borrower's identity as may be requested by Bank at any
time to enable Bank to verify Borrower's identity or to comply with any
applicable law or regulation, including, without limitation, Section 326 of the
USA Patriot Act of 2001, 31 U.S.C Section 5318.
7
USA PATRIOT ACT NOTIFICATION. The following notification is provided to Borrower
pursuant to Section 326 of the USA Patriot Act of 2001,31 U.S.C. Section 53l8:
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the
government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person or entity that opens an account,
including any deposit account, treasury management account, loan, other
extension of credit, or other financial services product. What this means for
Borrower: When Borrower opens an account, if Borrower is an individual Bank will
ask for Borrower's name, taxpayer identification number, residential address,
date of birth, and other information that will allow Bank to identify Borrower,
and if Borrower is not an individual Bank will ask for Borrower's name, taxpayer
identification number, business address, and other information that will allow
Bank to identify Borrower. Bank may also ask, if Borrower is an individual to
see Borrower's driver's license or other identifying documents, and if Borrower
is not an individual to see Borrower's legal organizational documents or other
identifying documents.
WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM
THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.
JURY WAIVER. THE BORROWER AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY
RELATED TO THIS NOTE OR THE OTHER RELATED DOCUMENTS. THIS PROVISION IS A
MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING EVIDENCED BY THIS NOTE.
Borrower:
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ #2 TASER International, Inc.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
Printed Name Title
Date Signed: JULY 12, 2004
8
(BANK ONE LOGO) NEGATIVE PLEDGE AGREEMENT
Dated as of June 22, 2004
FOR VALUABLE CONSIDERATION, the undersigned, TASER International, Inc. (the
"Pledgor"), agrees and pledges to Bank One, NA, with its main office in Chicago,
IL, whose address is ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(the "Bank"), its successors and assigns, that from the date of this agreement
until the "Liabilities" are paid in full, the Pledgor will not, without the
express written consent of the Bank, which consent shall be at the sole
discretion of the Bank, create or permit to exist any mortgage, pledge, title
retention lien, or other encumbrance or security interest with respect to all
assets now owned or hereafter acquired (the "Property"), except liens (i)
securing indebtedness to the Bank, and (ii) of current taxes not delinquent or
as security for taxes being contested in good faith, or in connection with
worker's compensation insurance, unemployment insurance, or of mechanics and
material men for sums not due or sums being contested in good faith.
BORROWER. The term "Borrower" in this agreement means TASER International, Inc.
LIABILITIES. The term "Liabilities" in this agreement means all obligations,
indebtedness and Liabilities of the Borrower to any one or more of the Bank,
BANK ONE CORPORATION, and any of their subsidiaries, affiliates or successors,
now existing or later arising, including, without limitation, all loans,
advances, interest, costs, overdraft indebtedness, credit card indebtedness,
lease obligations, or obligations relating to any Rate Management Transaction,
all monetary obligations incurred or accrued during the pendency of any
bankruptcy, insolvency, receivership or other similar proceedings, regardless of
whether allowed or allowable in such proceeding, and all renewals, extensions,
modifications, consolidations or substitutions of any of the foregoing, whether
the Borrower may be liable jointly with others or individually liable as a
debtor, maker, co-maker, drawer, endorser, guarantor, surety or otherwise, and
whether voluntarily or involuntarily incurred, due or not due, absolute or
contingent, direct or indirect, liquidated or unliquidated. The term "Rate
Management Transaction" in this agreement means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into among the
Borrower, the Bank or BANK ONE CORPORATION, or any of its subsidiaries or
affiliates or their successors, which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.
The Pledgor represents and warrants to the Bank that: (a) the Pledgor has
disclosed to the Bank in writing any location(s) where the Property may be
located; (b) the Property is free and clear of all security interests, and the
Pledgor has not executed or recorded, or permitted others to execute or record,
any security documents or financing statements relating to any of the Property
(except, if applicable, to the Bank); and (c) all of the Property is titled in
the Pledgor's legal name.
If the Pledgor defaults in the performance of any agreement set forth herein,
the Bank may declare the Liabilities (notwithstanding any provision thereof)
immediately due and payable, without demand or notice of any kind. The Bank
shall promptly advise the Pledgor of any such declaration, but failure to do so
shall not impair the effect of such declaration.
No delay on the part of the Bank in the exercise of any power or right shall
operate as a waiver thereof, nor shall any single or partial exercise of any
power or right preclude other or further exercise thereof, or the exercise of
any other power or right.
Any notices and demands under or related to this document shall be in writing
and delivered to the intended party at its address stated herein, and if to the
Bank, at its main office if no other address of the Bank is specified herein, by
one of the following means: (a) by hand, (b) by a nationally recognized
overnight courier service, or (c) by certified mail, postage prepaid, with
return receipt requested. Notice shall be deemed given: (a) upon receipt if
delivered by hand, (b) on the Delivery Day after the day of deposit with a
nationally recognized courier service, or (c) on the third Delivery Day after
the notice is deposited in the mail. "Delivery Day" means a day other than a
Saturday, a Sunday, or any other day on which national banking associations are
authorized to be closed. Any party may change its address for purposes of the
receipt of notices and demands by giving notice of such change in the manner
provided in this provision.
GOVERNING LAW AND VENUE. This agreement is delivered in the State of Arizona and
governed by Arizona law (without giving effect to its laws of conflicts).
The Pledgor agrees that any legal action or proceeding with respect to any of
its obligations under this agreement may be brought by the Bank in any state or
federal court located in the State of Arizona, as the Bank in its sole
discretion may elect. By the execution and delivery of this agreement, the
Pledgor submits to and accepts, for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of those courts.
The Pledgor waives any claim that the State of Arizona is not a convenient forum
or the proper venue for any such suit, action or proceeding.
WAIVER OF SPECIAL DAMAGES. THE PLEDGOR WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM
THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.
JURY WAIVER. THE PLEDGOR AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) BETWEEN OR AMONG THE PLEDGOR AND THE BANK ARISING OUT OF OR IN ANY
WAY RELATED TO THIS DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE
BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN.
This agreement shall be binding on the Pledgor and its successors and assigns;
and shall inure to the benefit of the Bank and its successors and assigns.
PLEDGOR:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ #2 TASER International, Inc.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
Printed Name Title
Fax/Telex No.▇▇▇ ▇▇▇ ▇▇▇▇
Date Signed: JULY 12, 2004
2